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[From the U.S. Government Publishing Office]


114th Congress }				 { REPT. 114-604
2d Session     }    HOUSE OF REPRESENTATIVES     { Part 1
_______________________________________________________________________
                                
           
           HELPING HOSPITALS IMPROVE PATIENT CARE ACT OF 2016

                               ----------                              

                              R E P O R T

                                 OF THE

                      COMMITTEE ON WAYS AND MEANS

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


  June 7, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________
               
              
                                CONTENTS

                                                                   Page
 I. SUMMARY AND BACKGROUND............................................8
          A. Purpose and Summary.................................     8
          B. Background and Need for Legislation.................    10
          C. Legislative History.................................    10
II. EXPLANATION OF THE BILL..........................................11
III.VOTES OF THE COMMITTEE...........................................16

IV. BUDGET EFFECTS OF THE BILL.......................................16
          A. Committee Estimate of Budgetary Effects.............    16
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................    16
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................    17
 V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......23
          A. Committee Oversight Findings and Recommendations....    23
          B. Statement of General Performance Goals and 
              Objectives.........................................    23
          C. Information Relating to Unfunded Mandates...........    23
          D. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................    23
          E. Duplication of Federal Programs.....................    23
          F. Disclosure of Directed Rule Makings.................    23
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............24
          A. Text of Existing Law Amended or Repealed by the 
              Bill, as Reported..................................    24
          B. Changes in Existing Law Proposed by the Bill, as 
              Reported...........................................   310


                                _______
                                
 
Mr. Brady of Texas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 5273]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 5273) to amend title XVIII of the Social Security 
Act to provide for regulatory relief under the Medicare program 
for certain providers of services and suppliers and increased 
transparency in hospital coding and enrollment data, and for 
other purposes, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Helping Hospitals 
Improve Patient Care Act of 2016''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

            TITLE I--PROVISIONS RELATING TO MEDICARE PART A

Sec. 101. Development of Medicare study for HCPCS version of MS-DRG 
codes for similar hospital services.
Sec. 102. Establishing beneficiary equity in the Medicare hospital 
readmission program.
Sec. 103. Five-year extension of the rural community hospital 
demonstration program.
Sec. 104. Regulatory relief for LTCHs.
Sec. 105. Savings from IPPS MACRA pay-for through not applying 
documentation and coding adjustments.

            TITLE II--PROVISIONS RELATING TO MEDICARE PART B

Sec. 201. Continuing Medicare payment under HOPD prospective payment 
system for services furnished by mid-build off-campus outpatient 
departments of providers.
Sec. 202. Treatment of cancer hospitals in off-campus outpatient 
department of a provider policy.
Sec. 203. Treatment of eligible professionals in ambulatory surgical 
centers for meaningful use and MIPS.

                  TITLE III--OTHER MEDICARE PROVISIONS

Sec. 301. Delay in authority to terminate contracts for Medicare 
Advantage plans failing to achieve minimum quality ratings.
Sec. 302. Requirement for enrollment data reporting for Medicare.
Sec. 303. Updating the Welcome to Medicare package.

            TITLE I--PROVISIONS RELATING TO MEDICARE PART A

SEC. 101. DEVELOPMENT OF MEDICARE STUDY FOR HCPCS VERSION OF MS-DRG 
                    CODES FOR SIMILAR HOSPITAL SERVICES.

  Section 1886 of the Social Security Act (42 U.S.C. 1395ww) is amended 
by adding at the end the following new subsection:
  ``(t) Relating Similar Inpatient and Outpatient Hospital Services.--
          ``(1) Development of hcpcs version of ms-drg codes.--
                  ``(A) In general.--Not later than January 1, 2018, 
                the Secretary shall develop HCPCS versions for MS-DRGs 
                that is similar to the ICD-10-PCS for such MS-DRGs such 
                that, to the extent possible, the MS-DRG assignment 
                shall be similar for a claim coded with the HCPCS 
                version as an identical claim coded with a ICD-10-PCS 
                code.
                  ``(B) Coverage of surgical ms-drgs.--In carrying out 
                subparagraph (A), the Secretary shall develop HCPCS 
                versions of MS-DRG codes for not fewer than 10 surgical 
                MS-DRGs.
                  ``(C) Publication and dissemination of the hcpcs 
                versions of ms-drgs.--
                          ``(i) In general.--The Secretary shall 
                        develop a HCPCS MS-DRG definitions manual and 
                        software that is similar to the definitions 
                        manual and software for ICD-10-PCS codes for 
                        such MS-DRGs. The Secretary shall post the 
                        HCPCS MS-DRG definitions manual and software on 
                        the Internet website of the Centers for 
                        Medicare & Medicaid Services. The HCPCS MS-DRG 
                        definitions manual and software shall be in the 
                        public domain and available for use and 
                        redistribution without charge.
                          ``(ii) Use of previous analysis done by 
                        medpac.--In developing the HCPCS MS-DRG 
                        definitions manual and software under clause 
                        (i), the Secretary shall consult with the 
                        Medicare Payment Advisory Commission and shall 
                        consider the analysis done by such Commission 
                        in translating outpatient surgical claims into 
                        inpatient surgical MS-DRGs in preparing chapter 
                        7 (relating to hospital short-stay policy 
                        issues) of its `Medicare and the Health Care 
                        Delivery System' report submitted to Congress 
                        in June 2015.
                  ``(D) Definition and reference.--In this paragraph:
                          ``(i) HCPCS.--The term `HCPCS' means, with 
                        respect to hospital items and services, the 
                        code under the Healthcare Common Procedure 
                        Coding System (HCPCS) (or a successor code) for 
                        such items and services.
                          ``(ii) ICD-10-PCS.--The term `ICD-10-PCS' 
                        means the International Classification of 
                        Diseases, 10th Revision, Procedure Coding 
                        System, and includes a subsequent revision of 
                        such International Classification of Diseases, 
                        Procedure Coding System.''.

SEC. 102. ESTABLISHING BENEFICIARY EQUITY IN THE MEDICARE HOSPITAL 
                    READMISSION PROGRAM.

  (a) Transitional Adjustment for Dual Eligible Population.--Section 
1886(q)(3) of the Social Security Act (42 U.S.C. 1395ww(q)(3)) is 
amended--
          (1) in subparagraph (A), by inserting ``subject to 
        subparagraph (D),'' after ``purposes of paragraph (1),''; and
          (2) by adding at the end the following new subparagraph:
                  ``(D) Transitional adjustment for dual eligibles.--
                          ``(i) In general.--In determining a 
                        hospital's adjustment factor under this 
                        paragraph for purposes of making payments for 
                        discharges occurring during and after fiscal 
                        year 2019, and before the application of clause 
                        (i) of subparagraph (E), the Secretary shall 
                        assign hospitals to groups (as defined by the 
                        Secretary under clause (ii)) and apply the 
                        applicable provisions of this subsection using 
                        a methodology in a manner that allows for 
                        separate comparison of hospitals within each 
                        such group, as determined by the Secretary.
                          ``(ii) Defining groups.--For purposes of this 
                        subparagraph, the Secretary shall define groups 
                        of hospitals based on their overall proportion, 
                        of the inpatients who are entitled to, or 
                        enrolled for, benefits under part A, who are 
                        full-benefit dual eligible individuals (as 
                        defined in section 1935(c)(6)). In defining 
                        groups, the Secretary shall consult the 
                        Medicare Payment Advisory Commission and may 
                        consider the analysis done by such Commission 
                        in preparing the portion of its report 
                        submitted to Congress in June 2013 relating to 
                        readmissions.
                          ``(iii) Minimizing reporting burden on 
                        hospitals.--In carrying out this subparagraph, 
                        the Secretary shall not impose any additional 
                        reporting requirements on hospitals.
                          ``(iv) Budget neutral design methodology.--
                        The Secretary shall design the methodology to 
                        implement this subparagraph so that the 
                        estimated total amount of reductions in 
                        payments under this subsection equals the 
                        estimated total amount of reductions in 
                        payments that would otherwise occur under this 
                        subsection if this subparagraph did not 
                        apply.''.
  (b) Subsequent Adjustments Based on IMPACT Reports.--Section 
1886(q)(3) of the Social Security Act (42 U.S.C. 1395ww(q)(3)), as 
amended by subsection (a), is further amended by adding at the end the 
following new subparagraph:
                  ``(E) Changes in risk adjustment.--
                          ``(i) Consideration of recommendations in 
                        impact reports.--The Secretary may take into 
                        account the studies conducted and the 
                        recommendations made by the Secretary under 
                        section 2(d)(1) of the IMPACT Act of 2014 
                        (Public Law 113-185; 42 U.S.C. 1395lll note) 
                        with respect to the application under this 
                        subsection of risk adjustment methodologies. 
                        Nothing in this clause shall be construed as 
                        precluding consideration of the use of 
                        groupings of hospitals.''.
  (c) MedPAC Study on Readmissions Program.--The Medicare Payment 
Advisory Commission shall conduct a study to review overall hospital 
readmissions described in section 1886(q)(5)(E) of the Social Security 
Act (42 U.S.C. 1395ww(q)(5)(E)) and whether such readmissions are 
related to any changes in outpatient and emergency services furnished. 
The Commission shall submit to Congress a report on such study in its 
report to Congress in June 2017.
  (d) Addressing Issue of Certain Patients.--Subparagraph (E) of 
section 1886(q)(3) of the Social Security Act (42 U.S.C. 1395ww(q)(3)), 
as added by subsection (b), is further amended by adding at the end the 
following new clause:
                          ``(ii) Consideration of exclusion of patient 
                        cases based on v or other appropriate codes.--
                        In promulgating regulations to carry out this 
                        subsection with respect to discharges occurring 
                        after fiscal year 2018, the Secretary may 
                        consider the use of V or other ICD-related 
                        codes for removal of a readmission. The 
                        Secretary may consider modifying measures under 
                        this subsection to incorporate V or other ICD-
                        related codes at the same time as other changes 
                        are being made under this subparagraph.''.
  (e) Removal of Certain Readmissions.--Subparagraph (E) of section 
1886(q)(3) of the Social Security Act (42 U.S.C. 1395ww(q)(3)), as 
added by subsection (b) and amended by subsection (d), is further 
amended by adding at the end the following new clause:
                          ``(iii) Removal of certain readmissions.--In 
                        promulgating regulations to carry out this 
                        subsection, with respect to discharges 
                        occurring after fiscal year 2018, the Secretary 
                        may consider removal as a readmission of an 
                        admission that is classified within one or more 
                        of the following: transplants, end-stage renal 
                        disease, burns, trauma, psychosis, or substance 
                        abuse. The Secretary may consider modifying 
                        measures under this subsection to remove 
                        readmissions at the same time as other changes 
                        are being made under this subparagraph.''.

SEC. 103. FIVE-YEAR EXTENSION OF THE RURAL COMMUNITY HOSPITAL 
                    DEMONSTRATION PROGRAM.

  (a) Extension.--Section 410A of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (Public Law 108-173; 42 
U.S.C. 1395ww note), as amended by sections 3123 and 10313 of the 
Patient Protection and Affordable Care Act (Public Law 111-148), is 
amended--
          (1) in subsection (a)(5), by striking ``5-year extension 
        period'' and inserting ``10-year extension period''; and
          (2) in subsection (g)--
                  (A) in the subsection heading, by striking ``Five-
                Year'' and inserting ``Ten-Year'';
                  (B) in paragraph (1), by striking ``additional 5-
                year'' and inserting ``additional 10-year'';
                  (C) by striking ``5-year extension period'' and 
                inserting ``10-year extension period'' each place it 
                appears;
                  (D) in paragraph (4)(B)--
                          (i) in the matter preceding clause (i), by 
                        inserting ``each 5-year period in'' after 
                        ``hospital during''; and
                          (ii) in clause (i), by inserting ``each 
                        applicable 5-year period in'' after ``the first 
                        day of''; and
                  (E) by adding at the end the following new 
                paragraphs:
          ``(5) Other hospitals in demonstration program.--During the 
        second 5 years of the 10-year extension period, the Secretary 
        shall apply the provisions of paragraph (4) to rural community 
        hospitals that are not described in paragraph (4) but are 
        participating in the demonstration program under this section 
        as of December 30, 2014, in a similar manner as such provisions 
        apply to rural community hospitals described in paragraph (4).
          ``(6) Expansion of demonstration program to rural areas in 
        any state.--
                  ``(A) In general.--The Secretary shall, 
                notwithstanding subsection (a)(2) or paragraph (2) of 
                this subsection, not later than 120 days after the date 
                of the enactment of this paragraph, issue a 
                solicitation for applications to select up to the 
                maximum number of additional rural community hospitals 
                located in any State to participate in the 
                demonstration program under this section for the second 
                5 years of the 10-year extension period without 
                exceeding the limitation under paragraph (3) of this 
                subsection.
                  ``(B) Priority.--In determining which rural community 
                hospitals that submitted an application pursuant to the 
                solicitation under subparagraph (A) to select for 
                participation in the demonstration program, the 
                Secretary--
                          ``(i) shall give priority to rural community 
                        hospitals located in one of the 20 States with 
                        the lowest population densities (as determined 
                        by the Secretary using the 2015 Statistical 
                        Abstract of the United States); and
                          ``(ii) may consider--
                                  ``(I) closures of hospitals located 
                                in rural areas in the State in which 
                                the rural community hospital is located 
                                during the 5-year period immediately 
                                preceding the date of the enactment of 
                                this paragraph; and
                                  ``(II) the population density of the 
                                State in which the rural community 
                                hospital is located.''.
  (b) Change in Timing for Report.--Subsection (e) of such section 410A 
is amended--
          (1) by striking ``Not later than 6 months after the 
        completion of the demonstration program under this section'' 
        and inserting ``Not later than August 1, 2018''; and
          (2) by striking ``such program'' and inserting ``the 
        demonstration program under this section''.

SEC. 104. REGULATORY RELIEF FOR LTCHS.

  (a) Technical Change to the Medicare Long-term Care Hospital 
Moratorium Exception.--
          (1) In general.--Section 114(d)(7) of the Medicare, Medicaid, 
        and SCHIP Extension Act of 2007 (42 U.S.C. 1395ww note), as 
        amended by sections 3106(b) and 10312(b) of Public Law 111-148, 
        section 1206(b)(2) of the Pathway for SGR Reform Act of 2013 
        (division B of Public Law 113-67), and section 112 of the 
        Protecting Access to Medicare Act of 2014, is amended by 
        striking ``The moratorium under paragraph (1)(A)'' and 
        inserting ``Any moratorium under paragraph (1)''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect as if included in the enactment of section 
        112 of the Protecting Access to Medicare Act of 2014.
  (b) Modification to Medicare Long-term Care Hospital High Cost 
Outlier Payments.--Section 1886(m) of the Social Security Act (42 
U.S.C. 1395ww(m)) is amended by adding at the end the following new 
paragraph:
          ``(7) Treatment of high cost outlier payments.--
                  ``(A) Adjustment to the standard federal payment rate 
                for estimated high cost outlier payments.--Under the 
                system described in paragraph (1), for fiscal years 
                beginning on or after October 1, 2017, the Secretary 
                shall reduce the standard Federal payment rate as if 
                the estimated aggregate amount of high cost outlier 
                payments for standard Federal payment rate discharges 
                for each such fiscal year would be equal to 8 percent 
                of estimated aggregate payments for standard Federal 
                payment rate discharges for each such fiscal year.
                  ``(B) Limitation on high cost outlier payment 
                amounts.--Notwithstanding subparagraph (A), the 
                Secretary shall set the fixed loss amount for high cost 
                outlier payments such that the estimated aggregate 
                amount of high cost outlier payments made for standard 
                Federal payment rate discharges for fiscal years 
                beginning on or after October 1, 2017, shall be equal 
                to 99.6875 percent of 8 percent of estimated aggregate 
                payments for standard Federal payment rate discharges 
                for each such fiscal year.
                  ``(C) Waiver of budget neutrality.--Any reduction in 
                payments resulting from the application of subparagraph 
                (B) shall not be taken into account in applying any 
                budget neutrality provision under such system.
                  ``(D) No effect on site neutral high cost outlier 
                payment rate.--This paragraph shall not apply with 
                respect to the computation of the applicable site 
                neutral payment rate under paragraph (6).''.

SEC. 105. SAVINGS FROM IPPS MACRA PAY-FOR THROUGH NOT APPLYING 
                    DOCUMENTATION AND CODING ADJUSTMENTS.

  Section 7(b)(1)(B)(iii) of the TMA, Abstinence Education, and QI 
Programs Extension Act of 2007 (Public Law 110-90), as amended by 
section 631(b) of the American Taxpayer Relief Act of 2012 (Public Law 
122-240) and section 414(1)(B)(iii) of the Medicare Access and CHIP 
Reauthorization Act of 2015 (Public Law 114-10), is amended by striking 
``an increase of 0.5 percentage points for discharges occurring during 
each of fiscal years 2018 through 2023'' and inserting ``an increase of 
0.4590 percentage points for discharges occurring during fiscal year 
2018 and 0.5 percentage points for discharges occurring during each of 
fiscal years 2019 through 2023''.

            TITLE II--PROVISIONS RELATING TO MEDICARE PART B

SEC. 201. CONTINUING MEDICARE PAYMENT UNDER HOPD PROSPECTIVE PAYMENT 
                    SYSTEM FOR SERVICES FURNISHED BY MID-BUILD OFF-
                    CAMPUS OUTPATIENT DEPARTMENTS OF PROVIDERS.

  (a) In General.--Section 1833(t)(21) of the Social Security Act (42 
U.S.C. 1395l(t)(21)) is amended--
          (1) in subparagraph (B)--
                  (A) in clause (i), by striking ``clause (ii)'' and 
                inserting ``the subsequent provisions of this 
                subparagraph''; and
                  (B) by adding at the end the following new clauses:
                          ``(iii) Deemed treatment for 2017.--For 
                        purposes of applying clause (ii) with respect 
                        to applicable items and services furnished 
                        during 2017, a department of a provider (as so 
                        defined) not described in such clause is deemed 
                        to be billing under this subsection with 
                        respect to covered OPD services furnished prior 
                        to November 2, 2015, if the Secretary received 
                        from the provider prior to December 2, 2015, an 
                        attestation (pursuant to section 413.65(b)(3) 
                        of title 42 of the Code of Federal Regulations) 
                        that such department was a department of a 
                        provider (as so defined).
                          ``(iv) Alternative exception beginning with 
                        2018.--For purposes of paragraph (1)(B)(v) and 
                        this paragraph with respect to applicable items 
                        and services furnished during 2018 or a 
                        subsequent year, the term `off-campus 
                        outpatient department of a provider' also shall 
                        not include a department of a provider (as so 
                        defined) that is not described in clause (ii) 
                        if--
                                  ``(I) the Secretary receives from the 
                                provider an attestation (pursuant to 
                                such section 413.65(b)(3)) not later 
                                than December 31, 2016 (or, if later, 
                                60 days after the date of the enactment 
                                of this clause), that such department 
                                met the requirements of a department of 
                                a provider specified in section 413.65 
                                of title 42 of the Code of Federal 
                                Regulations;
                                  ``(II) the provider includes such 
                                department as part of the provider on 
                                its enrollment form in accordance with 
                                the enrollment process under section 
                                1866(j); and
                                  ``(III) the department met the mid-
                                build requirement of clause (v) and the 
                                Secretary receives, not later than 60 
                                days after the date of the enactment of 
                                this clause, from the chief executive 
                                officer or chief operating officer of 
                                the provider a written certification 
                                that the department met such 
                                requirement.
                          ``(v) Mid-build requirement described.--The 
                        mid-build requirement of this clause is, with 
                        respect to a department of a provider, that 
                        before November 2, 2015, the provider had a 
                        binding written agreement with an outside 
                        unrelated party for the actual construction of 
                        such department.
                          ``(vii) Audit.--Not later than December 31, 
                        2018, the Secretary shall audit the compliance 
                        with requirements of clause (iv) with respect 
                        to each department of a provider to which such 
                        clause applies. If the Secretary finds as a 
                        result of an audit under this clause that the 
                        applicable requirements were not met with 
                        respect to such department, the department 
                        shall not be excluded from the term `off-campus 
                        outpatient department of a provider' under such 
                        clause.
                          ``(viii) Implementation.--For purposes of 
                        implementing clauses (iii) through (vii):
                                  ``(I) Notwithstanding any other 
                                provision of law, the Secretary may 
                                implement such clauses by program 
                                instruction or otherwise.
                                  ``(II) Subchapter I of chapter 35 of 
                                title 44, United States Code, shall not 
                                apply.
                                  ``(III) For purposes of carrying out 
                                this subparagraph with respect to 
                                clauses (iii) and (iv) (and clause 
                                (vii) insofar as it relates to clause 
                                (iv)), the Secretary shall provide for 
                                the transfer from the Supplementary 
                                Medical Insurance Trust Fund under 
                                section 1841, of $10,000,000 to the 
                                Centers for Medicare & Medicaid 
                                Services Program Management Account to 
                                remain available until December 31, 
                                2018.''; and
          (2) in subparagraph (E), by adding at the end the following 
        new clause:
                          ``(iv) The determination of an audit under 
                        subparagraph (B)(vii).''.
  (b) Effective Date.--The amendments made by this section shall be 
effective as if included in the enactment of section 603 of the 
Bipartisan Budget Act of 2015 (Public Law 114-74).

SEC. 202. TREATMENT OF CANCER HOSPITALS IN OFF-CAMPUS OUTPATIENT 
                    DEPARTMENT OF A PROVIDER POLICY.

  (a) In General.--Section 1833(t)(21)(B) of the Social Security Act 
(42 U.S.C. 1395l(t)(21)(B)), as amended by section 201(a), is amended--
          (1) by inserting after clause (v) the following new clause:
                          ``(vi) Exclusion for certain cancer 
                        hospitals.--For purposes of paragraph (1)(B)(v) 
                        and this paragraph with respect to applicable 
                        items and services furnished during 2017 or a 
                        subsequent year, the term `off-campus 
                        outpatient department of a provider' also shall 
                        not include a department of a provider (as so 
                        defined) that is not described in clause (ii) 
                        if the provider is a hospital described in 
                        section 1886(d)(1)(B)(v) and--
                                  ``(I) in the case of a department 
                                that met the requirements of section 
                                413.65 of title 42 of the Code of 
                                Federal Regulations after November 1, 
                                2015, and before the date of the 
                                enactment of this clause, the Secretary 
                                receives from the provider an 
                                attestation that such department met 
                                such requirements not later than 60 
                                days after such date of enactment; or
                                  ``(II) in the case of a department 
                                that meets such requirements after such 
                                date of enactment, the Secretary 
                                receives from the provider an 
                                attestation that such department meets 
                                such requirements not later than 60 
                                days after the date such requirements 
                                are first met with respect to such 
                                department.'';
          (2) in clause (vii), by inserting after the first sentence 
        the following: ``Not later than 2 years after the date the 
        Secretary receives an attestation under clause (vi) relating to 
        compliance of a department of a provider with requirements 
        referred to in such clause, the Secretary shall audit the 
        compliance with such requirements with respect to the 
        department.''; and
          (3) in clause (viii)(III), by adding at the end the 
        following: ``For purposes of carrying out this subparagraph 
        with respect to clause (vi) (and clause (vii) insofar as it 
        relates to such clause), the Secretary shall provide for the 
        transfer from the Supplementary Medical Insurance Trust Fund 
        under section 1841, of $2,000,000 to the Centers for Medicare & 
        Medicaid Services Program Management Account to remain 
        available until expended.''''.
  (b) Offsetting Savings.--Section 1833(t)(18) of the Social Security 
Act (42 U.S.C. 1395l(t)(18)) is amended--
          (1) in subparagraph (B), by inserting ``, subject to 
        subparagraph (C),'' after ``shall''; and
          (2) by adding at the end the following new subparagraph:
                  ``(C) Target pcr adjustment.--In applying section 
                419.43(i) of title 42 of the Code of Federal 
                Regulations to implement the appropriate adjustment 
                under this paragraph for services furnished on or after 
                January 1, 2018, the Secretary shall use a target PCR 
                that is 1.0 percentage points less than the target PCR 
                that would otherwise apply. In addition to the 
                percentage point reduction under the previous sentence, 
                the Secretary may consider making an additional 
                percentage point reduction to such target PCR that 
                takes into account payment rates for applicable items 
                and services described in paragraph (21)(C) other than 
                for services furnished by hospitals described in 
                section 1886(d)(1)(B)(v). In making any budget 
                neutrality adjustments under this subsection for 2018 
                or a subsequent year, the Secretary shall not take into 
                account the reduced expenditures that result from the 
                application of this subparagraph.''.
  (c) Effective Date.--The amendments made by this section shall be 
effective as if included in the enactment of section 603 of the 
Bipartisan Budget Act of 2015 (Public Law 114-74).

SEC. 203. TREATMENT OF ELIGIBLE PROFESSIONALS IN AMBULATORY SURGICAL 
                    CENTERS FOR MEANINGFUL USE AND MIPS.

  (a) In General.--Section 1848(a)(7)(D) of the Social Security Act (42 
U.S.C. 1395w-4(a)(7)(D)) is amended--
          (1) by striking ``hospital-based eligible professionals'' and 
        all that follows through ``No payment'' and inserting the 
        following: ``hospital-based and ambulatory surgical center-
        based eligible professionals.--
                          ``(i) Hospital-based.--No payment''; and
          (2) by adding at the end the following new clauses:
                          ``(ii) Ambulatory surgical center-based.--
                        Subject to clause (iv), no payment adjustment 
                        may be made under subparagraph (A) for 2017 and 
                        2018 in the case of an eligible professional 
                        with respect to whom substantially all of the 
                        covered professional services furnished by such 
                        professional are furnished in an ambulatory 
                        surgical center.
                          ``(iii) Determination.--The determination of 
                        whether an eligible professional is an eligible 
                        professional described in clause (ii) may be 
                        made on the basis of--
                                  ``(I) the site of service (as defined 
                                by the Secretary); or
                                  ``(II) an attestation submitted by 
                                the eligible professional.
                        Determinations made under subclauses (I) and 
                        (II) shall be made without regard to any 
                        employment or billing arrangement between the 
                        eligible professional and any other supplier or 
                        provider of services.
                          ``(iv) Sunset.--Clause (ii) shall no longer 
                        apply as of the first year that begins more 
                        than 3 years after the date on which the 
                        Secretary determines, through notice and 
                        comment rulemaking, that certified EHR 
                        technology applicable to the ambulatory 
                        surgical center setting is available.''.
  (b) Continued Application of Certain Provisions Under MIPS.--Section 
1848(o)(2)(D) of the Social Security Act (42 U.S.C. 1395w-4(o)(2)(D)) 
is amended by adding at the end the following new sentence: ``The 
provisions of subparagraphs (B) and (D) of subsection (a)(7), including 
the application of clause (iv) of such subparagraph (D), shall apply to 
assessments of MIPS eligible professionals under subsection (q) with 
respect to the performance category described in subsection 
(q)(2)(A)(iv) in a manner similar to the manner in which such 
provisions apply with respect to payment adjustments made under 
subsection (a)(7)(A).''.

                  TITLE III--OTHER MEDICARE PROVISIONS

SEC. 301. DELAY IN AUTHORITY TO TERMINATE CONTRACTS FOR MEDICARE 
                    ADVANTAGE PLANS FAILING TO ACHIEVE MINIMUM QUALITY 
                    RATINGS.

  (a) Findings.--Consistent with the studies provided under the IMPACT 
Act of 2014 (Public Law 113-185), it is the intent of Congress--
          (1) to continue to study and request input on the effects of 
        socioeconomic status and dual-eligible populations on the 
        Medicare Advantage STARS rating system before reforming such 
        system with the input of stakeholders; and
          (2) pending the results of such studies and input, to provide 
        for a temporary delay in authority of the Centers for Medicare 
        & Medicaid Services (CMS) to terminate Medicare Advantage plan 
        contracts solely on the basis of performance of plans under the 
        STARS rating system.
  (b) Delay in MA Contract Termination Authority for Plans Failing To 
Achieve Minimum Quality Ratings.--Section 1857(h) of the Social 
Security Act (42 U.S.C. 1395w-27(h)) is amended by adding at the end 
the following new paragraph:
          ``(3) Delay in contract termination authority for plans 
        failing to achieve minimum quality rating.--During the period 
        beginning on the date of the enactment of this paragraph and 
        through the end of plan year 2018, the Secretary may not 
        terminate a contract under this section with respect to the 
        offering of an MA plan by a Medicare Advantage organization 
        solely because the MA plan has failed to achieve a minimum 
        quality rating under the 5-star rating system under section 
        1853(o)(4).''.

SEC. 302. REQUIREMENT FOR ENROLLMENT DATA REPORTING FOR MEDICARE.

  Section 1874 of the Social Security Act (42 U.S.C. 1395kk) is amended 
by adding at the end the following new subsection:
  ``(g) Requirement for Enrollment Data Reporting.--
          ``(1) In general.--Each year (beginning with 2016), the 
        Secretary shall submit to the Committees on Ways and Means and 
        Energy and Commerce of the House of Representatives and the 
        Committee on Finance of the Senate a report on Medicare 
        enrollment data (and, in the case of part A, on data on 
        individuals receiving benefits under such part) as of a date in 
        such year specified by the Secretary. Such data shall be 
        presented--
                  ``(A) by Congressional district and State; and
                  ``(B) in a manner that provides for such data based 
                on--
                          ``(i) fee-for-service enrollment (as defined 
                        in paragraph (2));
                          ``(ii) enrollment under part C (including 
                        separate for aggregate enrollment in MA-PD 
                        plans and aggregate enrollment in MA plans that 
                        are not MA-PD plans); and
                          ``(iii) enrollment under part D.
          ``(2) Fee-for-service enrollment defined.--For purpose of 
        paragraph (1)(B)(i), the term `fee-for-service enrollment' 
        means aggregate enrollment (including receipt of benefits other 
        than through enrollment) under--
                  ``(A) part A only;
                  ``(B) part B only; and
                  ``(C) both part A and part B.''.

SEC. 303. UPDATING THE WELCOME TO MEDICARE PACKAGE.

  (a) In General.--Not later than 12 months after the last day of the 
period for the request of information described in subsection (b), the 
Secretary of Health and Human Services shall, taking into consideration 
information collected pursuant to subsection (b), update the 
information included in the Welcome to Medicare package to include 
information, presented in a clear and simple manner, about options for 
receiving benefits under the Medicare program under title XVIII of the 
Social Security Act (42 U.S.C. 1395 et seq.), including through the 
original medicare fee-for-service program under parts A and B of such 
title (42 U.S.C. 1395c et seq., 42 U.S.C. 1395j et seq.), Medicare 
Advantage plans under part C of such title (42 U.S.C. 1395w-21 et 
seq.), and prescription drug plans under part D of such title (42 
U.S.C. 1395w-101 et seq.)). The Secretary shall make subsequent updates 
to the information included in the Welcome to Medicare package as 
appropriate.
  (b) Request for Information.--Not later than six months after the 
date of the enactment of this Act, the Secretary of Health and Human 
Services shall request information, including recommendations, from 
stakeholders (including patient advocates, issuers, and employers) on 
information included in the Welcome to Medicare package, including 
pertinent data and information regarding enrollment and coverage for 
Medicare eligible individuals.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 5273, the ``Helping Hospitals Improve 
Patient Care Act of 2016'' (``HIP-C''), as ordered reported by 
the Committee on Ways and Means on May 24, 2016, would address 
payment issues for Medicare providers and better inform 
Medicare beneficiaries on how to enroll in the program. The 
main focus of HIP-C is to provide relief for those hospitals 
that were ``mid-build'' when the Bipartisan Budget Act of 2015 
(``BBA '15'') was signed into law. The bill also includes 
numerous policies promoted by Ways and Means Committee members.
    HIP-C provides an exception for those Hospital Outpatient 
Departments (``HOPDs'') that were mid-build at the time of 
enactment of the BBA '15. ``Mid-build'' is defined as a 
provider that had a binding written agreement with an outside, 
unrelated, party for the actual construction of the HOPD before 
November 2, 2016. Each HOPD will be required to submit a 
certification from the provider's Chief Executive Officer/Chief 
Operating Officer that the HOPD meets the definition of mid-
build within 60 days of the date of enactment. Further, each 
mid-build HOPD will be required to submit an attestation, 
subject to an audit by the Centers for Medicare and Medicaid 
Services (CMS), that it meets the requirements of being 
provider-based (PBD) (42 Code of Federal Regulations 413.65) by 
December 31, 2016 (or 60 days after the date of enactment, if 
later).
    HIP-C also affords all off-campus HOPDs that are part of a 
cancer hospital (defined as having an exemption from Medicare's 
prospective payment systems) an additional exemption from 
section 603 of the BBA '15. The bill also requires all future 
cancer HOPDs to attest to meeting the requirements of being 
PBD, subject to an audit by CMS. HIP-C includes a payment 
reduction to the target payment-to-cost ratio that is used to 
calculate the additional payments cancer hospitals receive.
    Further, HIP-C addresses several concerns about section 
3025 of the Affordable Care Act of 2010 (P.L. 111-148; 
``ACA''), the Hospital Readmissions Reduction Program 
(``HRRP''), which stakeholders have raised. The chief concern 
has been that the HRRP does not take into account socioeconomic 
status of the hospitals' patients when calculating the payment 
penalties for the 30-day readmission measures. HIP-C requires 
the Secretary to implement a transitional risk adjustment 
methodology to payment penalties to serve as a proxy of socio-
economic status for the HRRP. CMS will continue to publicly 
report hospitals' performance on HRRP measures. In addition to 
the new payment calculation, the bill clarifies that the 
Secretary is able to permanently use a more refined methodology 
for the HRRP following the analysis required by the Improving 
Medicare Post-Acute Care Transformation Act of 2014 
(``IMPACT''). The bill also requires a study by the Medicare 
Payment Advisory Commission (``MedPAC''), and allows for an 
analysis of ``V-codes'' and an exploration of potential 
exclusions.
    There are several other sections in the bill, including: a 
crosswalk to translate inpatient hospital codes to outpatient 
hospital codes; an extension to the Rural Community 
Demonstration Program; a ``mid-build'' exception to the current 
law moratorium on bed expansion for Long-Term Care Hospitals 
(``LTCHs''); a reduction to the inpatient hospital payment 
update that was included in the Medicare and CHIP 
Reauthorization Act of 2015 (``MACRA''); an exclusion for 
physicians who furnish substantially all of their Medicare 
services at ambulatory surgical centers (``ASC'') from the 
penalties under the Electronic Health Records (``EHR'') 
Incentives Program and subsequent program under the Merit-Based 
Incentive Payment System (``MIPS''); a delay for three years in 
the authority to terminate Medicare Advantage (``MA'') 
contracts based solely on plans' failing to achieve minimum 
quality ratings under the STARS rating system; a requirement 
for the Secretary to publish Medicare enrollment data on an 
annual basis for MA, Part D, and fee-for-service; and a 
requirement for the Secretary to revise the pre-Medicare 
eligibility enrollment notification to include the available 
options for receiving benefits under the Medicare program.

                 B. Background and Need for Legislation

    On May 18, 2016, Health Subcommittee Chairman Tiberi (R-OH) 
and Ranking Member McDermott (D-WA), introduced H.R. 5273, 
legislation to advance reforms for hospitals and other Medicare 
providers. The Committee on Ways and Means received the primary 
referral for the bill because the bill includes Medicare 
provisions that fall within the jurisdiction of the Committee, 
including relevant provisions of the Social Security Act.
    Over the past several years, there has been an increase in 
the rate of physician practices converted into HOPDs in order 
to take advantage of the higher reimbursement rates. Section 
603 of BBA '15 acted to change this misalignment in the 
Medicare program. Specifically, section 603 codified the CMS 
definition of PBD off-campus HOPDs as those locations that are 
not on the main campus of a hospital and are located between 
250 yards and 35 miles from the main campus. Further, the 
section defined a ``new'' PBD HOPD as an entity that was not 
currently billing for outpatient services as of date of 
enactment, which effectively grandfathered any off-campus PBD 
HOPD that was billing outpatient services before date of 
enactment (November 2, 2015). The practical effect of this 
policy is that new off-campus PBD HOPDs would be eligible for 
only physician fee schedule or ambulatory surgical center 
payment rates rather than the higher hospital outpatient 
payment rate.
    The Committee has a concern with Section 603 of the BBA '15 
because it did not exclude from the new payment rates those 
off-campus HOPDs that were mid-build before the date of 
enactment and inadvertently included ``cancer hospitals'' or 
those hospitals that are exempt from Medicare's inpatient and 
outpatient prospective payment systems.

                         C. Legislative History


Background

    H.R. 5273 was introduced on May 18, 2016, and was referred 
to the Committee on Ways and Means and additionally to the 
Committee on Energy and Commerce.

Committee hearings

    On September 9, 2011, the Committee on Ways and Means 
Subcommittee on Health held a hearing to examine the impact 
mergers and acquisitions in the health care sector are having 
on Medicare spending, beneficiary costs and private health 
insurance premiums.
    On July 24, 2014, the Committee on Ways and Means 
Subcommittee on Health held a hearing on the status of the MA 
program.
    On May 19, 2015, the Committee on Ways and Means 
Subcommittee on Health held a hearing to examine competition in 
the Medicare program, including the use of moratoria.
    On July 22, 2015, the Committee on Ways and Means 
Subcommittee on Health held a hearing on hospital payment 
issues, including the differences between inpatient and 
outpatient reimbursement, medical education and 
disproportionate share hospital (DSH) payments.
    On July 28, 2015, the Committee on Ways and Means 
Subcommittee on Health held a hearing on the status of rural 
health for Medicare beneficiaries and to highlight Member 
priorities.

Committee action

    The Committee on Ways and Means marked up H.R. 5273, the 
``Helping Hospitals Improve Patient Care Act of 2015,'' on May 
24, 2016, and ordered the bill, as amended, favorably reported 
(with a quorum being present). In addition, the Committee on 
Ways and Means previously marked up the following bills that 
were also included in H.R. 5273:
    H.R. 887: The Committee on Ways and Means marked up H.R. 
887, the ``Electronic Health Fairness Act of 2015,'' on 
February 26, 2015, and ordered the bill favorably reported to 
the House of Representatives as amended by a voice vote (with a 
quorum present).
    H.R. 2505: The Committee on Ways and Means marked up H.R. 
2505, the ``Medicare Advantage Coverage Transparency Act of 
2015,'' on June 2, 2015, and ordered the bill favorably 
reported to the House of Representatives as amended by a voice 
vote (with a quorum being present).
    H.R. 2506: The Committee on Ways and Means marked up H.R. 
2506, ``Senior's Health Care Plan Protection Act of 2015,'' on 
June 2, 2015, and ordered the bill, as amended, favorably 
reported (with a quorum being present).
    H.R. 2580: The Committee on Ways and Means marked up H.R. 
2580, ``LTCH Technical Correction Act of 2015,'' on June 2, 
2015, and ordered the bill, as amended, favorably reported 
(with a quorum being present).

                      II. EXPLANATION OF THE BILL


                              PRESENT LAW

    Under current law, the Secretary is not required to link 
the codes that are used to compare delivery of similar services 
between the inpatient and outpatient hospital settings. Today, 
the CMS requires inpatient hospitals to submit International 
Classification of Disease (ICD-10) codes and requires 
outpatient hospitals to submit Healthcare Common Procedure 
Classification System (HCPCS) codes for reimbursement purposes.
    The current law hospital readmissions program, the Hospital 
Readmissions Reduction Program (HRRP), as mandated by section 
3025 of the ACA. Beginning October 1, 2014, and thereafter, a 
hospital can be penalized as much as 3 percent of its annual 
market basket update if the hospital has a higher than expected 
rate of readmissions.
    The current law rural community hospital demonstration was 
mandated by section 410A of the ``Medicare Modernization Act of 
2003'' (P.L. 108-173). The demonstration was further extended 
by section 10313 of the ACA. In order to participate in the 
demonstration, a hospital must be located in Alaska, Arizona, 
Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota, 
Mississippi, Montana, Nebraska, Nevada, New Mexico, North 
Dakota, Oklahoma, Oregon, South Dakota, Utah, and Wyoming.
    The current law LTCH moratorium was created by section 1206 
of the Bipartisan Budget Act of 2013 (P.L. 113-67; ``BBA 
'13''). Beginning January 1, 2015, through September 30, 2017, 
section 1206 established the LTCH moratorium. Specifically, 
section 1206 modified section 114(d) of the ``Medicare, 
Medicaid and SCHIP Extension Act of 2007'' (P.L. 110-173), as 
amended by sections 3106(b) and 10312(b) of the ACA.
    Three months after BBA '13 of 2013 (P.L. 113-67) was signed 
into law, Congress further modified the LTCH moratorium with 
section 112 of the Protecting Access to Medicare Act of 2014 
(P.L. 113-93; ``PAMA''). PAMA provided for an exception for 
LTCH buildings that were mid-build.
    Under current law, hospitals are receiving a 0.8 percent 
reduction in payments, as mandated by section 605 of the 
American Taxpayer Relief Act of 2012 (P.L. 112-240; ``ATRA''). 
The annual update for hospitals was subsequently altered by 411 
of the MACRA (P.L. 114-10). Prior to the implementation of 
MACRA, hospitals were expected to receive an additional 
estimated 3.2 percent update for fiscal year 2018. However, 
under MACRA, hospitals are scheduled to receive an additional 
0.5 percent update for fiscal years 2018 through 2023.
    Under current law, there are four basic settings where 
Medicare patients can receive outpatient services (care that 
does not require an overnight stay): independent physician 
offices, ASCs, clinical labs, and HOPDs. Similarly, there are 
four different payment systems that apply to the services 
provided in these settings: (1) Outpatient Prospective Payment 
System (``OPPS''); (2) ASC payment system; (3) clinical lab fee 
schedule (``CLFS''); and (4) the physician fee schedule 
(``PFS''). In general, the OPPS pays significantly higher 
reimbursement rates than the PFS, CLFS or ASC payment systems. 
Section 603 of the Bipartisan Budget Act of 2015 (``BBA '15'') 
changed the payments to the lower PFS, CLFS or ASC 
reimbursement level for those off-campus HOPDs who were not 
billing the OPPS prior to November 2, 2015. However, BBA '15 
did not provide for an exception for the off-campus HOPDs that 
were mid-build when the law took effect.
    The current law PPS-exemption for cancer hospitals was 
authorized in the Tax, Equity and Fiscal Responsibility Act of 
1982 (P.L. 97-248; ``TEFRA''). Further, section 3138 of the ACA 
authorized CMS to amend the outpatient payment methodology to 
reimburse cancer hospitals based on a target payment-to-cost 
ratio (``PCR'') or the weighted average PCR for all PPS 
hospitals. When a cancer hospital's individual PCR is lower 
than the target PCR, CMS provides an add-on payment for 
outpatient services during cost report settlement that 
equalizes the two PCRs. Under current law, section 603 of BBA 
'15 also applies to cancer hospitals. Therefore, under current 
law, new off-campus centers for which cancer hospitals begin 
billing for outpatient services after November 2, 2015 would 
not qualify for the cancer hospital payments.
    The American Recovery and Reinvestment Act) of 2009 (P.L. 
111-5; ``ARRA'') established incentives for physicians and 
other professionals, collectively referred to as ``eligible 
professionals,'' and for hospitals to adopt EHR technology that 
meet certain certification standards. The ARRA excluded the 
services of physicians who furnish ``substantially all'' of 
their services in an inpatient hospital or hospital emergency 
department using the facilities' EHR system.
    Under current law, the Secretary has the authority to 
terminate Medicare Advantage contracts based on STARS rating 
system established by the Secretary through the regulatory 
process. Further, current law does not require the CMS to 
publish Medicare enrollment data by Congressional District, 
state, or zip code.
    Currently, seniors receive a welcome notification from 
Medicare three months prior to enrollment eligibility. This 
notification does not clearly explain key information about the 
choices that the beneficiaries will face when looking to 
enroll.

                       EXPLANATION OF PROVISIONS

    Section 101 of H.R. 5273 requires the Secretary to 
translate inpatient hospital codes (International 
Classification of Disease) to outpatient hospital (Healthcare 
Common Procedure Classification System) codes for 10 surgical 
procedures. This ``crosswalk'' is required to be completed no 
later than January 1, 2018.
    Section 102 of H.R. 5273 requires the Secretary to 
implement a transitional risk adjustment methodology to serve 
as a proxy of socio-economic status for the HRRP, including the 
clarification that the calculation should apply only to a 
hospital's Medicare population. In addition to the transitional 
adjustment, the section clarifies that the Secretary is able to 
permanently use a more refined methodology following the 
analysis required by the IMPACT Act. The section also requires 
a study by the MedPAC, and allows for an analysis of ``V-
codes'' and an exploration of potential exclusions.
    Section 103 of H.R. 5273 requires the Secretary to extend 
the current-law Rural Community Hospital Demonstration for an 
additional 5 years. The extension also permits the Secretary to 
include hospitals that have recently closed in eligible states.
    Section 104 of H.R. 5273 provides regulatory relief by 
allowing LTCHs to qualify for a ``mid-build'' exception to the 
current law moratorium on bed expansion. The section is offset 
by a reduction to LTCH outlier payments, requiring a higher 
threshold for LTCH discharges to qualify for outlier payments.
    Section 105 of H.R. 5273 reduces the payment update that 
was included in the bipartisan MACRA. Specifically, the update 
of 0.5 percent for fiscal year 2018 is changed to an update of 
0.4590.
    Section 201 of H.R. 5273 provides for an exception to 
section 603 of BBA '15 for HOPDs that were defined as ``mid-
build'' prior to November 2, 2015. ``Mid-build'' is defined as 
a provider that had a binding written agreement with an 
outside, unrelated, party for the actual construction of the 
HOPD. To qualify as ``mid-build,'' each HOPD will be required 
to submit a certification from the provider's Chief Executive 
Officer/Chief Operating Officer that the HOPD meets the 
definition of mid-build prior to 60 days after the date of 
enactment. Further, each mid-build HOPD will be required to 
submit an attestation that it meets the requirements of being 
provider-based (42 CFR 413.65) by December 31, 2016 or if 
later, 60 days after the date of enactment. In addition, the 
section also requires the Secretary to audit the accuracy of 
these attestations. HOPDs that meet all of above requirements 
will receive the full HOPD payment rate beginning January 1, 
2018 instead of the lower physician fee schedule or ambulatory 
surgical center payments required under the BBA '15. Finally, 
those off-campus HOPDs that submitted a voluntary attestation 
prior to December 2, 2015 will receive the full HOPD payment 
rate beginning January 1, 2017.
    Section 202 of H.R. 5273 provides that PPS-exempt cancer 
hospitals are not included in the payment changes made under 
section 603 of the BBA '15. This ensures that these facilities' 
payments continue under their existing separate system, as 
opposed to the inpatient and outpatient PPS systems. The 
section also requires cancer HOPDs to attest and requires the 
Secretary to audit the accuracy of the attestation. Section 202 
also includes a payment reduction to the target payment-to-cost 
ratio that is used to calculate the additional payments that 
PPS-exempt cancer hospitals receive.
    Section 203 of H.R. 5273 excludes physicians who furnish 
substantially all of their Medicare services at an ASC from the 
penalties under the EHR Incentives Program and subsequent 
program under MIPS. This exclusion ends three years after the 
Secretary of Health and Human Services, in consultation with 
stakeholders, determines that EHRs are available at the ASC 
setting.
    Section 301 of H.R. 5273 delays for three years the 
authority to terminate MA contracts based solely on plans' 
failing to achieve minimum quality ratings under the Medicare 
Advantage STARS rating system. The delay would not prevent CMS 
from terminating plans for the other ten performance categories 
considered in the Past Cycle Performance Review at any time.
    Section 302 of H.R. 5273 requires the Secretary to publish 
Medicare enrollment data by Congressional District, zip code, 
and state on an annual basis. This data includes MA, Part D, 
and fee-for-service enrollment data.
    Section 303 of H.R. 5273 requires the Secretary to revise 
the pre-Medicare eligibility enrollment notification to 
include, in a simplified manner, the available options for 
receiving benefits under the Medicare program, including 
through the original Medicare fee-for-service program, MA, and 
Part D. The section also requires the Secretary to reach out to 
stakeholders on their recommendations on what such notice would 
include.

                           REASONS FOR CHANGE

    As noted in its March 2015 Report to Congress, MedPAC 
``used several proprietary crosswalks of Current Procedural 
Terminology (and equivalent HCPCS) to ICD procedure codes 
because an official Medicare crosswalk does not exist.'' In 
order to more accurately compare, for both clinical and 
reimbursement purposes, inpatient and outpatient surgical 
procedures, H.R. 5273 requires the Secretary to develop a 
crosswalk linking codes. While the bill requires the 
publication and dissemination of the crosswalk, including 
software, the bill does not provide the Secretary the authority 
to use the crosswalk for implementing changes in reimbursement.
    As documented in its June 2013 Report to Congress, MedPAC 
recommended that the Congress consider providing the Secretary 
the authority to ``evaluate hospital readmission rates against 
a group of peers with a similar share of poor Medicare 
beneficiaries as a way to adjust readmission penalties for 
socioeconomic status.'' Further, hospitals have raised several 
concerns about the HRRP. Chief among those concerns has been 
not taking socio-economic status into account when calculating 
HRRP payment adjustments. Therefore, H.R. 5273 requires the 
Secretary to use a transitional adjustment under which 
hospitals would be placed into groups with similar percentages 
of dually eligible patients, as compared to their overall 
Medicare population to determine any payment adjustments.
    H.R. 5273 extends the rural community hospital 
demonstration because it is authorized only through the end of 
2015. The extension will provide additional time to develop 
permanent policy.
    The Committee intended for the change made with section 112 
of the PAMA to provide for an exception process that applied to 
both new building and expansion of beds. Due to a legislative 
drafting error, the exception process was not included for 
expansion of beds. Therefore, H.R. 5273 calls for a technical 
fix to the current law LTCH moratorium exception process.
    The Committee intends to fully offset the cost of H.R. 
5273. Therefore, the annual update for hospitals, as modified 
by MACRA, is reduced for fiscal year 2018.
    Since BBA '15 did not account for hospital outpatient 
departments that were mid-build, it was essential to allow 
projects that were mid-build before the date of enactment 
(November 2, 2015) the ability to receive the higher outpatient 
payments that were in effect when the projects began 
construction. In the past, Congress has afforded Medicare 
providers an exception for mid-build projects, such as the LTCH 
moratorium included in section 114 of the Medicare, Medicaid, 
and SCHIP Extension Act of 2007 (P.L. 110-173; ``MMSEA'') and 
section 112 of the PAMA. Therefore, H.R. 5273 allows for this 
exception.
    As stated above, section 603 of BBA '15 inadvertently 
included cancer hospitals. It was not the intent of Congress to 
include cancer hospitals under section 603 of BBA '15. 
Therefore, H.R. 5273 carves cancer hospitals out of section 
603.
    Including ASC patient encounters in the total number of 
patient encounters to be furnished in a setting with certified 
EHR technology puts physicians who practice in the ASC setting 
at a disadvantage. It holds them accountable for using 
certified EHR technology despite the fact that Congress did not 
offer incentives for ASCs to adopt EHR technology as it did for 
other care settings. Therefore, H.R. 5273 provides an exception 
for physicians practicing in ASCs.
    CMS should provide a more transparent accounting of 
Medicare enrollment data to Congress and other relevant 
government offices. Therefore, H.R. 5273 provides for better 
understanding of how Medicare is serving the health care needs 
of the nation as well as individual congressional districts.
    Seniors should have access to the plans that they choose 
and want. A decision to terminate a Medicare Advantage contract 
can be very disruptive, particularly to low-income or dually 
eligible beneficiaries, as well as those with limited medical 
access. Research and studies have shown that STARS measures may 
unduly affect plans that serve these beneficiaries. Therefore, 
H.R. 5273 delays for three years the Secretary's authority to 
terminate plans solely due to a lack of meeting minimum STARS 
measures while studies continue, such as those required under 
the IMPACT Act.
    The decision process when seniors are eligible to enroll in 
Medicare can be complex, and making incorrect or late decisions 
can affect seniors financially. H.R. 5273 would send the 
initial notification that seniors receive earlier and expand it 
to include information on all of the choices for enrollment 
once they are Medicare eligible in a clear and concise manner.

                            EFFECTIVE DATES

    The effective date of section 101 is January 1, 2018.
    The effective dates in section 102 are October 1, 2018 for 
the dually eligible adjustment and June 2017 for the MedPAC 
Report to Congress.
    The effective date of section 103 is the date of enactment.
    The effective dates in section 104 are April 1, 2014 for 
the LTCH bed moratorium and October 1, 2017 for the LTCH 
outlier change.
    The effective date of section 105 is October 1, 2017.
    The effective dates in section 201 are January 1, 2017 for 
deemed HOPDs and January 1, 2018 for mid-build HOPDs, 60 days 
after the date of enactment for the mid-build certification, 
December 31, 2016 (or 60 days after the date if later) for 
submission of the attestation and December 31, 2018 for 
auditing.
    The effective dates in section 202 are November 2, 2015 for 
the exemption from Section 603 of BBA '15 and January 1, 2018 
for the payment-to-cost ratio adjustment.
    The effective date of section 203 is January 1, 2017.
    The effective date of section 301 is the date of enactment.
    The effective date of section 302 is 2016.
    The effective dates for section 303 are 6 months after the 
date of enactment for the request for information and 12 months 
after the date of the request for information to update the 
Welcome to Medicare package.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 5273, the ``Helping Hospitals Improve 
Patient Care Act of 2015,'' on May 24, 2016.
    The bill, H.R. 5273, was ordered favorably reported as 
amended by voice vote (with a quorum being present).

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 5273, as 
reported. The Committee agrees with the estimate prepared by 
the Congressional Budget Office (CBO), which is included below.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee states further that the bill involves no new or 
increased tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, June 3, 2016.
Hon. Kevin Brady,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5273, the Helping 
Hospitals Improve Patient Care Act of 2016.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Lori Housman.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 5273--Helping Hospitals Improve Patient Care Act of 2016

    Summary: H.R. 5273 would modify Medicare payment rules for 
certain hospital outpatient departments and some hospital 
inpatient services, increase the number of beds for long-term 
care hospitals (LTCHs), extend a demonstration involving rural 
community hospitals, modify meaningful use standards for some 
physicians practicing in ambulatory surgical centers, and delay 
the Center for Medicare and Medicaid Services' (CMS) authority 
to terminate certain Medicare Advantage (MA) contracts.
    CBO estimates that enacting H.R. 5273 would increase direct 
spending by $50 million over the 2017-2021 period but decrease 
direct spending by $14 million over the 2017-2026 period. Pay-
as-you-go procedures apply because enacting the legislation 
would affect direct spending. Enacting the bill would not 
affect revenues.
    CBO estimates that enacting the legislation would not 
increase net direct spending or on-budget deficits by more than 
$5 billion in any of the four consecutive 10-year periods 
beginning in 2027.
    H.R. 5273 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary effect of H.R. 5273 is shown in the following table. 
The costs of this legislation fall within budget function 570 
(Medicare).

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         By fiscal year, in millions of dollars--
                                                         ---------------------------------------------------------------------------------------------------------------------------------------
                                                             2017       2018       2019       2020       2021       2022       2023       2024       2025       2026     2017-2021    2017-2026
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         INCREASES OR DECREASES (-) IN DIRECT SPENDINGab
 
TITLE I--PROVISIONS RELATING TO MEDICARE PART A:
    Rural hospital demonstration........................         26        102        -29        -77          0          0         -6        -19        -17          0           22          -21
    Long-term care hospitals............................         -1          5         10          0         -2         -2         -2         -2         -3         -3           12            0
    IPPS update.........................................          0        -55        -70        -75        -80        -85        -90        -90       -100       -105         -280         -750
TITLE II--PROVISIONS RELATING TO MEDICARE PART B:
    Payment rules for off-campus outpatient departments.         20         50         60         70         80         90         90         90        100        110          280          760
    Payment rules for off-campus outpatient departments           5          5          5          5          0          0         -5         -5         -5         -5           20            0
     of cancer hospitals................................
    Electronic health records in ambulatory surgical              4          9          4          0          0          0          0          0          0          0           17           17
     centers............................................
TITLE III--OTHER MEDICARE PROVISIONS:
    Delay termination for Medicare Advantage plans......          0         -5        -10         -5          0          0          0          0          0          0          -20          -20
        Total, Net Increases or Decreases (-) in Direct          54        111        -30        -82         -2          3        -13        -27        -25         -3           50          -14
         Spending Outlays...............................
 
                                                 NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM INCREASES OR DECREASES (-) IN DIRECT SPENDING
 
Impact on Deficit.......................................         54        111        -30        -82         -2          3        -13        -27        -25         -3           50         -14
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Components may not add to totals because of rounding. IPPS = inpatient prospective payment system; TRICARE = the health plan operated by the Department of Defense.
aBudget authority equals outlays for direct spending provisions. All changes in direct spending are on-budget.
bAll Medicare provisions include interactions with Medicare Advantage payments, Medicare Part A and Part B premiums, and TRICARE.

    Basis of estimate:

             TITLE I. PROVISIONS AFFECTING MEDICARE PART A

    Rural hospital demonstration. Section 103 of the bill would 
extend the Rural Community Hospital Demonstration Program for 
an additional five years and allow more hospitals to enter the 
demonstration. Under the demonstration program, Medicare pays 
certain hospitals in rural areas on the basis of the reasonable 
costs they incur instead of using the payment rates determined 
by Medicare's Inpatient Prospective Payment System (IPPS). CBO 
estimates that enacting this provision would increase direct 
spending in fiscal years 2017 and 2018. However, when the cost 
reports for those years are settled (generally five years after 
the fiscal year ends), the Medicare program would recoup those 
increases in payments by reducing the payment rates for all 
hospitals paid under the IPPS. Those changes in payments to 
hospitals also would affect payment rates for Medicare 
Advantage plans, which are based on spending in the fee-for-
service part of Medicare. CBO estimates that the initial 
increases in payments to MA plans would be smaller than the 
subsequent reductions (when the hospitals' cost reports are 
settled) because the share of Medicare beneficiaries enrolled 
in MA is projected to increase over the next ten years. In 
total, CBO estimates that section 103 would reduce direct 
spending for Medicare by $21 million over the 2017-2026 period.
    Long-term care hospitals. Title I would lift a moratorium 
in current law that prohibits existing long-term care hospitals 
(LTCHs) from increasing the number of beds in their facilities. 
CBO estimates that provision would increase payments to LTCHs 
by about $20 million over the 2017-2026 period. To offset that 
increase, payment rates for LTCH services would be reduced by 
0.08 percent beginning in 2017. In combination, CBO estimates 
those provisions would have no net budgetary effect over the 
2017-2026 period.
    IPPS update. The bill would reduce the update to IPPS 
payment rates for services furnished in fiscal year 2018 by 
0.04 percentage points. CBO estimates that provision would 
reduce direct spending for Medicare by $750 million over the 
2017-2026 period.
    Other provisions. Title I also would require the Secretary 
of Health and Human Services to develop a mechanism that would 
enable services provided in an outpatient department to be 
assigned to the diagnosis-related groups that are used to set 
payment rates for hospital inpatient services. In addition, 
Title I would require the Secretary to modify the criteria for 
determining which hospitals are subject to payment reductions 
related to high readmission rates. CBO estimates those 
provisions would have no budgetary effect.

             TITLE II. PROVISIONS AFFECTING MEDICARE PART B

    Payment rules for off-campus outpatient departments. 
Section 201 would exempt certain hospital outpatient 
departments (HOPDs) from payment rules established in the 
Bipartisan Budget Act of 2015 (BBA15). Those payment rules 
require Medicare to pay for services furnished in new off-
campus facilities using the payment rates that would have been 
in effect if the services were performed in an office setting 
or an ambulatory surgical center beginning in 2018.\1\
---------------------------------------------------------------------------
    \1\In Medicare, payment rates for the same service vary based on 
the setting. Services provided in an office setting by physicians and 
health professionals are paid a single fee from the physician fee 
schedule (PFS). For services provided in facilities, such as HOPD or 
ambulatory surgical centers, Medicare pays the practitioner a fee from 
the PFS, which is lower than the comparable fee in the professional's 
office, and a facility fee to either the HOPD or ASC. Generally, the 
total payment rate for services provided in facilities is higher than 
the rate for the same service provided in an office.
---------------------------------------------------------------------------
    Off-campus facilities that were already billing as HOPDs 
when BBA15 was enacted continue to receive the higher payment 
rates that apply to an outpatient department on the campus of a 
hospital. H.R. 5273 would allow off-campus facilities that were 
under construction on November 2, 2015, to be paid at the same 
rates as an HOPD beginning in 2018. H.R. 5273 would require 
such facilities to document and attest that status, and the 
Secretary of Health and Human Services would be required to 
conduct audits during 2017 and 2018.
    Nearly 100 hospitals have identified themselves as having 
off-campus facilities under construction on November 2, 2015. 
Based on that information, CBO estimates that increasing 
payment rates for services provided in those facilities would 
increase net Medicare spending by $750 million over the 2017-
2026 period. H.R. 5273 would also provide an additional $10 
million in funding for implementing section 201.
    Payment rules for off-campus outpatient departments of 
cancer hospitals. Section 202 would exclude new off-campus 
facilities in cancer hospitals that are exempt from Medicare's 
prospective payment system from the lower payment rates 
established in BBA15. Payment rates for services in these new 
off-campus facilities would continue under the rules in place 
prior to enactment of BBA15 and would generally be higher. 
Those facilities would have to attest that they qualify for 
those higher payment rates and the Secretary would be required 
to audit that attestation. The bill would provide $2 million 
for those audits. In addition, section 202 would apply an 
across-the-board 1 percent reduction to payment rates for 
services furnished by outpatient departments of cancer 
hospitals in 2018. Taken together, CBO estimates the provisions 
of section 202 would increase direct spending by $20 million 
over the 2017-2021 period, but would have no net budgetary 
effect over the 2017-2026 period.
    Electronic health records in ambulatory surgical centers. 
Section 203 of H.R 5273 would exempt eligible professionals 
based in an ambulatory surgical center (ASC) from being subject 
to payment reductions for failing to meet the requirements for 
meaningful use of electronic health records (EHRs) that were 
established by the Health Information Technology Act of 2009. 
That exemption would apply to payments made in calendar years 
2017 and 2018 and would continue under the Merit-Based 
Incentive Payment System (MIPS) starting in 2019. The exemption 
would expire three years after the Secretary determines that 
certified EHR technology applicable to ASCs is available.
    Very few ASCs currently have EHR technology. Thus, section 
203 would enable about 2,000 ASC-based professionals to avoid 
penalties related to their use of EHR. Under current law, CBO 
expects those penalties to average about $3,000 for each 
professional in calendar years 2017 and 2018. Beginning in 2019 
under the MIPS program, any change in Medicare payments to 
professionals based in ASCs would be offset by changes in 
payment rates to other professionals. CBO estimates that 
section 203 would result in fewer penalties, which would 
increase direct spending by $17 million over the 2017-2026 
period.

                  TITLE III. OTHER MEDICARE PROVISIONS

    Delay termination for Medicare Advantage plans. Under 
current law, the Centers for Medicare and Medicaid Services 
(CMS) has announced that, beginning with plan year 2017, it 
will not renew contracts with Medicare Advantage plans that 
fail, for three consecutive years, to achieve at least three 
stars under the five-star quality-rating system. The bill would 
delay CMS' authority to terminate those contracts until plan 
year 2020. Thus, enacting the legislation would permit certain 
plans that otherwise would not be renewed under current law to 
continue operating through 2019. Those plans tend to receive 
slightly lower payments than other Medicare Advantage plans in 
the same areas, in part because they do not receive bonus 
payments under the five-star rating system.
    CBO projects that very few beneficiaries--less than 0.1 
percent of MA enrollees--will be enrolled in plans that fail to 
achieve minimum quality ratings, and thus would be subject to 
the changes under the legislation. Permitting those plans to 
continue operating would reduce direct spending by $20 million 
over the 2017-2026 period, CBO estimates.
    CMS has announced that one contract will not be eligible 
for renewal in 2017. Although H.R. 5273 would make that 
contract eligible for renewal, CBO assumes that the legislation 
would be enacted towards the end of fiscal year 2016, after the 
point when insurance carriers must submit materials in order to 
participate in the program in 2017. Thus, in CBO's judgment, 
the legislation would have no effect on spending or on the 
number of plans that will participate in the MA program during 
that year.
    Other provisions. H.R. 5273 would require CMS to publish 
data on enrollment in the fee-for-service and Medicare 
Advantage components of the Medicare program at the state and 
Congressional-district level and provide clear descriptions of 
the fee-for-service, Medicare Advantage, and Part D 
prescription drug programs in the ``Welcome to Medicare'' 
package that is given to new enrollees. CBO estimates those 
provisions would not affect direct spending because neither 
would affect Medicare's coverage rules or payment rates.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays that are subject to those 
pay-as-you-go procedures are shown in the following table.

             CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 5273, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON MAY 24, 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 By fiscal year, in millions of dollars--
                                                --------------------------------------------------------------------------------------------------------
                                                  2016   2017   2018   2019    2020    2021   2022   2023    2024    2025    2026   2016-2021  2016-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       NET INCREASE OR DECREASE (-) IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact.................      0     54    111     -30     -82     -2      3     -13     -27     -25      -3        50        -14
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term direct spending and deficits: CBO 
estimates that enacting the legislation would not increase net 
direct spending or on-budget deficits by more than $5 billion 
in any of the four consecutive 10-year periods beginning in 
2027.
    Intergovernmental and private-sector impact: H.R. 5273 
contains no intergovernmental or private-sector mandates as 
defined in UMRA, and would not affect the budgets of state, 
local, or tribal governments.
    Previous CBO estimate: On July 17, 2015 CBO transmitted a 
cost estimate for S. 607, the Rural Community Hospital 
Demonstration Extension Act of 2015 as reported by the Senate 
Committee on Finance on June 24, 2015. Section 103 of H.R. 5273 
is similar to S. 607. Differences in the estimated budgetary 
effects of the two bills reflect the fact that section 103 of 
H.R. 5273 would allow additional hospitals to join the Rural 
Community Hospital demonstration.
    On June 15, 2015 CBO transmitted a cost estimate for H.R. 
2580, the LTCH Technical Correction Act of 2015 as reported by 
the House Committee on Ways and Means on June 2, 2015. Section 
104 of H.R. 5273 is similar to H.R. 2580. Changes in the 
budgetary effects of the two bills reflect changes in CBO's 
baseline projections under current law.
    CBO has published two previous estimates of bills similar 
to provisions in section 203, which would modify the treatment 
of eligible professionals in ambulatory surgical centers for 
meaningful use and MIPS. CBO transmitted a cost estimate for 
H.R. 887 on March 12, 2015, and an estimate for S. 1347 on July 
16, 2015; those two bills had identical language and were both 
entitled the Electronic Health Fairness Act of 2015. 
Differences in the estimated budgetary effects in section 203 
from those previous estimates reflect differences in the 
legislative language.
    On June 12, 2015, CBO transmitted a cost estimate for H.R. 
2506, the Seniors' Health Care Plan Protection Act of 2015, as 
reported by the House Committee on Ways and Means on June 2, 
2015. Section 301 of H.R. 5273 is similar to H.R. 2506. 
Differences in the estimated budgetary effects of the two bills 
reflect updated information on plan performance in the star-
ratings system.
    Estimate prepared by: Federal Costs: Lori Housman, Jamease 
Kowalczyk, Paul Masi, Kevin McNellis, and Zoe Williams; Impact 
on State, Local, and Tribal Governments: Zachary Byrum; Impact 
on the Private Sector: Amy Petz.
    Estimate approved by: Holly Harvey, Deputy Assistant 
Director for Budget Analysis.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


           A. Committee Oversight Findings and Recommendation

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

  D. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   E. Duplication of Federal Programs

    In compliance with Sec. 3(g)(2) of H. Res. 5 (114th 
Congress), the Committee states that no provision of the bill 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program; 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139; or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                 F. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED


  A. Text of Existing Law Amended or Repealed by the Bill, as Reported

    In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

SOCIAL SECURITY ACT

           *       *       *       *       *       *       *



TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *



   Part B--Supplementary Medical Insurance Benefits for the Aged and 
Disabled

           *       *       *       *       *       *       *



                          PAYMENT OF BENEFITS

  Sec. 1833. (a) Except as provided in section 1876, and 
subject to the succeeding provisions of this section, there 
shall be paid from the Federal Supplementary Medical Insurance 
Trust Fund, in the case of each individual who is covered under 
the insurance program established by this part and incurs 
expenses for services with respect to which benefits are 
payable under this part, amounts equal to--(1) in the case of 
services described in section 1832(a)(1)--80 percent of the 
reasonable charges for the services; except that (A) an 
organization which provides medical and other health services 
(or arranges for their availability) on a prepayment basis (and 
either is sponsored by a union or employer, or does not 
provide, or arrange for the provision of, any inpatient 
hospital services) may elect to be paid 80 percent of the 
reasonable cost of services for which payment may be made under 
this part on behalf of individuals enrolled in such 
organization in lieu of 80 percent of the reasonable charges 
for such services if the organization undertakes to charge such 
individuals no more than 20 percent of such reasonable cost 
plus any amounts payable by them as a result of subsection (b), 
(B) with respect to items and services described in section 
1861(s)(10)(A), the amounts paid shall be 100 percent of the 
reasonable charges for such items and services, (C) with 
respect to expenses incurred for those physicians' services for 
which payment may be made under this part that are described in 
section 1862(a)(4), the amounts paid shall be subject to such 
limitations as may be prescribed by regulations, (D) with 
respect to clinical diagnostic laboratory tests for which 
payment is made under this part (i)(I) on the basis of a fee 
schedule under subsection (h)(1) (for tests furnished before 
January 1, 2017) or section 1834(d)(1), the amount paid shall 
be equal to 80 percent (or 100 percent, in the case of such 
tests for which payment is made on an assignment-related basis) 
of the lesser of the amount determined under such fee schedule, 
the limitation amount for that test determined under subsection 
(h)(4)(B), or the amount of the charges billed for the tests, 
or (II) under section 1834A (for tests furnished on or after 
January1, 2017), the amount paid shall be equal to 80 
percent(or 100 percent, in the case of such tests for which 
payment is made on an assignment-related basis) of the lesser 
of the amount determined under such section or the amount of 
the charges billed for the tests, or (ii) for tests furnished 
before January 1, 2017,on the basis of a negotiated rate 
established under subsection (h)(6), the amount paid shall be 
equal to 100 percent of such negotiated rate,,(E) with respect 
to services furnished to individuals who have been determined 
to have end stage renal disease, the amounts paid shall be 
determined subject to the provisions of section 1881,(F) with 
respect to clinical social worker services under section 
1861(s)(2)(N), the amounts paid shall be 80 percent of the 
lesser of (i) the actual charge for the services or (ii) 75 
percent of the amount determined for payment of a psychologist 
under clause (L),
                  (G) with respect to facility services 
                furnished in connection with a surgical 
                procedure specified pursuant to subsection 
                (i)(1)(A) and furnished to an individual in an 
                ambulatory surgical center described in such 
                subsection, for services furnished beginning 
                with the implementation date of a revised 
                payment system for such services in such 
                facilities specified in subsection (i)(2)(D), 
                the amounts paid shall be 80 percent of the 
                lesser of the actual charge for the services or 
                the amount determined by the Secretary under 
                such revised payment system,
          (H) with respect to services of a certified 
        registered nurse anesthetist under section 1861(s)(11), 
        the amounts paid shall be 80 percent of the least of 
        the actual charge, the prevailing charge that would be 
        recognized (or, for services furnished on or after 
        January 1, 1992, the fee schedule amount provided under 
        section 1848) if the services had been performed by an 
        anesthesiologist, or the fee schedule for such services 
        established by the Secretary in accordance with 
        subsection (l), (I) with respect to covered items 
        (described in section 1834(a)(13)), the amounts paid 
        shall be the amounts described in section 1834(a)(1), 
        and(J) with respect to expenses incurred for 
        radiologist services (as defined in section 
        1834(b)(6)), subject to section 1848, the amounts paid 
        shall be 80 percent of the lesser of the actual charge 
        for the services or the amount provided under the fee 
        schedule established under section 1834(b), (K) with 
        respect to certified nurse-midwife services under 
        section 1861(s)(2)(L), the amounts paid shall be 80 
        percent of the lesser of the actual charge for the 
        services or the amount determined by a fee schedule 
        established by the Secretary for the purposes of this 
        subparagraph (but in no event shall such fee schedule 
        exceed 65 percent of the prevailing charge that would 
        be allowed for the same service performed by a 
        physician, or, for services furnished on or after 
        January 1, 1992, 65 percent (or 100 percent for 
        services furnished on or after January 1, 2011) of the 
        fee schedule amount provided under section 1848 for the 
        same service performed by a physician), (L) with 
        respect to qualified psychologist services under 
        section 1861(s)(2)(M), the amounts paid shall be 80 
        percent of the lesser of the actual charge for the 
        services or the amount determined by a fee schedule 
        established by the Secretary for the purposes of this 
        subparagraph, (M) with respect to prosthetic devices 
        and orthotics and prosthetics (as defined in section 
        1834(h)(4)), the amounts paid shall be the amounts 
        described in section 1834(h)(1), (N) with respect to 
        expenses incurred for physicians' services (as defined 
        in section 1848(j)(3)) other than personalized 
        prevention plan services (as defined in section 
        1861(hhh)(1)), the amounts paid shall be 80 percent of 
        the payment basis determined under section 1848(a)(1), 
        (O) with respect to services described in section 
        1861(s)(2)(K) (relating to services furnished by 
        physician assistants, nurse practitioners, or clinic 
        nurse specialists), the amounts paid shall be equal to 
        80 percent of (i) the lesser of the actual charge or 85 
        percent of the fee schedule amount provided under 
        section 1848, or (ii) in the case of services as an 
        assistant at surgery, the lesser of the actual charge 
        or 85 percent of the amount that would otherwise be 
        recognized if performed by a physician who is serving 
        as an assistant at surgery, (P) with respect to 
        surgical dressings, the amounts paid shall be the 
        amounts determined under section 1834(i), (Q) with 
        respect to items or services for which fee schedules 
        are established pursuant to section 1842(s), the 
        amounts paid shall be 80 percent of the lesser of the 
        actual charge or the fee schedule established in such 
        section, (R) with respect to ambulance services, (i) 
        the amounts paid shall be 80 percent of the lesser of 
        the actual charge for the services or the amount 
        determined by a fee schedule established by the 
        Secretary under section 1834(l) and (ii) with respect 
        to ambulance services described in section 1834(l)(8), 
        the amounts paid shall be the amounts determined under 
        section 1834(g) for outpatient critical access hospital 
        services, (S) with respect to drugs and biologicals 
        (including intravenous immune globulin (as defined in 
        section 1861(zz))) not paid on a cost or prospective 
        payment basis as otherwise provided in this part (other 
        than items and services described in subparagraph (B)), 
        the amounts paid shall be 80 percent of the lesser of 
        the actual charge or the payment amount established in 
        section 1842(o) (or, if applicable, under section 1847, 
        1847A, or 1847B), (T) with respect to medical nutrition 
        therapy services (as defined in section 1861(vv)), the 
        amount paid shall be 80 percent (or 100 percent if such 
        services are recommended with a grade of A or B by the 
        United States Preventive Services Task Force for any 
        indication or population and are appropriate for the 
        individual) of the lesser of the actual charge for the 
        services or 85 percent of the amount determined under 
        the fee schedule established under section 1848(b) for 
        the same services if furnished by a physician, (U) with 
        respect to facility fees described in section 
        1834(m)(2)(B), the amounts paid shall be 80 percent of 
        the lesser of the actual charge or the amounts 
        specified in such section, (V) notwithstanding 
        subparagraphs (I) (relating to durable medical 
        equipment), (M) (relating to prosthetic devices and 
        orthotics and prosthetics), and (Q) (relating to 
        1842(s) items), with respect to competitively priced 
        items and services (described in section 1847(a)(2)) 
        that are furnished in a competitive area, the amounts 
        paid shall be the amounts described in section 
        1847(b)(5), (W) with respect to additional preventive 
        services (as defined in section 1861(ddd)(1)), the 
        amount paid shall be (i) in the case of such services 
        which are clinical diagnostic laboratory tests, the 
        amount determined under subparagraph (D) (if such 
        subparagraph were applied, by substituting ``100 
        percent'' for ``80 percent''), and (ii) in the case of 
        all other such services, 100 percent of the lesser of 
        the actual charge for the service or the amount 
        determined under a fee schedule established by the 
        Secretary for purposes of this subparagraph, (X) with 
        respect to personalized prevention plan services (as 
        defined in section 1861(hhh)(1)), the amount paid shall 
        be 100 percent of the lesser of the actual charge for 
        the services or the amount determined under the payment 
        basis determined under section 1848, (Y) with respect 
        to preventive services described in subparagraphs (A) 
        and (B) of section 1861(ddd)(3) that are appropriate 
        for the individual and, in the case of such services 
        described in subparagraph (A), are recommended with a 
        grade of A or B by the United States Preventive 
        Services Task Force for any indication or population, 
        the amount paid shall be 100 percent of (i) except as 
        provided in clause (ii), the lesser of the actual 
        charge for the services or the amount determined under 
        the fee schedule that applies to such services under 
        this part, and (ii) in the case of such services that 
        are covered OPD services (as defined in subsection 
        (t)(1)(B)), the amount determined under subsection (t), 
        (Z) with respect to Federally qualified health center 
        services for which payment is made under section 
        1834(o), the amounts paid shall be 80 percent of the 
        lesser of the actual charge or the amount determined 
        under such section, and (AA) with respect to an 
        applicable disposable device (as defined in paragraph 
        (2) of section 1834(s)) furnished to an individual 
        pursuant to paragraph (1) of such section, the amount 
        paid shall be equal to 80 percent of the lesser of the 
        actual charge or the amount determined under paragraph 
        (3) of such section;
          (2) in the case of services described in section 
        1832(a)(2) (except those services described in 
        subparagraphs (C), (D), (E), (F), (G), (H), and (I) of 
        such section and unless otherwise specified in section 
        1881)--
                  (A) with respect to home health services 
                (other than a covered osteoporosis drug) (as 
                defined in section 1861(kk)), the amount 
                determined under the prospective payment system 
                under section 1895;
                  (B) with respect to other items and services 
                (except those described in subparagraph (C), 
                (D), or (E) of this paragraph and except as may 
                be provided in section 1886 or section 
                1888(e)(9))--
                          (i) furnished before January 1, 1999, 
                        the lesser of--
                                  (I) the reasonable cost of 
                                such services, as determined 
                                under section 1861(v), or
                                  (II) the customary charges 
                                with respect to such 
                                services,--less the amount a 
                                provider may charge as 
                                described in clause (ii) of 
                                section 1866(a)(2)(A), but in 
                                no case may the payment for 
                                such other services exceed 80 
                                percent of such reasonable 
                                cost, or
                          (ii) if such services are furnished 
                        before January 1, 1999, by a public 
                        provider of services, or by another 
                        provider which demonstrates to the 
                        satisfaction of the Secretary that a 
                        significant portion of its patients are 
                        low-income (and requests that payment 
                        be made under this clause), free of 
                        charge or at nominal charges to the 
                        public, 80 percent of the amount 
                        determined in accordance with section 
                        1814(b)(2), or
                          (iii) if such services are furnished 
                        on or after January 1, 1999, the amount 
                        determined under subsection (t), or
                          (iv) if (and for so long as) the 
                        conditions described in section 
                        1814(b)(3) are met, the amounts 
                        determined under the reimbursement 
                        system described in such section;
                  (C) with respect to services described in the 
                second sentence of section 1861(p), 80 percent 
                of the reasonable charges for such services;
                  (D) with respect to clinical diagnostic 
                laboratory tests for which payment is made 
                under this part (i)(I)on the basis of a fee 
                schedule determined under subsection(h)(1) (for 
                tests furnished before January 1, 2017) or 
                section 1834(d)(1), the amount paid shall be 
                equal to 80 percent (or 100 percent, in the 
                case of such tests for which payment is made on 
                an assignment-related basis or to a provider 
                having an agreement under section 1866) of the 
                lesser of the amount determined under such fee 
                schedule, the limitation amount for that test 
                determined under subsection (h)(4)(B), or the 
                amount of the charges billed for the tests, or 
                (II) under section 1834A (for tests furnished 
                on or after January 1, 2017), the amount paid 
                shall be equal to 80 percent (or 100 percent, 
                in the case of such tests for which payment is 
                made on an assignment-related basis or to a 
                provider having an agreement under section 
                1866) of the lesser of the amount determined 
                under such section or the amount of the charges 
                billed for the tests, or (ii) for tests 
                furnished before January 1, 2017, on the basis 
                of a negotiated rate established under 
                subsection (h)(6), the amount paid shall be 
                equal to 100 percent of such negotiated rate 
                for such tests;
                  (E) with respect to--
                          (i) outpatient hospital radiology 
                        services (including diagnostic and 
                        therapeutic radiology, nuclear medicine 
                        and CAT scan procedures, magnetic 
                        resonance imaging, and ultrasound and 
                        other imaging services, but excluding 
                        screening mammography and, for services 
                        furnished on or after January 1, 2005, 
                        diagnostic mammography), and
                          (ii) effective for procedures 
                        performed on or after October 1, 1989, 
                        diagnostic procedures (as defined by 
                        the Secretary) described in section 
                        1861(s)(3) (other than diagnostic x-ray 
                        tests and diagnostic laboratory tests),
                the amount determined under subsection (n) or, 
                for services or procedures performed on or 
                after January 1, 1999, subsection (t);
                  (F) with respect to a covered osteoporosis 
                drug (as defined in section 1861(kk)) furnished 
                by a home health agency, 80 percent of the 
                reasonable cost of such service, as determined 
                under section 1861(v);
                  (G) with respect to items and services 
                described in section 1861(s)(10)(A), the lesser 
                of--
                          (i) the reasonable cost of such 
                        services, as determined under section 
                        1861(v), or
                          (ii) the customary charges with 
                        respect to such services; and
                  (H) with respect to personalized prevention 
                plan services (as defined in section 
                1861(hhh)(1)) furnished by an outpatient 
                department of a hospital, the amount determined 
                under paragraph (1)(X),
                or, if such services are furnished by a public 
                provider of services, or by another provider 
                which demonstrates to the satisfaction of the 
                Secretary that a significant portion of its 
                patients are low-income (and requests that 
                payment be made under this provision), free of 
                charge or at nominal charges to the public, the 
                amount determined in accordance with section 
                1814(b)(2);
          (3) in the case of services described in section 
        1832(a)(2)(D)--
                  (A) except as provided in subparagraph (B), 
                the costs which are reasonable and related to 
                the cost of furnishing such services or which 
                are based on such other tests of reasonableness 
                as the Secretary may prescribe in regulations, 
                including those authorized under section 
                1861(v)(1)(A), less the amount a provider may 
                charge as described in clause (ii) of section 
                1866(a)(2)(A), but in no case may the payment 
                for such services (other than for items and 
                services described in section 1861(s)(10)(A)) 
                exceed 80 percent of such costs; or
                  (B) with respect to the services described in 
                clause (ii) of section 1832(a)(2)(D) that are 
                furnished to an individual enrolled with a MA 
                plan under part C pursuant to a written 
                agreement described in section 1853(a)(4), the 
                amount (if any) by which--
                          (i) the amount of payment that would 
                        have otherwise been provided (I) under 
                        subparagraph (A) (calculated as if 
                        ``100 percent'' were substituted for 
                        ``80 percent'' in such subparagraph) 
                        for such services if the individual had 
                        not been so enrolled, or (II) in the 
                        case of such services furnished on or 
                        after the implementation date of the 
                        prospective payment system under 
                        section 1834(o), under such section 
                        (calculated as if ``100 percent'' were 
                        substituted for ``80 percent'' in such 
                        section) for such services if the 
                        individual had not been so enrolled; 
                        exceeds
                          (ii) the amount of the payments 
                        received under such written agreement 
                        for such services (not including any 
                        financial incentives provided for in 
                        such agreement such as risk pool 
                        payments, bonuses, or withholds),
                less the amount the federally qualified health 
                center may charge as described in section 
                1857(e)(3)(B);
          (4) in the case of facility services described in 
        section 1832(a)(2)(F), and outpatient hospital facility 
        services furnished in connection with surgical 
        procedures specified by the Secretary pursuant to 
        section 1833(i)(1)(A), the applicable amount as 
        determined under paragraph (2) or (3) of subsection (i) 
        or subsection (t);
          (5) in the case of covered items (described in 
        section 1834(a)(13)) the amounts described in section 
        1834(a)(1);
          (6) in the case of outpatient critical access 
        hospital services, the amounts described in section 
        1834(g);
          (7) in the case of prosthetic devices and orthotics 
        and prosthetics (as described in section 1834(h)(4)), 
        the amounts described in section 1834(h);
          (8) in the case of--
                  (A) outpatient physical therapy services, 
                outpatient speech-language pathology services, 
                and outpatient occupational therapy services 
                furnished--
                          (i) by a rehabilitation agency, 
                        public health agency, clinic, 
                        comprehensive outpatient rehabilitation 
                        facility, or skilled nursing facility,
                          (ii) by a home health agency to an 
                        individual who is not homebound, or
                          (iii) by another entity under an 
                        arrangement with an entity described in 
                        clause (i) or (ii); and
                  (B) outpatient physical therapy services, 
                outpatient speech-language pathology services, 
                and outpatient occupational therapy services 
                furnished--
                          (i) by a hospital to an outpatient or 
                        to a hospital inpatient who is entitled 
                        to benefits under part A but has 
                        exhausted benefits for inpatient 
                        hospital services during a spell of 
                        illness or is not so entitled to 
                        benefits under part A, or
                          (ii) by another entity under an 
                        arrangement with a hospital described 
                        in clause (i),
        the amounts described in section 1834(k); and
          (9) in the case of services described in section 
        1832(a)(2)(E) that are not described in paragraph (8), 
        the amounts described in section 1834(k).
         Paragraph (3)(A) shall not apply to Federally 
        qualified health center services furnished on or after 
        the implementation date of the prospective payment 
        system under section 1834(0).
  (b) Before applying subsection (a) with respect to expenses 
incurred by an individual during any calendar year, the total 
amount of the expenses incurred by such individual during such 
year (which would, except for this subsection, constitute 
incurred expenses from which benefits payable under subsection 
(a) are determinable) shall be reduced by a deductible of $75 
for calendar years before 1991, $100 for 1991 through 2004, 
$110 for 2005, and for a subsequent year the amount of such 
deductible for the previous year increased by the annual 
percentage increase in the monthly actuarial rate under section 
1839(a)(1) ending with such subsequent year (rounded to the 
nearest $1); except that (1) such total amount shall not 
include expenses incurred for preventive services described in 
subparagraph (A) of section 1861(ddd)(3) that are recommended 
with a grade of A or B by the United States Preventive Services 
Task Force for any indication or population and are appropriate 
for the individual., (2) such deductible shall not apply with 
respect to home health services (other than a covered 
osteoporosis drug (as defined in section 1861(kk))), (3) such 
deductible shall not apply with respect to clinical diagnostic 
laboratory tests for which payment is made under this part (A) 
under subsection (a)(1)(D)(i) or (a)(2)(D)(i) on an assignment-
related basis, or to a provider having an agreement under 
section 1866, or (B) for tests furnished before January 1, 
2017,on the basis of a negotiated rate determined under 
subsection (h)(6), (4) such deductible shall not apply to 
Federally qualified health center services, (5) such deductible 
shall not apply with respect to screening mammography (as 
described in section 1861(jj)), (6) such deductible shall not 
apply with respect to screening pap smear and screening pelvic 
exam (as described in section 1861(nn)), (7) such deductible 
shall not apply with respect to ultrasound screening for 
abdominal aortic aneurysm (as defined in section 1861(bbb)), 
(8) such deductible shall not apply with respect to colorectal 
cancer screening tests (as described in section 1861(pp)(1)), 
(9) such deductible shall not apply with respect to an initial 
preventive physical examination (as defined in section 
1861(ww)), and (10) such deductible shall not apply with 
respect to personalized prevention plan services (as defined in 
section 1861(hhh)(1)). The total amount of the expenses 
incurred by an individual as determined under the preceding 
sentence shall, after the reduction specified in such sentence, 
be further reduced by an amount equal to the expenses incurred 
for the first three pints of whole blood (or equivalent 
quantities of packed red blood cells, as defined under 
regulations) furnished to the individual during the calendar 
year, except that such deductible for such blood shall in 
accordance with regulations be appropriately reduced to the 
extent that there has been a replacement of such blood (or 
equivalent quantities of packed red blood cells, as so 
defined); and for such purposes blood (or equivalent quantities 
of packed red blood cells, as so defined) furnished such 
individual shall be deemed replaced when the institution or 
other person furnishing such blood (or such equivalent 
quantities of packed red blood cells, as so defined) is given 
one pint of blood for each pint of blood (or equivalent 
quantities of packed red blood cells, as so defined) furnished 
such individual with respect to which a deduction is made under 
this sentence. The deductible under the previous sentence for 
blood or blood cells furnished an individual in a year shall be 
reduced to the extent that a deductible has been imposed under 
section 1813(a)(2) to blood or blood cells furnished the 
individual in the year. Paragraph (1) of the first sentence of 
this subsection shall apply with respect to a colorectal cancer 
screening test regardless of the code that is billed for the 
establishment of a diagnosis as a result of the test, or for 
the removal of tissue or other matter or other procedure that 
is furnished in connection with, as a result of, and in the 
same clinical encounter as the screening test.
  (c)(1) Notwithstanding any other provision of this part, with 
respect to expenses incurred in a calendar year in connection 
with the treatment of mental, psychoneurotic, and personality 
disorders of an individual who is not an inpatient of a 
hospital at the time such expenses are incurred, there shall be 
considered as incurred expenses for purposes of subsections (a) 
and (b)--
          (A) for expenses incurred in years prior to 2010, 
        only 62\1/2\ percent of such expenses;
          (B) for expenses incurred in 2010 or 2011, only 68\3/
        4\ percent of such expenses;
          (C) for expenses incurred in 2012, only 75 percent of 
        such expenses;
          (D) for expenses incurred in 2013, only 81\1/4\ 
        percent of such expenses; and
          (E) for expenses incurred in 2014 or any subsequent 
        calendar year, 100 percent of such expenses.
  (2) For purposes of subparagraphs (A) through (D) of 
paragraph (1), the term ``treatment'' does not include brief 
office visits (as defined by the Secretary) for the sole 
purpose of monitoring or changing drug prescriptions used in 
the treatment of such disorders or partial hospitalization 
services that are not directly provided by a physician
  (d) No payment may be made under this part with respect to 
any services furnished an individual to the extent that such 
individual is entitled (or would be entitled except for section 
1813) to have payment made with respect to such services under 
part A.
  (e) No payment shall be made to any provider of services or 
other person under this part unless there has been furnished 
such information as may be necessary in order to determine the 
amounts due such provider or other person under this part for 
the period with respect to which the amounts are being paid or 
for any prior period.
  (f) In establishing limits under subsection (a) on payment 
for rural health clinic services provided by rural health 
clinics (other than such clinics in hospitals with less than 50 
beds), the Secretary shall establish such limit, for services 
provided--
          (1) in 1988, after March 31, at $46 per visit, and
          (2) in a subsequent year, at the limit established 
        under this subsection for the previous year increased 
        by the percentage increase in the MEI (as defined in 
        section 1842(i)(3)) applicable to primary care services 
        (as defined in section 1842(i)(4)) furnished as of the 
        first day of that year.
  (g)(1) Subject to paragraphs (4) and (5), in the case of 
physical therapy services of the type described in section 
1861(p) and speech-language pathology services of the type 
described in such section through the application of section 
1861(ll)(2), but (except as provided in paragraph (6)) not 
described in subsection (a)(8)(B), and physical therapy 
services and speech-language pathology services of such type 
which are furnished by a physician or as incident to 
physicians' services, with respect to expenses incurred in any 
calendar year, no more than the amount specified in paragraph 
(2) for the year shall be considered as incurred expenses for 
purposes of subsections (a) and (b).
  (2) The amount specified in this paragraph--
          (A) for 1999, 2000, and 2001, is $1,500, and
          (B) for a subsequent year is the amount specified in 
        this paragraph for the preceding year increased by the 
        percentage increase in the MEI (as defined in section 
        1842(i)(3)) for such subsequent year;
except that if an increase under subparagraph (B) for a year is 
not a multiple of $10, it shall be rounded to the nearest 
multiple of $10.
  (3) Subject to paragraphs (4) and (5), in the case of 
occupational therapy services (of the type that are described 
in section 1861(p) (but (except as provided in paragraph (6)) 
not described in subsection (a)(8)(B)) through the operation of 
section 1861(g) and of such type which are furnished by a 
physician or as incident to physicians' services), with respect 
to expenses incurred in any calendar year, no more than the 
amount specified in paragraph (2) for the year shall be 
considered as incurred expenses for purposes of subsections (a) 
and (b).
  (4) This subsection shall not apply to expenses incurred with 
respect to services furnished during 2000, 2001, 2002, 2004, 
and 2005.
  (5)(A) With respect to expenses incurred during the period 
beginning on January 1, 2006, and ending on December 31, 2017, 
for services, the Secretary shall implement a process under 
which an individual enrolled under this part may, upon request 
of the individual or a person on behalf of the individual, 
obtain an exception from the uniform dollar limitation 
specified in paragraph (2), for services described in 
paragraphs (1) and (3) if the provision of such services is 
determined to be medically necessary and if the requirement of 
subparagraph (B) is met. Under such process, if the Secretary 
does not make a decision on such a request for an exception 
within 10 business days of the date of the Secretary's receipt 
of the request made in accordance with such requirement, the 
Secretary shall be deemed to have found the services to be 
medically necessary.
  (B) In the case of outpatient therapy services for which an 
exception is requested under the first sentence of subparagraph 
(A), the claim for such services shall contain an appropriate 
modifier (such as the KX modifier used as of the date of the 
enactment of this subparagraph) indicating that such services 
are medically necessary as justified by appropriate 
documentation in the medical record involved.
  (C)(i) In applying this paragraph with respect to a request 
for an exception with respect to expenses that would be 
incurred for outpatient therapy services (including services 
described in subsection (a)(8)(B)) that would exceed the 
threshold described in clause (ii) for a year, the request for 
such an exception, for services furnished on or after October 
1, 2012, shall be subject to a manual medical review process 
that, subject to subparagraph (E), is similar to the manual 
medical review process used for certain exceptions under this 
paragraph in 2006.
  (ii) The threshold under this clause for a year is $3,700. 
Such threshold shall be applied separately--
          (I) for physical therapy services and speech-language 
        pathology services; and
          (II) for occupational therapy services.
  (D) With respect to services furnished on or after January 1, 
2013, where payment may not be made as a result of application 
of paragraphs (1) and (3), section 1879 shall apply in the same 
manner as such section applies to a denial that is made by 
reason of section 1862(a)(1).
  (E)(i) In place of the manual medical review process under 
subparagraph (C)(i), the Secretary shall implement a process 
for medical review under this subparagraph under which the 
Secretary shall identify and conduct medical review for 
services described in subparagraph (C)(i) furnished by a 
provider of services or supplier (in this subparagraph referred 
to as a ``therapy provider'') using such factors as the 
Secretary determines to be appropriate.
  (ii) Such factors may include the following:
          (I) The therapy provider has had a high claims denial 
        percentage for therapy services under this part or is 
        less compliant with applicable requirements under this 
        title.
          (II) The therapy provider has a pattern of billing 
        for therapy services under this part that is aberrant 
        compared to peers or otherwise has questionable billing 
        practices for such services, such as billing medically 
        unlikely units of services in a day.
          (III) The therapy provider is newly enrolled under 
        this title or has not previously furnished therapy 
        services under this part.
          (IV) The services are furnished to treat a type of 
        medical condition.
          (V) The therapy provider is part of group that 
        includes another therapy provider identified using the 
        factors determined under this subparagraph.
  (iii) For purposes of carrying out this subparagraph, the 
Secretary shall provide for the transfer, from the Federal 
Supplementary Medical Insurance Trust Fund under section 1841, 
of $5,000,000 to the Centers for Medicare & Medicaid Services 
Program Management Account for fiscal years 2015 and 2016, to 
remain available until expended. Such funds may not be used by 
a contractor under section 1893(h) for medical reviews under 
this subparagraph.
  (iv) The targeted review process under this subparagraph 
shall not apply to services for which expenses are incurred 
beyond the period for which the exceptions process under 
subparagraph (A) is implemented.
  (6)(A) In applying paragraphs (1) and (3) to services 
furnished during the period beginning not later than October 1, 
2012, and ending on December 31, 2017, the exclusion of 
services described in subsection (a)(8)(B) from the uniform 
dollar limitation specified in paragraph (2) shall not apply to 
such services furnished during 2012 through 2017.
  (B)(i) With respect to outpatient therapy services furnished 
beginning on or after January 1, 2013, and before January 1, 
2014, for which payment is made under section 1834(g), the 
Secretary shall count toward the uniform dollar limitations 
described in paragraphs (1) and (3) and the threshold described 
in paragraph (5)(C) the amount that would be payable under this 
part if such services were paid under section 1834(k)(1)(B) 
instead of being paid under section 1834(g).
  (ii) Nothing in clause (i) shall be construed as changing the 
method of payment for outpatient therapy services under section 
1834(g).
  (h)(1)(A) Subject to section 1834(d)(1), the Secretary shall 
establish fee schedules for clinical diagnostic laboratory 
tests (including prostate cancer screening tests under section 
1861(oo) consisting of prostate-specific antigen blood tests) 
for which payment is made under this part, other than such 
tests performed by a provider of services for an inpatient of 
such provider.
  (B) In the case of clinical diagnostic laboratory tests 
performed by a physician or by a laboratory (other than tests 
performed by a qualified hospital laboratory (as defined in 
subparagraph (D)) for outpatients of such hospital), the fee 
schedules established under subparagraph (A) shall be 
established on a regional, statewide, or carrier service area 
basis (as the Secretary may determine to be appropriate) for 
tests furnished on or after July 1, 1984.
  (C) In the case of clinical diagnostic laboratory tests 
performed by a qualified hospital laboratory (as defined in 
subparagraph (D)) for outpatients of such hospital, the fee 
schedules established under subparagraph (A) shall be 
established on a regional, statewide, or carrier service area 
basis (as the Secretary may determine to be appropriate) for 
tests furnished on or after July 1, 1984.
  (D) In this subsection, the term ``qualified hospital 
laboratory'' means a hospital laboratory, in a sole community 
hospital (as defined in section 1886(d)(5)(D)(iii)), which 
provides some clinical diagnostic laboratory tests 24 hours a 
day in order to serve a hospital emergency room which is 
available to provide services 24 hours a day and 7 days a week.
  (2)(A)(i) Except as provided in clause (v), subparagraph (B), 
and paragraph (4), the Secretary shall set the fee schedules at 
60 percent (or, in the case of a test performed by a qualified 
hospital laboratory (as defined in paragraph (1)(D)) for 
outpatients of such hospital, 62 percent) of the prevailing 
charge level determined pursuant to the third and fourth 
sentences of section 1842(b)(3) for similar clinical diagnostic 
laboratory tests for the applicable region, State, or area for 
the 12-month period beginning July 1, 1984, adjusted annually 
(to become effective on January 1 of each year) by, subject to 
clause (iv), a percentage increase or decrease equal to the 
percentage increase or decrease in the Consumer Price Index for 
All Urban Consumers (United States city average) minus, for 
each of the years 2009 and 2010, 0.5 percentage points, and, 
for tests furnished before the dateof enactment of section 
1834A, subject to such other adjustments as the Secretary 
determines are justified by technological changes.
  (ii) Notwithstanding clause (i)--
          (I) any change in the fee schedules which would have 
        become effective under this subsection for tests 
        furnished on or after January 1, 1988, shall not be 
        effective for tests furnished during the 3-month period 
        beginning on January 1, 1988,
          (II) the Secretary shall not adjust the fee schedules 
        under clause (i) to take into account any increase in 
        the consumer price index for 1988,
          (III) the annual adjustment in the fee schedules 
        determined under clause (i) for each of the years 1991, 
        1992, and 1993 shall be 2 percent, and
          (IV) the annual adjustment in the fee schedules 
        determined under clause (i) for each of the years 1994 
        and 1995, 1998 through 2002, and 2004 through 2008 
        shall be 0 percent.
  (iii) In establishing fee schedules under clause (i) with 
respect to automated tests and tests (other than cytopathology 
tests) which before July 1, 1984, the Secretary made subject to 
a limit based on lowest charge levels under the sixth sentence 
of section 1842(b)(3) performed after March 31, 1988, the 
Secretary shall reduce by 8.3 percent the fee schedules 
otherwise established for 1988, and such reduced fee schedules 
shall serve as the base for 1989 and subsequent years.
  (iv) After determining the adjustment to the fee schedules 
under clause (i), the Secretary shall reduce such adjustment--
          (I) for 2011 and each subsequent year, by the 
        productivity adjustment described in section 
        1886(b)(3)(B)(xi)(II); and
          (II) for each of 2011 through 2015, by 1.75 
        percentage points.
Subclause (I) shall not apply in a year where the adjustment to 
the fee schedules determined under clause (i) is 0.0 or a 
percentage decrease for a year. The application of the 
productivity adjustment under subclause (I) shall not result in 
an adjustment to the fee schedules under clause (i) being less 
than 0.0 for a year. The application of subclause (II) may 
result in an adjustment to the fee schedules under clause (i) 
being less than 0.0 for a year, and may result in payment rates 
for a year being less than such payment rates for the preceding 
year.
  (v) The Secretary shall reduce by 2 percent the fee schedules 
otherwise determined under clause (i) for 2013, and such 
reduced fee schedules shall serve as the base for 2014 and 
subsequent years.
  (B) The Secretary may make further adjustments or exceptions 
to the fee schedules to assure adequate reimbursement of (i) 
emergency laboratory tests needed for the provision of bona 
fide emergency services, and (ii) certain low volume high-cost 
tests where highly sophisticated equipment or extremely skilled 
personnel are necessary to assure quality.
  (3) In addition to the amounts provided under the fee 
schedules (for tests furnished before January 1, 2017)or under 
section 1834A (for tests furnished on or afterJanuary 1, 2017), 
subject to subsection (b)(5) of such section, the Secretary 
shall provide for and establish (A) a nominal fee to cover the 
appropriate costs in collecting the sample on which a clinical 
diagnostic laboratory test was performed and for which payment 
is made under this part, except that not more than one such fee 
may be provided under this paragraph with respect to samples 
collected in the same encounter, and (B) a fee to cover the 
transportation and personnel expenses for trained personnel to 
travel to the location of an individual to collect the sample, 
except that such a fee may be provided only with respect to an 
individual who is homebound or an inpatient in an inpatient 
facility (other than a hospital). In establishing a fee to 
cover the transportation and personnel expenses for trained 
personnel to travel to the location of an individual to collect 
a sample, the Secretary shall provide a method for computing 
the fee based on the number of miles traveled and the personnel 
costs associated with the collection of each individual sample, 
but the Secretary shall only be required to apply such method 
in the case of tests furnished during the period beginning on 
April 1, 1989, and ending on December 31, 1990, by a laboratory 
that establishes to the satisfaction of the Secretary (based on 
data for the 12-month period ending June 30, 1988) that (i) the 
laboratory is dependent upon payments under this title for at 
least 80 percent of its collected revenues for clinical 
diagnostic laboratory tests, (ii) at least 85 percent of its 
gross revenues for such tests are attributable to tests 
performed with respect to individuals who are homebound or who 
are residents in a nursing facility, and (iii) the laboratory 
provided such tests for residents in nursing facilities 
representing at least 20 percent of the number of such 
facilities in the State in which the laboratory is located.
  (4)(A) In establishing any fee schedule under this 
subsection, the Secretary may provide for an adjustment to take 
into account, with respect to the portion of the expenses of 
clinical diagnostic laboratory tests attributable to wages, the 
relative difference between a region's or local area's wage 
rates and the wage rate presumed in the data on which the 
schedule is based.
  (B) For purposes of subsections (a)(1)(D)(i) and 
(a)(2)(D)(i), the limitation amount for a clinical diagnostic 
laboratory test performed--
          (i) on or after July 1, 1986, and before April 1, 
        1988, is equal to 115 percent of the median of all the 
        fee schedules established for that test for that 
        laboratory setting under paragraph (1),
          (ii) after March 31, 1988, and before January 1, 
        1990, is equal to the median of all the fee schedules 
        established for that test for that laboratory setting 
        under paragraph (1),
          (iii) after December 31, 1989, and before January 1, 
        1991, is equal to 93 percent of the median of all the 
        fee schedules established for that test for that 
        laboratory setting under paragraph (1),
          (iv) after December 31, 1990, and before January 1, 
        1994, is equal to 88 percent of such median,
          (v) after December 31, 1993, and before January 1, 
        1995, is equal to 84 percent of such median,
          (vi) after December 31, 1994, and before January 1, 
        1996, is equal to 80 percent of such median,
          (vii) after December 31, 1995, and before January 1, 
        1998, is equal to 76 percent of such median, and
          (viii) after December 31, 1997, is equal to 74 
        percent of such median (or 100 percent of such median 
        in the case of a clinical diagnostic laboratory test 
        performed on or after January 1, 2001, that the 
        Secretary determines is a new test for which no 
        limitation amount has previously been established under 
        this subparagraph).
  (5)(A) In the case of a bill or request for payment for a 
clinical diagnostic laboratory test for which payment may 
otherwise be made under this part on an assignment-related 
basis or under a provider agreement under section 1866, payment 
may be made only to the person or entity which performed or 
supervised the performance of such test; except that--
          (i) if a physician performed or supervised the 
        performance of such test, payment may be made to 
        another physician with whom he shares his practice,
          (ii) in the case of a test performed at the request 
        of a laboratory by another laboratory, payment may be 
        made to the referring laboratory but only if--
                  (I) the referring laboratory is located in, 
                or is part of, a rural hospital,
                  (II) the referring laboratory is wholly owned 
                by the entity performing such test, the 
                referring laboratory wholly owns the entity 
                performing such test, or both the referring 
                laboratory and the entity performing such test 
                are wholly-owned by a third entity, or
                  (III) not more than 30 percent of the 
                clinical diagnostic laboratory tests for which 
                such referring laboratory (but not including a 
                laboratory described in subclause (II)), 
                receives requests for testing during the year 
                in which the test is performed are performed by 
                another laboratory, and
          (iii) in the case of a clinical diagnostic laboratory 
        test provided under an arrangement (as defined in 
        section 1861(w)(1)) made by a hospital, critical access 
        hospital, or skilled nursing facility, payment shall be 
        made to the hospital or skilled nursing facility.
  (B) In the case of such a bill or request for payment for a 
clinical diagnostic laboratory test for which payment may 
otherwise be made under this part, and which is not described 
in subparagraph (A), payment may be made to the beneficiary 
only on the basis of the itemized bill of the person or entity 
which performed or supervised the performance of the test.
  (C) Payment for a clinical diagnostic laboratory test, 
including a test performed in a physician's office but 
excluding a test performed by a rural health clinic may only be 
made on an assignment-related basis or to a provider of 
services with an agreement in effect under section 1866.
  (D) A person may not bill for a clinical diagnostic 
laboratory test, including a test performed in a physician's 
office but excluding a test performed by a rural health clinic, 
other than on an assignment-related basis. If a person 
knowingly and willfully and on a repeated basis bills for a 
clinical diagnostic laboratory test in violation of the 
previous sentence, the Secretary may apply sanctions against 
the person in the same manner as the Secretary may apply 
sanctions against a physician in accordance with paragraph (2) 
of section 1842(j) in the same manner such paragraphs apply 
with respect to a physician. Paragraph (4) of such section 
shall apply in this subparagraph in the same manner as such 
paragraph applies to such section.
  (6) For tests furnished before January 1, 2017, inthe case of 
any diagnostic laboratory test payment for which is not made on 
the basis of a fee schedule under paragraph (1), the Secretary 
may establish a payment rate which is acceptable to the person 
or entity performing the test and which would be considered the 
full charge for such tests. Such negotiated rate shall be 
limited to an amount not in excess of the total payment that 
would have been made for the services in the absence of such 
rate.
  (7) Notwithstanding paragraphs (1) and (4)and section 1834A, 
the Secretary shall establish a national minimum payment amount 
under this part for a diagnostic or screening pap smear 
laboratory test (including all cervical cancer screening 
technologies that have been approved by the Food and Drug 
Administration as a primary screening method for detection of 
cervical cancer) equal to $14.60 for tests furnished in 2000. 
For such tests furnished in subsequent years, such national 
minimum payment amount shall be adjusted annually as provided 
in paragraph (2).
  (8)(A) The Secretary shall establish by regulation procedures 
for determining the basis for, and amount of, payment under 
this subsection for any clinical diagnostic laboratory test 
with respect to which a new or substantially revised HCPCS code 
is assigned on or after January 1, 2005 (in this paragraph 
referred to as ``new tests'').
  (B) Determinations under subparagraph (A) shall be made only 
after the Secretary--
          (i) makes available to the public (through an 
        Internet website and other appropriate mechanisms) a 
        list that includes any such test for which 
        establishment of a payment amount under this subsection 
        is being considered for a year;
          (ii) on the same day such list is made available, 
        causes to have published in the Federal Register notice 
        of a meeting to receive comments and recommendations 
        (and data on which recommendations are based) from the 
        public on the appropriate basis under this subsection 
        for establishing payment amounts for the tests on such 
        list;
          (iii) not less than 30 days after publication of such 
        notice convenes a meeting, that includes 
        representatives of officials of the Centers for 
        Medicare & Medicaid Services involved in determining 
        payment amounts, to receive such comments and 
        recommendations (and data on which the recommendations 
        are based);
          (iv) taking into account the comments and 
        recommendations (and accompanying data) received at 
        such meeting, develops and makes available to the 
        public (through an Internet website and other 
        appropriate mechanisms) a list of proposed 
        determinations with respect to the appropriate basis 
        for establishing a payment amount under this subsection 
        for each such code, together with an explanation of the 
        reasons for each such determination, the data on which 
        the determinations are based, and a request for public 
        written comments on the proposed determination; and
          (v) taking into account the comments received during 
        the public comment period, develops and makes available 
        to the public (through an Internet website and other 
        appropriate mechanisms) a list of final determinations 
        of the payment amounts for such tests under this 
        subsection, together with the rationale for each such 
        determination, the data on which the determinations are 
        based, and responses to comments and suggestions 
        received from the public.
  (C) Under the procedures established pursuant to subparagraph 
(A), the Secretary shall--
          (i) set forth the criteria for making determinations 
        under subparagraph (A); and
          (ii) make available to the public the data (other 
        than proprietary data) considered in making such 
        determinations.
  (D) The Secretary may convene such further public meetings to 
receive public comments on payment amounts for new tests under 
this subsection as the Secretary deems appropriate.
  (E) For purposes of this paragraph:
          (i) The term ``HCPCS'' refers to the Health Care 
        Procedure Coding System.
          (ii) A code shall be considered to be ``substantially 
        revised'' if there is a substantive change to the 
        definition of the test or procedure to which the code 
        applies (such as a new analyte or a new methodology for 
        measuring an existing analyte-specific test).
  (9) Notwithstanding any other provision in this part, in the 
case of any diagnostic laboratory test for HbA1c that is 
labeled by the Food and Drug Administration for home use and is 
furnished on or after April 1, 2008, the payment rate for such 
test shall be the payment rate established under this part for 
a glycated hemoglobin test (identified as of October 1, 2007, 
by HCPCS code 83036 (and any succeeding codes)).
  (i)(1) The Secretary shall, in consultation with appropriate 
medical organizations--
          (A) specify those surgical procedures which are 
        appropriately (when considered in terms of the proper 
        utilization of hospital inpatient facilities) performed 
        on an inpatient basis in a hospital but which also can 
        be performed safely on an ambulatory basis in an 
        ambulatory surgical center (meeting the standards 
        specified under section 1832(a)(2)(F)(i)), critical 
        access hospital, or hospital outpatient department, and
          (B) specify those surgical procedures which are 
        appropriately (when considered in terms of the proper 
        utilization of hospital inpatient facilities) performed 
        on an inpatient basis in a hospital but which also can 
        be performed safely on an ambulatory basis in a 
        physician's office.
The lists of procedures established under subparagraphs (A) and 
(B) shall be reviewed and updated not less often than every 2 
years, in consultation with appropriate trade and professional 
organizations.
  (2)(A) For services furnished prior to the implementation of 
the system described in subparagraph (D), subject to 
subparagraph (E), the amount of payment to be made for facility 
services furnished in connection with a surgical procedure 
specified pursuant to paragraph (1)(A) and furnished to an 
individual in an ambulatory surgical center described in such 
paragraph shall be equal to 80 percent of a standard overhead 
amount established by the Secretary (with respect to each such 
procedure) on the basis of the Secretary's estimate of a fair 
fee which--
          (i) takes into account the costs incurred by such 
        centers, or classes of centers, generally in providing 
        services furnished in connection with the performance 
        of such procedure, as determined in accordance with a 
        survey (based upon a representative sample of 
        procedures and facilities) of the actual audited costs 
        incurred by such centers in providing such services,
          (ii) takes such costs into account in such a manner 
        as will assure that the performance of the procedure in 
        such a center will result in substantially less amounts 
        paid under this title than would have been paid if the 
        procedure had been performed on an inpatient basis in a 
        hospital, and
          (iii) in the case of insertion of an intraocular lens 
        during or subsequent to cataract surgery includes 
        payment which is reasonable and related to the cost of 
        acquiring the class of lens involved.
Each amount so established shall be reviewed and updated not 
later than July 1, 1987, and annually thereafter to take 
account of varying conditions in different areas.
  (B) The amount of payment to be made under this part for 
facility services furnished, in connection with a surgical 
procedure specified pursuant to paragraph (1)(B), in a 
physician's office shall be equal to 80 percent of a standard 
overhead amount established by the Secretary (with respect to 
each such procedure) on the basis of the Secretary's estimate 
of a fair fee which--
          (i) takes into account additional costs, not usually 
        included in the professional fee, incurred by 
        physicians in securing, maintaining, and staffing the 
        facilities and ancillary services appropriate for the 
        performance of such procedure in the physician's 
        office, and
          (ii) takes such items into account in such a manner 
        which will assure that the performance of such 
        procedure in the physician's office will result in 
        substantially less amounts paid under this title than 
        would have been paid if the services had been furnished 
        on an inpatient basis in a hospital.
Each amount so established shall be reviewed and updated not 
later than July 1, 1987, and annually thereafter to take 
account of varying conditions in different areas.
  (C)(i) Notwithstanding the second sentence of each of 
subparagraphs (A) and (B), except as otherwise specified in 
clauses (ii), (iii), and (iv), if the Secretary has not updated 
amounts established under such subparagraphs or under 
subparagraph (D), with respect to facility services furnished 
during a fiscal year (beginning with fiscal year 1986 or a 
calendar year (beginning with 2006)), such amounts shall be 
increased by the percentage increase in the Consumer Price 
Index for all urban consumers (U.S. city average) as estimated 
by the Secretary for the 12-month period ending with the 
midpoint of the year involved.
  (ii) In each of the fiscal years 1998 through 2002, the 
increase under this subparagraph shall be reduced (but not 
below zero) by 2.0 percentage points.
  (iii) In fiscal year 2004, beginning with April 1, 2004, the 
increase under this subparagraph shall be the Consumer Price 
Index for all urban consumers (U.S. city average) as estimated 
by the Secretary for the 12-month period ending with March 31, 
2003, minus 3.0 percentage points.
  (iv) In fiscal year 2005, the last quarter of calendar year 
2005, and each of calendar years 2006 through 2009, the 
increase under this subparagraph shall be 0 percent.
  (D)(i) Taking into account the recommendations in the report 
under section 626(d) of Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003, the Secretary shall 
implement a revised payment system for payment of surgical 
services furnished in ambulatory surgical centers.
  (ii) In the year the system described in clause (i) is 
implemented, such system shall be designed to result in the 
same aggregate amount of expenditures for such services as 
would be made if this subparagraph did not apply, as estimated 
by the Secretary and taking into account reduced expenditures 
that would apply if subparagraph (E) were to continue to apply, 
as estimated by the Secretary.
  (iii) The Secretary shall implement the system described in 
clause (i) for periods in a manner so that it is first 
effective beginning on or after January 1, 2006, and not later 
than January 1, 2008.
  (iv) The Secretary may implement such system in a manner so 
as to provide for a reduction in any annual update for failure 
to report on quality measures in accordance with paragraph (7).
          (v) In implementing the system described in clause 
        (i) for 2011 and each subsequent year, any annual 
        update under such system for the year, after 
        application of clause (iv), shall be reduced by the 
        productivity adjustment described in section 
        1886(b)(3)(B)(xi)(II). The application of the preceding 
        sentence may result in such update being less than 0.0 
        for a year, and may result in payment rates under the 
        system described in clause (i) for a year being less 
        than such payment rates for the preceding year.
  (vi) There shall be no administrative or judicial review 
under section 1869, 1878, or otherwise, of the classification 
system, the relative weights, payment amounts, and the 
geographic adjustment factor, if any, under this subparagraph.
  (E) With respect to surgical procedures furnished on or after 
January 1, 2007, and before the effective date of the 
implementation of a revised payment system under subparagraph 
(D), if--
          (i) the standard overhead amount under subparagraph 
        (A) for a facility service for such procedure, without 
        the application of any geographic adjustment, exceeds
          (ii) the Medicare OPD fee schedule amount established 
        under the prospective payment system for hospital 
        outpatient department services under paragraph (3)(D) 
        of section 1833(t) for such service for such year, 
        determined without regard to geographic adjustment 
        under paragraph (2)(D) of such section,
the Secretary shall substitute under subparagraph (A) the 
amount described in clause (ii) for the standard overhead 
amount for such service referred to in clause (i).
  (3)(A) The aggregate amount of the payments to be made under 
this part for outpatient hospital facility services or critical 
access hospital services furnished before January 1, 1999, in 
connection with surgical procedures specified under paragraph 
(1)(A) shall be equal to the lesser of--
          (i) the amount determined with respect to such 
        services under subsection (a)(2)(B); or
          (ii) the blend amount (described in subparagraph 
        (B)).
  (B)(i) The blend amount for a cost reporting period is the 
sum of--
          (I) the cost proportion (as defined in clause 
        (ii)(I)) of the amount described in subparagraph 
        (A)(i), and
          (II) the ASC proportion (as defined in clause 
        (ii)(II)) of the standard overhead amount payable with 
        respect to the same surgical procedure as if it were 
        provided in an ambulatory surgical center in the same 
        area, as determined under paragraph (2)(A), less the 
        amount a provider may charge as described in clause 
        (ii) of section 1866(a)(2)(A).
  (ii) Subject to paragraph (4), in this paragraph:
          (I) The term ``cost proportion'' means 75 percent for 
        cost reporting periods beginning in fiscal year 1988, 
        50 percent for portions of cost reporting periods 
        beginning on or after October 1, 1988, and ending on or 
        before December 31, 1990, and 42 percent for portions 
        of cost reporting periods beginning on or after January 
        1, 1991.
          (II) The term ``ASC proportion'' means 25 percent for 
        cost reporting periods beginning in fiscal year 1988, 
        50 percent for portions of cost reporting periods 
        beginning on or after October 1, 1988, and ending on or 
        before December 31, 1990, and 58 percent for portions 
        of cost reporting periods beginning on or after January 
        1, 1991.
  (4)(A) In the case of a hospital that--
          (i) makes application to the Secretary and 
        demonstrates that it specializes in eye services or eye 
        and ear services (as determined by the Secretary),
          (ii) receives more than 30 percent of its total 
        revenues from outpatient services, and
          (iii) on October 1, 1987--
                  (I) was an eye specialty hospital or an eye 
                and ear specialty hospital, or
                  (II) was operated as an eye or eye and ear 
                unit (as defined in subparagraph (B)) of a 
                general acute care hospital which, on the date 
                of the application described in clause (i), 
                operates less than 20 percent of the beds that 
                the hospital operated on October 1, 1987, and 
                has sold or otherwise disposed of a substantial 
                portion of the hospital's other acute care 
                operations,
the cost proportion and ASC proportion in effect under 
subclauses (I) and (II) of paragraph (3)(B)(ii) for cost 
reporting periods beginning in fiscal year 1988 shall remain in 
effect for cost reporting periods beginning on or after October 
1, 1988, and before January 1, 1995.
  (B) For purposes of this subparagraph (A)(iii)(II), the term 
``eye or eye and ear unit'' means a physically separate or 
distinct unit containing separate surgical suites devoted 
solely to eye or eye and ear services.
  (5)(A) The Secretary is authorized to provide by regulations 
that in the case of a surgical procedure, specified by the 
Secretary pursuant to paragraph (1)(A), performed in an 
ambulatory surgical center described in such paragraph, there 
shall be paid (in lieu of any amounts otherwise payable under 
this part) with respect to the facility services furnished by 
such center and with respect to all related services (including 
physicians' services, laboratory, X-ray, and diagnostic 
services) a single all-inclusive fee established pursuant to 
subparagraph (B), if all parties furnishing all such services 
agree to accept such fee (to be divided among the parties 
involved in such manner as they shall have previously agreed 
upon) as full payment for the services furnished.
  (B) In implementing this paragraph, the Secretary shall 
establish with respect to each surgical procedure specified 
pursuant to paragraph (1)(A) the amount of the all-inclusive 
fee for such procedure, taking into account such factors as may 
be appropriate. The amount so established with respect to any 
surgical procedure shall be reviewed periodically and may be 
adjusted by the Secretary, when appropriate, to take account of 
varying conditions in different areas.
  (6) Any person, including a facility having an agreement 
under section 1832(a)(2)(F)(i), who knowingly and willfully 
presents, or causes to be presented, a bill or request for 
payment, for an intraocular lens inserted during or subsequent 
to cataract surgery for which payment may be made under 
paragraph (2)(A)(iii), is subject to a civil money penalty of 
not to exceed $2,000. The provisions of section 1128A (other 
than subsections (a) and (b)) shall apply to a civil money 
penalty under the previous sentence in the same manner as such 
provisions apply to a penalty or proceeding under section 
1128A(a).
  (7)(A) For purposes of paragraph (2)(D)(iv), the Secretary 
may provide, in the case of an ambulatory surgical center that 
does not submit, to the Secretary in accordance with this 
paragraph, data required to be submitted on measures selected 
under this paragraph with respect to a year, any annual 
increase provided under the system established under paragraph 
(2)(D) for such year shall be reduced by 2.0 percentage points. 
A reduction under this subparagraph shall apply only with 
respect to the year involved and the Secretary shall not take 
into account such reduction in computing any annual increase 
factor for a subsequent year.
  (B) Except as the Secretary may otherwise provide, the 
provisions of subparagraphs (B), (C), (D), and (E) of paragraph 
(17) of section 1833(t) shall apply with respect to services of 
ambulatory surgical centers under this paragraph in a similar 
manner to the manner in which they apply under such paragraph 
and, for purposes of this subparagraph, any reference to a 
hospital, outpatient setting, or outpatient hospital services 
is deemed a reference to an ambulatory surgical center, the 
setting of such a center, or services of such a center, 
respectively.
  (j) Whenever a final determination is made that the amount of 
payment made under this part either to a provider of services 
or to another person pursuant to an assignment under section 
1842(b)(3)(B)(ii) was in excess of or less than the amount of 
payment that is due, and payment of such excess or deficit is 
not made (or effected by offset) within 30 days of the date of 
the determination, interest shall accrue on the balance of such 
excess or deficit not paid or offset (to the extent that the 
balance is owed by or owing to the provider) at a rate 
determined in accordance with the regulations of the Secretary 
of the Treasury applicable to charges for late payments.
  (k) With respect to services described in section 
1861(s)(10)(B), the Secretary may provide, instead of the 
amount of payment otherwise provided under this part, for 
payment of such an amount or amounts as reasonably reflects the 
general cost of efficiently providing such services.
  (l)(1)(A) The Secretary shall establish a fee schedule for 
services of certified registered nurse anesthetists under 
section 1861(s)(11).
  (B) In establishing the fee schedule under this paragraph the 
Secretary may utilize a system of time units, a system of base 
and time units, or any appropriate methodology.
  (C) The provisions of this subsection shall not apply to 
certain services furnished in certain hospitals in rural areas 
under the provisions of section 9320(k) of the Omnibus Budget 
Reconciliation Act of 1986, as amended by section 6132 of the 
Omnibus Budget Reconciliation Act of 1989.
  (2) Except as provided in paragraph (3), the fee schedule 
established under paragraph (1) shall be initially based on 
audited data from cost reporting periods ending in fiscal year 
1985 and such other data as the Secretary determines necessary.
  (3)(A) In establishing the initial fee schedule for those 
services, the Secretary shall adjust the fee schedule to the 
extent necessary to ensure that the estimated total amount 
which will be paid under this title for those services plus 
applicable coinsurance in 1989 will equal the estimated total 
amount which would be paid under this title for those services 
in 1989 if the services were included as inpatient hospital 
services and payment for such services was made under part A in 
the same manner as payment was made in fiscal year 1987, 
adjusted to take into account changes in prices and technology 
relating to the administration of anesthesia.
  (B) The Secretary shall also reduce the prevailing charge of 
physicians for medical direction of a certified registered 
nurse anesthetist, or the fee schedule for services of 
certified registered nurse anesthetists, or both, to the extent 
necessary to ensure that the estimated total amount which will 
be paid under this title plus applicable coinsurance for such 
medical direction and such services in 1989 and 1990 will not 
exceed the estimated total amount which would have been paid 
plus applicable coinsurance but for the enactment of the 
amendments made by section 9320 of the Omnibus Budget 
Reconciliation Act of 1986. A reduced prevailing charge under 
this subparagraph shall become the prevailing charge but for 
subsequent years for purposes of applying the economic index 
under the fourth sentence of section 1842(b)(3).
  (4)(A) Except as provided in subparagraphs (C) and (D), in 
determining the amount paid under the fee schedule under this 
subsection for services furnished on or after January 1, 1991, 
by a certified registered nurse anesthetist who is not 
medically directed--
          (i) the conversion factor shall be--
                  (I) for services furnished in 1991, $15.50,
                  (II) for services furnished in 1992, $15.75,
                  (III) for services furnished in 1993, $16.00,
                  (IV) for services furnished in 1994, $16.25,
                  (V) for services furnished in 1995, $16.50,
                  (VI) for services furnished in 1996, $16.75, 
                and
                  (VII) for services furnished in calendar 
                years after 1996, the previous year's 
                conversion factor increased by the update 
                determined under section 1848(d) for physician 
                anesthesia services for that year;
          (ii) the payment areas to be used shall be the fee 
        schedule areas used under section 1848 (or, in the case 
        of services furnished during 1991, the localities used 
        under section 1842(b)) for purposes of computing 
        payments for physicians' services that are anesthesia 
        services;
          (iii) the geographic adjustment factors to be applied 
        to the conversion factor under clause (i) for services 
        in a fee schedule area or locality is--
                  (I) in the case of services furnished in 
                1991, the geographic work index value and the 
                geographic practice cost index value specified 
                in section 1842(q)(1)(B) for physicians' 
                services that are anesthesia services furnished 
                in the area or locality, and
                  (II) in the case of services furnished after 
                1991, the geographic work index value, the 
                geographic practice cost index value, and the 
                geographic malpractice index value used for 
                determining payments for physicians' services 
                that are anesthesia services under section 
                1848,
        with 70 percent of the conversion factor treated as 
        attributable to work and 30 percent as attributable to 
        overhead for services furnished in 1991 (and the 
        portions attributable to work, practice expenses, and 
        malpractice expenses in 1992 and thereafter being the 
        same as is applied under section 1848).
  (B)(i) Except as provided in clause (ii) and subparagraph 
(D), in determining the amount paid under the fee schedule 
under this subsection for services furnished on or after 
January 1, 1991, and before January 1, 1994, by a certified 
registered nurse anesthetist who is medically directed, the 
Secretary shall apply the same methodology specified in 
subparagraph (A).
  (ii) The conversion factor used under clause (i) shall be--
          (I) for services furnished in 1991, $10.50,
          (II) for services furnished in 1992, $10.75, and
          (III) for services furnished in 1993, $11.00.
  (iii) In the case of services of a certified registered nurse 
anesthetist who is medically directed or medically supervised 
by a physician which are furnished on or after January 1, 1994, 
the fee schedule amount shall be one-half of the amount 
described in section 1848(a)(5)(B) with respect to the 
physician.
  (C) Notwithstanding subclauses (I) through (V) of 
subparagraph (A)(i)--
          (i) in the case of a 1990 conversion factor that is 
        greater than $16.50, the conversion factor for a 
        calendar year after 1990 and before 1996 shall be the 
        1990 conversion factor reduced by the product of the 
        last digit of the calendar year and one-fifth of the 
        amount by which the 1990 conversion factor exceeds 
        $16.50; and
          (ii) in the case of a 1990 conversion factor that is 
        greater than $15.49 but less than $16.51, the 
        conversion factor for a calendar year after 1990 and 
        before 1996 shall be the greater of--
                  (I) the 1990 conversion factor, or
                  (II) the conversion factor specified in 
                subparagraph (A)(i) for the year involved.
  (D) Notwithstanding subparagraph (C), in no case may the 
conversion factor used to determine payment for services in a 
fee schedule area or locality under this subsection, as 
adjusted by the adjustment factors specified in subparagraphs 
(A)(iii), exceed the conversion factor used to determine the 
amount paid for physicians' services that are anesthesia 
services in the area or locality.
  (5)(A) Payment for the services of a certified registered 
nurse anesthetist (for which payment may otherwise be made 
under this part) may be made on the basis of a claim or request 
for payment presented by the certified registered nurse 
anesthetist furnishing such services, or by a hospital, 
critical access hospital, physician, group practice, or 
ambulatory surgical center with which the certified registered 
nurse anesthetist furnishing such services has an employment or 
contractual relationship that provides for payment to be made 
under this part for such services to such hospital, critical 
access hospital, physician, group practice, or ambulatory 
surgical center.
  (B) No hospital or critical access hospital that presents a 
claim or request for payment for services of a certified nurse 
anesthetist under this part may treat any uncollected 
coinsurance amount imposed under this part with respect to such 
services as a bad debt of such hospital or critical access 
hospital for purposes of this title.
  (6) If an adjustment under paragraph (3)(B) results in a 
reduction in the reasonable charge for a physicians' service 
and a nonparticipating physician furnishes the service to an 
individual entitled to benefits under this part after the 
effective date of the reduction, the physician's actual charge 
is subject to a limit under section 1842(j)(1)(D).
  (m)(1) In the case of physicians' services furnished in a 
year to an individual, who is covered under the insurance 
program established by this part and who incurs expenses for 
such services, in an area that is designated (under section 
332(a)(1)(A) of the Public Health Service Act) as a health 
professional shortage area as identified by the Secretary prior 
to the beginning of such year, in addition to the amount 
otherwise paid under this part, there also shall be paid to the 
physician (or to an employer or facility in the cases described 
in clause (A) of section 1842(b)(6)) (on a monthly or quarterly 
basis) from the Federal Supplementary Medical Insurance Trust 
Fund an amount equal to 10 percent of the payment amount for 
the service under this part.
  (2) For each health professional shortage area identified in 
paragraph (1) that consists of an entire county, the Secretary 
shall provide for the additional payment under paragraph (1) 
without any requirement on the physician to identify the health 
professional shortage area involved. The Secretary may 
implement the previous sentence using the method specified in 
subsection (u)(4)(C).
  (3) The Secretary shall post on the Internet website of the 
Centers for Medicare & Medicaid Services a list of the health 
professional shortage areas identified in paragraph (1) that 
consist of a partial county to facilitate the additional 
payment under paragraph (1) in such areas.
  (4) There shall be no administrative or judicial review under 
section 1869, section 1878, or otherwise, respecting--
          (A) the identification of a county or area;
          (B) the assignment of a specialty of any physician 
        under this paragraph;
          (C) the assignment of a physician to a county under 
        this subsection; or
          (D) the assignment of a postal ZIP Code to a county 
        or other area under this subsection.
  (n)(1)(A) The aggregate amount of the payments to be made for 
all or part of a cost reporting period for services described 
in subsection (a)(2)(E)(i) furnished under this part on or 
after October 1, 1988, and before January 1, 1999, and for 
services described in subsection (a)(2)(E)(ii) furnished under 
this part on or after October 1, 1989, and before January 1, 
1999, shall be equal to the lesser of--
          (i) the amount determined with respect to such 
        services under subsection (a)(2)(B), or
          (ii) the blend amount for radiology services and 
        diagnostic procedures determined in accordance with 
        subparagraph (B).
  (B)(i) The blend amount for radiology services and diagnostic 
procedures for a cost reporting period is the sum of--
          (I) the cost proportion (as defined in clause (ii)) 
        of the amount described in subparagraph (A)(i); and
          (II) the charge proportion (as defined in clause 
        (ii)(II)) of 62 percent (for services described in 
        subsection (a)(2)(E)(i)), or (for procedures described 
        in subsection (a)(2)(E)(ii)), 42 percent or such other 
        percent established by the Secretary (or carriers 
        acting pursuant to guidelines issued by the Secretary) 
        based on prevailing charges established with actual 
        charge data, of the prevailing charge or (for services 
        described in subsection (a)(2)(E)(i) furnished on or 
        after January 1, 1989) the fee schedule amount 
        established for participating physicians for the same 
        services as if they were furnished in a physician's 
        office in the same locality as determined under section 
        1842(b), less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).
  (ii) In this subparagraph:
          (I) The term ``cost proportion'' means 50 percent, 
        except that such term means 65 percent in the case of 
        outpatient radiology services for portions of cost 
        reporting periods which occur in fiscal year 1989 and 
        in the case of diagnostic procedures described in 
        subsection (a)(2)(E)(ii) for portions of cost reporting 
        periods which occur in fiscal year 1990, and such term 
        means 42 percent in the case of outpatient radiology 
        services for portions of cost reporting periods 
        beginning on or after January 1, 1991.
          (II) The term ``charge proportion'' means 100 percent 
        minus the cost proportion.
  (o)(1) In the case of shoes described in section 
1861(s)(12)--
          (A) no payment may be made under this part, with 
        respect to any individual for any year, for the 
        furnishing of--
                  (i) more than one pair of custom molded shoes 
                (including inserts provided with such shoes) 
                and 2 additional pairs of inserts for such 
                shoes, or
                  (ii) more than one pair of extra-depth shoes 
                (not including inserts provided with such 
                shoes) and 3 pairs of inserts for such shoes, 
                and
          (B) with respect to expenses incurred in any calendar 
        year, no more than the amount of payment applicable 
        under paragraph (2) shall be considered as incurred 
        expenses for purposes of subsections (a) and (b).
Payment for shoes (or inserts) under this part shall be 
considered to include payment for any expenses for the fitting 
of such shoes (or inserts).
  (2)(A) Except as provided by the Secretary under 
subparagraphs (B) and (C), the amount of payment under this 
paragraph for custom molded shoes, extra-depth shoes, and 
inserts shall be the amount determined for such items by the 
Secretary under section 1834(h).
  (B) The Secretary may establish payment amounts for shoes and 
inserts that are lower than the amount established under 
section 1834(h) if the Secretary finds that shoes and inserts 
of an appropriate quality are readily available at or below the 
amount established under such section.
  (C) In accordance with procedures established by the 
Secretary, an individual entitled to benefits with respect to 
shoes described in section 1861(s)(12) may substitute 
modification of such shoes instead of obtaining one (or more, 
as specified by the Secretary) pair of inserts (other than the 
original pair of inserts with respect to such shoes). In such 
case, the Secretary shall substitute, for the payment amount 
established under section 1834(h), a payment amount that the 
Secretary estimates will assure that there is no net increase 
in expenditures under this subsection as a result of this 
subparagraph.
  (3) In this title, the term ``shoes'' includes, except for 
purposes of subparagraphs (A)(ii) and (B) of paragraph (2), 
inserts for extra-depth shoes.
  (q)(1) Each request for payment, or bill submitted, for an 
item or service furnished by an entity for which payment may be 
made under this part and for which the entity knows or has 
reason to believe there has been a referral by a referring 
physician (within the meaning of section 1877) shall include 
the name and unique physician identification number for the 
referring physician.
  (2)(A) In the case of a request for payment for an item or 
service furnished by an entity under this part on an 
assignment-related basis and for which information is required 
to be provided under paragraph (1) but not included, payment 
may be denied under this part.
  (B) In the case of a request for payment for an item or 
service furnished by an entity under this part not submitted on 
an assignment-related basis and for which information is 
required to be provided under paragraph (1) but not included--
          (i) if the entity knowingly and willfully fails to 
        provide such information promptly upon request of the 
        Secretary or a carrier, the entity may be subject to a 
        civil money penalty in an amount not to exceed $2,000, 
        and
          (ii) if the entity knowingly, willfully, and in 
        repeated cases fails, after being notified by the 
        Secretary of the obligations and requirements of this 
        subsection to provide the information required under 
        paragraph (1), the entity may be subject to exclusion 
        from participation in the programs under this Act for a 
        period not to exceed 5 years, in accordance with the 
        procedures of subsections (c), (f), and (g) of section 
        1128.
The provisions of section 1128A (other than subsections (a) and 
(b)) shall apply to civil money penalties under clause (i) in 
the same manner as they apply to a penalty or proceeding under 
section 1128A(a).
  (r)(1) With respect to services described in section 
1861(s)(2)(K)(ii) (relating to nurse practitioner or clinical 
nurse specialist services), payment may be made on the basis of 
a claim or request for payment presented by the nurse 
practitioner or clinical nurse specialist furnishing such 
services, or by a hospital, critical access hospital, skilled 
nursing facility or nursing facility (as defined in section 
1919(a)), physician, group practice, or ambulatory surgical 
center with which the nurse practitioner or clinical nurse 
specialist has an employment or contractual relationship that 
provides for payment to be made under this part for such 
services to such hospital, physician, group practice, or 
ambulatory surgical center.
  (2) No hospital or critical access hospital that presents a 
claim or request for payment under this part for services 
described in section 1861(s)(2)(K)(ii) may treat any 
uncollected coinsurance amount imposed under this part with 
respect to such services as a bad debt of such hospital for 
purposes of this title.
  (s) The Secretary may not provide for payment under 
subsection (a)(1)(A) with respect to an organization unless the 
organization provides assurances satisfactory to the Secretary 
that the organization meets the requirement of section 1866(f) 
(relating to maintaining written policies and procedures 
respecting advance directives).
  (t) Prospective Payment System for Hospital Outpatient 
Department Services.--
          (1) Amount of payment.--
                  (A) In general.--With respect to covered OPD 
                services (as defined in subparagraph (B)) 
                furnished during a year beginning with 1999, 
                the amount of payment under this part shall be 
                determined under a prospective payment system 
                established by the Secretary in accordance with 
                this subsection.
                  (B) Definition of covered opd services.--For 
                purposes of this subsection, the term ``covered 
                OPD services''--
                          (i) means hospital outpatient 
                        services designated by the Secretary;
                          (ii) subject to clause (iv), includes 
                        inpatient hospital services designated 
                        by the Secretary that are covered under 
                        this part and furnished to a hospital 
                        inpatient who (I) is entitled to 
                        benefits under part A but has exhausted 
                        benefits for inpatient hospital 
                        services during a spell of illness, or 
                        (II) is not so entitled;
                          (iii) includes implantable items 
                        described in paragraph (3), (6), or (8) 
                        of section 1861(s);
                          (iv) does not include any therapy 
                        services described in subsection (a)(8) 
                        or ambulance services, for which 
                        payment is made under a fee schedule 
                        described in section 1834(k) or section 
                        1834(l) and does not include screening 
                        mammography (as defined in section 
                        1861(jj)), diagnostic mammography, or 
                        personalized prevention plan services 
                        (as defined in section 1861(hhh)(1)); 
                        and
                          (v) does not include applicable items 
                        and services (as defined in 
                        subparagraph (A) of paragraph (21)) 
                        that are furnished on or after January 
                        1, 2017, by an off-campus outpatient 
                        department of a provider (as defined in 
                        subparagraph (B) of such paragraph).
          (2) System requirements.--Under the payment system--
                  (A) the Secretary shall develop a 
                classification system for covered OPD services;
                  (B) the Secretary may establish groups of 
                covered OPD services, within the classification 
                system described in subparagraph (A), so that 
                services classified within each group are 
                comparable clinically and with respect to the 
                use of resources and so that an implantable 
                item is classified to the group that includes 
                the service to which the item relates;
                  (C) the Secretary shall, using data on claims 
                from 1996 and using data from the most recent 
                available cost reports, establish relative 
                payment weights for covered OPD services (and 
                any groups of such services described in 
                subparagraph (B)) based on median (or, at the 
                election of the Secretary, mean) hospital costs 
                and shall determine projections of the 
                frequency of utilization of each such service 
                (or group of services) in 1999;
                  (D) subject to paragraph (19), the Secretary 
                shall determine a wage adjustment factor to 
                adjust the portion of payment and coinsurance 
                attributable to labor-related costs for 
                relative differences in labor and labor-related 
                costs across geographic regions in a budget 
                neutral manner;
                  (E) the Secretary shall establish, in a 
                budget neutral manner, outlier adjustments 
                under paragraph (5) and transitional pass-
                through payments under paragraph (6) and other 
                adjustments as determined to be necessary to 
                ensure equitable payments, such as adjustments 
                for certain classes of hospitals;
                  (F) the Secretary shall develop a method for 
                controlling unnecessary increases in the volume 
                of covered OPD services;
                  (G) the Secretary shall create additional 
                groups of covered OPD services that classify 
                separately those procedures that utilize 
                contrast agents from those that do not; and
                  (H) with respect to devices of brachytherapy 
                consisting of a seed or seeds (or radioactive 
                source), the Secretary shall create additional 
                groups of covered OPD services that classify 
                such devices separately from the other services 
                (or group of services) paid for under this 
                subsection in a manner reflecting the number, 
                isotope, and radioactive intensity of such 
                devices furnished, including separate groups 
                for palladium-103 and iodine-125 devices and 
                for stranded and non-stranded devices furnished 
                on or after July 1, 2007.
        For purposes of subparagraph (B), items and services 
        within a group shall not be treated as ``comparable 
        with respect to the use of resources'' if the highest 
        median cost (or mean cost, if elected by the Secretary 
        under subparagraph (C)) for an item or service within 
        the group is more than 2 times greater than the lowest 
        median cost (or mean cost, if so elected) for an item 
        or service within the group; except that the Secretary 
        may make exceptions in unusual cases, such as low 
        volume items and services, but may not make such an 
        exception in the case of a drug or biological that has 
        been designated as an orphan drug under section 526 of 
        the Federal Food, Drug and Cosmetic Act.
          (3) Calculation of base amounts.--
                  (A) Aggregate amounts that would be payable 
                if deductibles were disregarded.--The Secretary 
                shall estimate the sum of--
                          (i) the total amounts that would be 
                        payable from the Trust Fund under this 
                        part for covered OPD services in 1999, 
                        determined without regard to this 
                        subsection, as though the deductible 
                        under section 1833(b) did not apply, 
                        and
                          (ii) the total amounts of copayments 
                        estimated to be paid under this 
                        subsection by beneficiaries to 
                        hospitals for covered OPD services in 
                        1999, as though the deductible under 
                        section 1833(b) did not apply.
                  (B) Unadjusted copayment amount.--
                          (i) In general.--For purposes of this 
                        subsection, subject to clause (ii), the 
                        ``unadjusted copayment amount'' 
                        applicable to a covered OPD service (or 
                        group of such services) is 20 percent 
                        of the national median of the charges 
                        for the service (or services within the 
                        group) furnished during 1996, updated 
                        to 1999 using the Secretary's estimate 
                        of charge growth during the period.
                          (ii) Adjusted to be 20 percent when 
                        fully phased in.--If the pre-deductible 
                        payment percentage for a covered OPD 
                        service (or group of such services) 
                        furnished in a year would be equal to 
                        or exceed 80 percent, then the 
                        unadjusted copayment amount shall be 20 
                        percent of amount determined under 
                        subparagraph (D).
                          (iii) Rules for new services.--The 
                        Secretary shall establish rules for 
                        establishment of an unadjusted 
                        copayment amount for a covered OPD 
                        service not furnished during 1996, 
                        based upon its classification within a 
                        group of such services.
                  (C) Calculation of conversion factors.--
                          (i) For 1999.--
                                  (I) In general.--The 
                                Secretary shall establish a 
                                1999 conversion factor for 
                                determining the medicare OPD 
                                fee schedule amounts for each 
                                covered OPD service (or group 
                                of such services) furnished in 
                                1999. Such conversion factor 
                                shall be established on the 
                                basis of the weights and 
                                frequencies described in 
                                paragraph (2)(C) and in such a 
                                manner that the sum for all 
                                services and groups of the 
                                products (described in 
                                subclause (II) for each such 
                                service or group) equals the 
                                total projected amount 
                                described in subparagraph (A).
                                  (II) Product described.--The 
                                Secretary shall determine for 
                                each service or group the 
                                product of the medicare OPD fee 
                                schedule amounts (taking into 
                                account appropriate adjustments 
                                described in paragraphs (2)(D) 
                                and (2)(E)) and the estimated 
                                frequencies for such service or 
                                group.
                          (ii) Subsequent years.--Subject to 
                        paragraph (8)(B), the Secretary shall 
                        establish a conversion factor for 
                        covered OPD services furnished in 
                        subsequent years in an amount equal to 
                        the conversion factor established under 
                        this subparagraph and applicable to 
                        such services furnished in the previous 
                        year increased by the OPD fee schedule 
                        increase factor specified under clause 
                        (iv) for the year involved.
                          (iii) Adjustment for service mix 
                        changes.--Insofar as the Secretary 
                        determines that the adjustments for 
                        service mix under paragraph (2) for a 
                        previous year (or estimates that such 
                        adjustments for a future year) did (or 
                        are likely to) result in a change in 
                        aggregate payments under this 
                        subsection during the year that are a 
                        result of changes in the coding or 
                        classification of covered OPD services 
                        that do not reflect real changes in 
                        service mix, the Secretary may adjust 
                        the conversion factor computed under 
                        this subparagraph for subsequent years 
                        so as to eliminate the effect of such 
                        coding or classification changes.
                          (iv) OPD fee schedule increase 
                        factor.--For purposes of this 
                        subparagraph, subject to paragraph (17) 
                        and subparagraph (F) of this paragraph, 
                        the ``OPD fee schedule increase 
                        factor'' for services furnished in a 
                        year is equal to the market basket 
                        percentage increase applicable under 
                        section 1886(b)(3)(B)(iii) to hospital 
                        discharges occurring during the fiscal 
                        year ending in such year, reduced by 1 
                        percentage point for such factor for 
                        services furnished in each of 2000 and 
                        2002. In applying the previous sentence 
                        for years beginning with 2000, the 
                        Secretary may substitute for the market 
                        basket percentage increase an annual 
                        percentage increase that is computed 
                        and applied with respect to covered OPD 
                        services furnished in a year in the 
                        same manner as the market basket 
                        percentage increase is determined and 
                        applied to inpatient hospital services 
                        for discharges occurring in a fiscal 
                        year.
                  (D) Calculation of medicare opd fee schedule 
                amounts.--The Secretary shall compute a 
                medicare OPD fee schedule amount for each 
                covered OPD service (or group of such services) 
                furnished in a year, in an amount equal to the 
                product of--
                          (i) the conversion factor computed 
                        under subparagraph (C) for the year, 
                        and
                          (ii) the relative payment weight 
                        (determined under paragraph (2)(C)) for 
                        the service or group.
                  (E) Pre-deductible payment percentage.--The 
                pre-deductible payment percentage for a covered 
                OPD service (or group of such services) 
                furnished in a year is equal to the ratio of--
                          (i) the medicare OPD fee schedule 
                        amount established under subparagraph 
                        (D) for the year, minus the unadjusted 
                        copayment amount determined under 
                        subparagraph (B) for the service or 
                        group, to
                          (ii) the medicare OPD fee schedule 
                        amount determined under subparagraph 
                        (D) for the year for such service or 
                        group.
                  (F) Productivity and other adjustment.--After 
                determining the OPD fee schedule increase 
                factor under subparagraph (C)(iv), the 
                Secretary shall reduce such increase factor--
                          (i) for 2012 and subsequent years, by 
                        the productivity adjustment described 
                        in section 1886(b)(3)(B)(xi)(II); and
                          (ii) for each of 2010 through 2019, 
                        by the adjustment described in 
                        subparagraph (G).
                The application of this subparagraph may result 
                in the increase factor under subparagraph 
                (C)(iv) being less than 0.0 for a year, and may 
                result in payment rates under the payment 
                system under this subsection for a year being 
                less than such payment rates for the preceding 
                year.
                  (G) Other adjustment.--For purposes of 
                subparagraph (F)(ii), the adjustment described 
                in this subparagraph is--
                          (i) for each of 2010 and 2011, 0.25 
                        percentage point;
                          (ii) for each of 2012 and 2013, 0.1 
                        percentage point;
                          (iii) for 2014, 0.3 percentage point;
                          (iv) for each of 2015 and 2016, 0.2 
                        percentage point; and
                          (v) for each of 2017, 2018, and 2019, 
                        0.75 percentage point.
          (4) Medicare payment amount.--The amount of payment 
        made from the Trust Fund under this part for a covered 
        OPD service (and such services classified within a 
        group) furnished in a year is determined, subject to 
        paragraph (7), as follows:
                  (A) Fee schedule adjustments.--The medicare 
                OPD fee schedule amount (computed under 
                paragraph (3)(D)) for the service or group and 
                year is adjusted for relative differences in 
                the cost of labor and other factors determined 
                by the Secretary, as computed under paragraphs 
                (2)(D) and (2)(E).
                  (B) Subtract applicable deductible.--Reduce 
                the adjusted amount determined under 
                subparagraph (A) by the amount of the 
                deductible under section 1833(b), to the extent 
                applicable.
                  (C) Apply payment proportion to remainder.--
                The amount of payment is the amount so 
                determined under subparagraph (B) multiplied by 
                the pre-deductible payment percentage (as 
                determined under paragraph (3)(E)) for the 
                service or group and year involved, plus the 
                amount of any reduction in the copayment amount 
                attributable to paragraph (8)(C).
          (5) Outlier adjustment.--
                  (A) In general.--Subject to subparagraph (D), 
                the Secretary shall provide for an additional 
                payment for each covered OPD service (or group 
                of services) for which a hospital's charges, 
                adjusted to cost, exceed--
                          (i) a fixed multiple of the sum of--
                                  (I) the applicable medicare 
                                OPD fee schedule amount 
                                determined under paragraph 
                                (3)(D), as adjusted under 
                                paragraph (4)(A) (other than 
                                for adjustments under this 
                                paragraph or paragraph (6)); 
                                and
                                  (II) any transitional pass-
                                through payment under paragraph 
                                (6); and
                          (ii) at the option of the Secretary, 
                        such fixed dollar amount as the 
                        Secretary may establish.
                  (B) Amount of adjustment.--The amount of the 
                additional payment under subparagraph (A) shall 
                be determined by the Secretary and shall 
                approximate the marginal cost of care beyond 
                the applicable cutoff point under such 
                subparagraph.
                  (C) Limit on aggregate outlier adjustments.--
                          (i) In general.--The total of the 
                        additional payments made under this 
                        paragraph for covered OPD services 
                        furnished in a year (as estimated by 
                        the Secretary before the beginning of 
                        the year) may not exceed the applicable 
                        percentage (specified in clause (ii)) 
                        of the total program payments estimated 
                        to be made under this subsection for 
                        all covered OPD services furnished in 
                        that year. If this paragraph is first 
                        applied to less than a full year, the 
                        previous sentence shall apply only to 
                        the portion of such year.
                          (ii) Applicable percentage.--For 
                        purposes of clause (i), the term 
                        ``applicable percentage'' means a 
                        percentage specified by the Secretary 
                        up to (but not to exceed)--
                                  (I) for a year (or portion of 
                                a year) before 2004, 2.5 
                                percent; and
                                  (II) for 2004 and thereafter, 
                                3.0 percent.
                  (D) Transitional authority.--In applying 
                subparagraph (A) for covered OPD services 
                furnished before January 1, 2002, the Secretary 
                may--
                          (i) apply such subparagraph to a bill 
                        for such services related to an 
                        outpatient encounter (rather than for a 
                        specific service or group of services) 
                        using OPD fee schedule amounts and 
                        transitional pass-through payments 
                        covered under the bill; and
                          (ii) use an appropriate cost-to-
                        charge ratio for the hospital involved 
                        (as determined by the Secretary), 
                        rather than for specific departments 
                        within the hospital.
                  (E) Exclusion of separate drug and biological 
                apcs from outlier payments.--No additional 
                payment shall be made under subparagraph (A) in 
                the case of ambulatory payment classification 
                groups established separately for drugs or 
                biologicals.
          (6) Transitional pass-through for additional costs of 
        innovative medical devices, drugs, and biologicals.--
                  (A) In general.--The Secretary shall provide 
                for an additional payment under this paragraph 
                for any of the following that are provided as 
                part of a covered OPD service (or group of 
                services):
                          (i) Current orphan drugs.--A drug or 
                        biological that is used for a rare 
                        disease or condition with respect to 
                        which the drug or biological has been 
                        designated as an orphan drug under 
                        section 526 of the Federal Food, Drug 
                        and Cosmetic Act if payment for the 
                        drug or biological as an outpatient 
                        hospital service under this part was 
                        being made on the first date that the 
                        system under this subsection is 
                        implemented.
                          (ii) Current cancer therapy drugs and 
                        biologicals and brachytherapy.--A drug 
                        or biological that is used in cancer 
                        therapy, including (but not limited to) 
                        a chemotherapeutic agent, an 
                        antiemetic, a hematopoietic growth 
                        factor, a colony stimulating factor, a 
                        biological response modifier, a 
                        bisphosphonate, and a device of 
                        brachytherapy or temperature monitored 
                        cryoablation, if payment for such drug, 
                        biological, or device as an outpatient 
                        hospital service under this part was 
                        being made on such first date.
                          (iii) Current radiopharmaceutical 
                        drugs and biological products.--A 
                        radiopharmaceutical drug or biological 
                        product used in diagnostic, monitoring, 
                        and therapeutic nuclear medicine 
                        procedures if payment for the drug or 
                        biological as an outpatient hospital 
                        service under this part was being made 
                        on such first date.
                          (iv) New medical devices, drugs, and 
                        biologicals.--A medical device, drug, 
                        or biological not described in clause 
                        (i), (ii), or (iii) if--
                                  (I) payment for the device, 
                                drug, or biological as an 
                                outpatient hospital service 
                                under this part was not being 
                                made as of December 31, 1996; 
                                and
                                  (II) the cost of the drug or 
                                biological or the average cost 
                                of the category of devices is 
                                not insignificant in relation 
                                to the OPD fee schedule amount 
                                (as calculated under paragraph 
                                (3)(D)) payable for the service 
                                (or group of services) 
                                involved.
                  (B) Use of categories in determining 
                eligibility of a device for pass-through 
                payments.--The following provisions apply for 
                purposes of determining whether a medical 
                device qualifies for additional payments under 
                clause (ii) or (iv) of subparagraph (A):
                          (i) Establishment of initial 
                        categories.--
                                  (I) In general.--The 
                                Secretary shall initially 
                                establish under this clause 
                                categories of medical devices 
                                based on type of device by 
                                April 1, 2001. Such categories 
                                shall be established in a 
                                manner such that each medical 
                                device that meets the 
                                requirements of clause (ii) or 
                                (iv) of subparagraph (A) as of 
                                January 1, 2001, is included in 
                                such a category and no such 
                                device is included in more than 
                                one category. For purposes of 
                                the preceding sentence, whether 
                                a medical device meets such 
                                requirements as of such date 
                                shall be determined on the 
                                basis of the program memoranda 
                                issued before such date.
                                  (II) Authorization of 
                                implementation other than 
                                through regulations.--The 
                                categories may be established 
                                under this clause by program 
                                memorandum or otherwise, after 
                                consultation with groups 
                                representing hospitals, 
                                manufacturers of medical 
                                devices, and other affected 
                                parties.
                          (ii) Establishing criteria for 
                        additional categories.--
                                  (I) In general.--The 
                                Secretary shall establish 
                                criteria that will be used for 
                                creation of additional 
                                categories (other than those 
                                established under clause (i)) 
                                through rulemaking (which may 
                                include use of an interim final 
                                rule with comment period).
                                  (II) Standard.--Such 
                                categories shall be established 
                                under this clause in a manner 
                                such that no medical device is 
                                described by more than one 
                                category. Such criteria shall 
                                include a test of whether the 
                                average cost of devices that 
                                would be included in a category 
                                and are in use at the time the 
                                category is established is not 
                                insignificant, as described in 
                                subparagraph (A)(iv)(II).
                                  (III) Deadline.--Criteria 
                                shall first be established 
                                under this clause by July 1, 
                                2001. The Secretary may 
                                establish in compelling 
                                circumstances categories under 
                                this clause before the date 
                                such criteria are established.
                                  (IV) Adding categories.--The 
                                Secretary shall promptly 
                                establish a new category of 
                                medical devices under this 
                                clause for any medical device 
                                that meets the requirements of 
                                subparagraph (A)(iv) and for 
                                which none of the categories in 
                                effect (or that were previously 
                                in effect) is appropriate.
                          (iii) Period for which category is in 
                        effect.--A category of medical devices 
                        established under clause (i) or (ii) 
                        shall be in effect for a period of at 
                        least 2 years, but not more than 3 
                        years, that begins--
                                  (I) in the case of a category 
                                established under clause (i), 
                                on the first date on which 
                                payment was made under this 
                                paragraph for any device 
                                described by such category 
                                (including payments made during 
                                the period before April 1, 
                                2001); and
                                  (II) in the case of any other 
                                category, on the first date on 
                                which payment is made under 
                                this paragraph for any medical 
                                device that is described by 
                                such category.
                          (iv) Requirements treated as met.--A 
                        medical device shall be treated as 
                        meeting the requirements of 
                        subparagraph (A)(iv), regardless of 
                        whether the device meets the 
                        requirement of subclause (I) of such 
                        subparagraph, if--
                                  (I) the device is described 
                                by a category established and 
                                in effect under clause (i); or
                                  (II) the device is described 
                                by a category established and 
                                in effect under clause (ii) and 
                                an application under section 
                                515 of the Federal Food, Drug, 
                                and Cosmetic Act has been 
                                approved with respect to the 
                                device, or the device has been 
                                cleared for market under 
                                section 510(k) of such Act, or 
                                the device is exempt from the 
                                requirements of section 510(k) 
                                of such Act pursuant to 
                                subsection (l) or (m) of 
                                section 510 of such Act or 
                                section 520(g) of such Act.
                        Nothing in this clause shall be 
                        construed as requiring an application 
                        or prior approval (other than that 
                        described in subclause (II)) in order 
                        for a covered device described by a 
                        category to qualify for payment under 
                        this paragraph.
                  (C) Limited period of payment.--
                          (i) Drugs and biologicals.--The 
                        payment under this paragraph with 
                        respect to a drug or biological shall 
                        only apply during a period of at least 
                        2 years, but not more than 3 years, 
                        that begins--
                                  (I) on the first date this 
                                subsection is implemented in 
                                the case of a drug or 
                                biological described in clause 
                                (i), (ii), or (iii) of 
                                subparagraph (A) and in the 
                                case of a drug or biological 
                                described in subparagraph 
                                (A)(iv) and for which payment 
                                under this part is made as an 
                                outpatient hospital service 
                                before such first date; or
                                  (II) in the case of a drug or 
                                biological described in 
                                subparagraph (A)(iv) not 
                                described in subclause (I), on 
                                the first date on which payment 
                                is made under this part for the 
                                drug or biological as an 
                                outpatient hospital service.
                          (ii) Medical devices.--Payment shall 
                        be made under this paragraph with 
                        respect to a medical device only if 
                        such device--
                                  (I) is described by a 
                                category of medical devices 
                                established and in effect under 
                                subparagraph (B); and
                                  (II) is provided as part of a 
                                service (or group of services) 
                                paid for under this subsection 
                                and provided during the period 
                                for which such category is in 
                                effect under such subparagraph.
                  (D) Amount of additional payment.--Subject to 
                subparagraph (E)(iii), the amount of the 
                payment under this paragraph with respect to a 
                device, drug, or biological provided as part of 
                a covered OPD service is--
                          (i) in the case of a drug or 
                        biological, the amount by which the 
                        amount determined under section 1842(o) 
                        (or if the drug or biological is 
                        covered under a competitive acquisition 
                        contract under section 1847B, an amount 
                        determined by the Secretary equal to 
                        the average price for the drug or 
                        biological for all competitive 
                        acquisition areas and year established 
                        under such section as calculated and 
                        adjusted by the Secretary for purposes 
                        of this paragraph) for the drug or 
                        biological exceeds the portion of the 
                        otherwise applicable medicare OPD fee 
                        schedule that the Secretary determines 
                        is associated with the drug or 
                        biological; or
                          (ii) in the case of a medical device, 
                        the amount by which the hospital's 
                        charges for the device, adjusted to 
                        cost, exceeds the portion of the 
                        otherwise applicable medicare OPD fee 
                        schedule that the Secretary determines 
                        is associated with the device.
                  (E) Limit on aggregate annual adjustment.--
                          (i) In general.--The total of the 
                        additional payments made under this 
                        paragraph for covered OPD services 
                        furnished in a year (as estimated by 
                        the Secretary before the beginning of 
                        the year) may not exceed the applicable 
                        percentage (specified in clause (ii)) 
                        of the total program payments estimated 
                        to be made under this subsection for 
                        all covered OPD services furnished in 
                        that year. If this paragraph is first 
                        applied to less than a full year, the 
                        previous sentence shall apply only to 
                        the portion of such year.
                          (ii) Applicable percentage.--For 
                        purposes of clause (i), the term 
                        ``applicable percentage'' means--
                                  (I) for a year (or portion of 
                                a year) before 2004, 2.5 
                                percent; and
                                  (II) for 2004 and thereafter, 
                                a percentage specified by the 
                                Secretary up to (but not to 
                                exceed) 2.0 percent.
                          (iii) Uniform prospective reduction 
                        if aggregate limit projected to be 
                        exceeded.--If the Secretary estimates 
                        before the beginning of a year that the 
                        amount of the additional payments under 
                        this paragraph for the year (or portion 
                        thereof) as determined under clause (i) 
                        without regard to this clause will 
                        exceed the limit established under such 
                        clause, the Secretary shall reduce pro 
                        rata the amount of each of the 
                        additional payments under this 
                        paragraph for that year (or portion 
                        thereof) in order to ensure that the 
                        aggregate additional payments under 
                        this paragraph (as so estimated) do not 
                        exceed such limit.
                  (F) Limitation of application of functional 
                equivalence standard.--
                          (i) In general.--The Secretary may 
                        not publish regulations that apply a 
                        functional equivalence standard to a 
                        drug or biological under this 
                        paragraph.
                          (ii) Application.--Clause (i) shall 
                        apply to the application of a 
                        functional equivalence standard to a 
                        drug or biological on or after the date 
                        of enactment of the Medicare 
                        Prescription Drug, Improvement, and 
                        Modernization Act of 2003 unless--
                                  (I) such application was 
                                being made to such drug or 
                                biological prior to such date 
                                of enactment; and
                                  (II) the Secretary applies 
                                such standard to such drug or 
                                biological only for the purpose 
                                of determining eligibility of 
                                such drug or biological for 
                                additional payments under this 
                                paragraph and not for the 
                                purpose of any other payments 
                                under this title.
                          (iii) Rule of construction.--Nothing 
                        in this subparagraph shall be construed 
                        to effect the Secretary's authority to 
                        deem a particular drug to be identical 
                        to another drug if the 2 products are 
                        pharmaceutically equivalent and 
                        bioequivalent, as determined by the 
                        Commissioner of Food and Drugs.
          (7) Transitional adjustment to limit decline in 
        payment.--
                  (A) Before 2002.--Subject to subparagraph 
                (D), for covered OPD services furnished before 
                January 1, 2002, for which the PPS amount (as 
                defined in subparagraph (E)) is--
                          (i) at least 90 percent, but less 
                        than 100 percent, of the pre-BBA amount 
                        (as defined in subparagraph (F)), the 
                        amount of payment under this subsection 
                        shall be increased by 80 percent of the 
                        amount of such difference;
                          (ii) at least 80 percent, but less 
                        than 90 percent, of the pre-BBA amount, 
                        the amount of payment under this 
                        subsection shall be increased by the 
                        amount by which (I) the product of 0.71 
                        and the pre-BBA amount, exceeds (II) 
                        the product of 0.70 and the PPS amount;
                          (iii) at least 70 percent, but less 
                        than 80 percent, of the pre-BBA amount, 
                        the amount of payment under this 
                        subsection shall be increased by the 
                        amount by which (I) the product of 0.63 
                        and the pre-BBA amount, exceeds (II) 
                        the product of 0.60 and the PPS amount; 
                        or
                          (iv) less than 70 percent of the pre-
                        BBA amount, the amount of payment under 
                        this subsection shall be increased by 
                        21 percent of the pre-BBA amount.
                  (B) 2002.--Subject to subparagraph (D), for 
                covered OPD services furnished during 2002, for 
                which the PPS amount is--
                          (i) at least 90 percent, but less 
                        than 100 percent, of the pre-BBA 
                        amount, the amount of payment under 
                        this subsection shall be increased by 
                        70 percent of the amount of such 
                        difference;
                          (ii) at least 80 percent, but less 
                        than 90 percent, of the pre-BBA amount, 
                        the amount of payment under this 
                        subsection shall be increased by the 
                        amount by which (I) the product of 0.61 
                        and the pre-BBA amount, exceeds (II) 
                        the product of 0.60 and the PPS amount; 
                        or
                          (iii) less than 80 percent of the 
                        pre-BBA amount, the amount of payment 
                        under this subsection shall be 
                        increased by 13 percent of the pre-BBA 
                        amount.
                  (C) 2003.--Subject to subparagraph (D), for 
                covered OPD services furnished during 2003, for 
                which the PPS amount is--
                          (i) at least 90 percent, but less 
                        than 100 percent, of the pre-BBA 
                        amount, the amount of payment under 
                        this subsection shall be increased by 
                        60 percent of the amount of such 
                        difference; or
                          (ii) less than 90 percent of the pre-
                        BBA amount, the amount of payment under 
                        this subsection shall be increased by 6 
                        percent of the pre-BBA amount.
                  (D) Hold harmless provisions.--
                          (i) Temporary treatment for certain 
                        rural hospitals.--(I) In the case of a 
                        hospital located in a rural area and 
                        that has not more than 100 beds or a 
                        sole community hospital (as defined in 
                        section 1886(d)(5)(D)(iii)) located in 
                        a rural area, for covered OPD services 
                        furnished before January 1, 2006, for 
                        which the PPS amount is less than the 
                        pre-BBA amount, the amount of payment 
                        under this subsection shall be 
                        increased by the amount of such 
                        difference.
                          (II) In the case of a hospital 
                        located in a rural area and that has 
                        not more than 100 beds and that is not 
                        a sole community hospital (as defined 
                        in section 1886(d)(5)(D)(iii)), for 
                        covered OPD services furnished on or 
                        after January 1, 2006, and before 
                        January 1, 2013, for which the PPS 
                        amount is less than the pre-BBA amount, 
                        the amount of payment under this 
                        subsection shall be increased by the 
                        applicable percentage of the amount of 
                        such difference. For purposes of the 
                        preceding sentence, the applicable 
                        percentage shall be 95 percent with 
                        respect to covered OPD services 
                        furnished in 2006, 90 percent with 
                        respect to such services furnished in 
                        2007, and 85 percent with respect to 
                        such services furnished in 2008, 2009, 
                        2010, 2011, or 2012.
                          (III) In the case of a sole community 
                        hospital (as defined in section 
                        1886(d)(5)(D)(iii)) that has not more 
                        than 100 beds, for covered OPD services 
                        furnished on or after January 1, 2009, 
                        and before January 1, 2013, for which 
                        the PPS amount is less than the pre-BBA 
                        amount, the amount of payment under 
                        this subsection shall be increased by 
                        85 percent of the amount of such 
                        difference. In the case of covered OPD 
                        services furnished on or after January 
                        1, 2010, and before March 1, 2012, the 
                        preceding sentence shall be applied 
                        without regard to the 100-bed 
                        limitation.
                          (ii) Permanent treatment for cancer 
                        hospitals and children's hospitals.--In 
                        the case of a hospital described in 
                        clause (iii) or (v) of section 
                        1886(d)(1)(B), for covered OPD services 
                        for which the PPS amount is less than 
                        the pre-BBA amount, the amount of 
                        payment under this subsection shall be 
                        increased by the amount of such 
                        difference.
                  (E) PPS amount defined.--In this paragraph, 
                the term ``PPS amount'' means, with respect to 
                covered OPD services, the amount payable under 
                this title for such services (determined 
                without regard to this paragraph), including 
                amounts payable as copayment under paragraph 
                (8), coinsurance under section 
                1866(a)(2)(A)(ii), and the deductible under 
                section 1833(b).
                  (F) Pre-BBA amount defined.--
                          (i) In general.--In this paragraph, 
                        the ``pre-BBA amount'' means, with 
                        respect to covered OPD services 
                        furnished by a hospital in a year, an 
                        amount equal to the product of the 
                        reasonable cost of the hospital for 
                        such services for the portions of the 
                        hospital's cost reporting period (or 
                        periods) occurring in the year and the 
                        base OPD payment-to-cost ratio for the 
                        hospital (as defined in clause (ii)).
                          (ii) Base payment-to-cost-ratio 
                        defined.--For purposes of this 
                        subparagraph, the ``base payment-to-
                        cost ratio'' for a hospital means the 
                        ratio of--
                                  (I) the hospital's 
                                reimbursement under this part 
                                for covered OPD services 
                                furnished during the cost 
                                reporting period ending in 1996 
                                (or in the case of a hospital 
                                that did not submit a cost 
                                report for such period, during 
                                the first subsequent cost 
                                reporting period ending before 
                                2001 for which the hospital 
                                submitted a cost report), 
                                including any reimbursement for 
                                such services through cost-
                                sharing described in 
                                subparagraph (E), to
                                  (II) the reasonable cost of 
                                such services for such period.
                        The Secretary shall determine such 
                        ratios as if the amendments made by 
                        section 4521 of the Balanced Budget Act 
                        of 1997 were in effect in 1996.
                  (G) Interim payments.--The Secretary shall 
                make payments under this paragraph to hospitals 
                on an interim basis, subject to retrospective 
                adjustments based on settled cost reports.
                  (H) No effect on copayments.--Nothing in this 
                paragraph shall be construed to affect the 
                unadjusted copayment amount described in 
                paragraph (3)(B) or the copayment amount under 
                paragraph (8).
                  (I) Application without regard to budget 
                neutrality.--The additional payments made under 
                this paragraph--
                          (i) shall not be considered an 
                        adjustment under paragraph (2)(E); and
                          (ii) shall not be implemented in a 
                        budget neutral manner.
          (8) Copayment amount.--
                  (A) In general.--Except as provided in 
                subparagraphs (B) and (C), the copayment amount 
                under this subsection is the amount by which 
                the amount described in paragraph (4)(B) 
                exceeds the amount of payment determined under 
                paragraph (4)(C).
                  (B) Election to offer reduced copayment 
                amount.--The Secretary shall establish a 
                procedure under which a hospital, before the 
                beginning of a year (beginning with 1999), may 
                elect to reduce the copayment amount otherwise 
                established under subparagraph (A) for some or 
                all covered OPD services to an amount that is 
                not less than 20 percent of the medicare OPD 
                fee schedule amount (computed under paragraph 
                (3)(D)) for the service involved. Under such 
                procedures, such reduced copayment amount may 
                not be further reduced or increased during the 
                year involved and the hospital may disseminate 
                information on the reduction of copayment 
                amount effected under this subparagraph.
                  (C) Limitation on copayment amount.--
                          (i) To inpatient hospital deductible 
                        amount.--In no case shall the copayment 
                        amount for a procedure performed in a 
                        year exceed the amount of the inpatient 
                        hospital deductible established under 
                        section 1813(b) for that year.
                          (ii) To specified percentage.--The 
                        Secretary shall reduce the national 
                        unadjusted copayment amount for a 
                        covered OPD service (or group of such 
                        services) furnished in a year in a 
                        manner so that the effective copayment 
                        rate (determined on a national 
                        unadjusted basis) for that service in 
                        the year does not exceed the following 
                        percentage:
                                  (I) For procedures performed 
                                in 2001, on or after April 1, 
                                2001, 57 percent.
                                  (II) For procedures performed 
                                in 2002 or 2003, 55 percent.
                                  (III) For procedures 
                                performed in 2004, 50 percent.
                                  (IV) For procedures performed 
                                in 2005, 45 percent.
                                  (V) For procedures performed 
                                in 2006 and thereafter, 40 
                                percent.
                  (D) No impact on deductibles.--Nothing in 
                this paragraph shall be construed as affecting 
                a hospital's authority to waive the charging of 
                a deductible under section 1833(b).
                  (E) Computation ignoring outlier and pass-
                through adjustments.--The copayment amount 
                shall be computed under subparagraph (A) as if 
                the adjustments under paragraphs (5) and (6) 
                (and any adjustment made under paragraph (2)(E) 
                in relation to such adjustments) had not 
                occurred.
          (9) Periodic review and adjustments components of 
        prospective payment system.--
                  (A) Periodic review.--The Secretary shall 
                review not less often than annually and revise 
                the groups, the relative payment weights, and 
                the wage and other adjustments described in 
                paragraph (2) to take into account changes in 
                medical practice, changes in technology, the 
                addition of new services, new cost data, and 
                other relevant information and factors. The 
                Secretary shall consult with an expert outside 
                advisory panel composed of an appropriate 
                selection of representatives of providers to 
                review (and advise the Secretary concerning) 
                the clinical integrity of the groups and 
                weights. Such panel may use data collected or 
                developed by entities and organizations (other 
                than the Department of Health and Human 
                Services) in conducting such review.
                  (B) Budget neutrality adjustment.--If the 
                Secretary makes adjustments under subparagraph 
                (A), then the adjustments for a year may not 
                cause the estimated amount of expenditures 
                under this part for the year to increase or 
                decrease from the estimated amount of 
                expenditures under this part that would have 
                been made if the adjustments had not been made. 
                In determining adjustments under the preceding 
                sentence for 2004 and 2005, the Secretary shall 
                not take into account under this subparagraph 
                or paragraph (2)(E) any expenditures that would 
                not have been made but for the application of 
                paragraph (14).
                  (C) Update factor.--If the Secretary 
                determines under methodologies described in 
                paragraph (2)(F) that the volume of services 
                paid for under this subsection increased beyond 
                amounts established through those 
                methodologies, the Secretary may appropriately 
                adjust the update to the conversion factor 
                otherwise applicable in a subsequent year.
          (10) Special rule for ambulance services.--The 
        Secretary shall pay for hospital outpatient services 
        that are ambulance services on the basis described in 
        section 1861(v)(1)(U), or, if applicable, the fee 
        schedule established under section 1834(l).
          (11) Special rules for certain hospitals.--In the 
        case of hospitals described in clause (iii) or (v) of 
        section 1886(d)(1)(B)--
                  (A) the system under this subsection shall 
                not apply to covered OPD services furnished 
                before January 1, 2000; and
                  (B) the Secretary may establish a separate 
                conversion factor for such services in a manner 
                that specifically takes into account the unique 
                costs incurred by such hospitals by virtue of 
                their patient population and service intensity.
          (12) Limitation on review.--There shall be no 
        administrative or judicial review under section 1869, 
        1878, or otherwise of--
                  (A) the development of the classification 
                system under paragraph (2), including the 
                establishment of groups and relative payment 
                weights for covered OPD services, of wage 
                adjustment factors, other adjustments, and 
                methods described in paragraph (2)(F);
                  (B) the calculation of base amounts under 
                paragraph (3);
                  (C) periodic adjustments made under paragraph 
                (6);
                  (D) the establishment of a separate 
                conversion factor under paragraph (8)(B); and
                  (E) the determination of the fixed multiple, 
                or a fixed dollar cutoff amount, the marginal 
                cost of care, or applicable percentage under 
                paragraph (5) or the determination of 
                insignificance of cost, the duration of the 
                additional payments, the determination and 
                deletion of initial and new categories 
                (consistent with subparagraphs (B) and (C) of 
                paragraph (6)), the portion of the medicare OPD 
                fee schedule amount associated with particular 
                devices, drugs, or biologicals, and the 
                application of any pro rata reduction under 
                paragraph (6).
          (13) Authorization of adjustment for rural 
        hospitals.--
                  (A) Study.--The Secretary shall conduct a 
                study to determine if, under the system under 
                this subsection, costs incurred by hospitals 
                located in rural areas by ambulatory payment 
                classification groups (APCs) exceed those costs 
                incurred by hospitals located in urban areas.
                  (B) Authorization of adjustment.--Insofar as 
                the Secretary determines under subparagraph (A) 
                that costs incurred by hospitals located in 
                rural areas exceed those costs incurred by 
                hospitals located in urban areas, the Secretary 
                shall provide for an appropriate adjustment 
                under paragraph (2)(E) to reflect those higher 
                costs by January 1, 2006.
          (14) Drug apc payment rates.--
                  (A) In general.--The amount of payment under 
                this subsection for a specified covered 
                outpatient drug (defined in subparagraph (B)) 
                that is furnished as part of a covered OPD 
                service (or group of services)--
                          (i) in 2004, in the case of--
                                  (I) a sole source drug shall 
                                in no case be less than 88 
                                percent, or exceed 95 percent, 
                                of the reference average 
                                wholesale price for the drug;
                                  (II) an innovator multiple 
                                source drug shall in no case 
                                exceed 68 percent of the 
                                reference average wholesale 
                                price for the drug; or
                                  (III) a noninnovator multiple 
                                source drug shall in no case 
                                exceed 46 percent of the 
                                reference average wholesale 
                                price for the drug;
                          (ii) in 2005, in the case of--
                                  (I) a sole source drug shall 
                                in no case be less than 83 
                                percent, or exceed 95 percent, 
                                of the reference average 
                                wholesale price for the drug;
                                  (II) an innovator multiple 
                                source drug shall in no case 
                                exceed 68 percent of the 
                                reference average wholesale 
                                price for the drug; or
                                  (III) a noninnovator multiple 
                                source drug shall in no case 
                                exceed 46 percent of the 
                                reference average wholesale 
                                price for the drug; or
                          (iii) in a subsequent year, shall be 
                        equal, subject to subparagraph (E)--
                                  (I) to the average 
                                acquisition cost for the drug 
                                for that year (which, at the 
                                option of the Secretary, may 
                                vary by hospital group (as 
                                defined by the Secretary based 
                                on volume of covered OPD 
                                services or other relevant 
                                characteristics)), as 
                                determined by the Secretary 
                                taking into account the 
                                hospital acquisition cost 
                                survey data under subparagraph 
                                (D); or
                                  (II) if hospital acquisition 
                                cost data are not available, 
                                the average price for the drug 
                                in the year established under 
                                section 1842(o), section 1847A, 
                                or section 1847B, as the case 
                                may be, as calculated and 
                                adjusted by the Secretary as 
                                necessary for purposes of this 
                                paragraph.
                  (B) Specified covered outpatient drug 
                defined.--
                          (i) In general.--In this paragraph, 
                        the term ``specified covered outpatient 
                        drug'' means, subject to clause (ii), a 
                        covered outpatient drug (as defined in 
                        section 1927(k)(2)) for which a 
                        separate ambulatory payment 
                        classification group (APC) has been 
                        established and that is--
                                  (I) a radiopharmaceutical; or
                                  (II) a drug or biological for 
                                which payment was made under 
                                paragraph (6) (relating to 
                                pass-through payments) on or 
                                before December 31, 2002.
                          (ii) Exception.--Such term does not 
                        include--
                                  (I) a drug or biological for 
                                which payment is first made on 
                                or after January 1, 2003, under 
                                paragraph (6);
                                  (II) a drug or biological for 
                                which a temporary HCPCS code 
                                has not been assigned; or
                                  (III) during 2004 and 2005, 
                                an orphan drug (as designated 
                                by the Secretary).
                  (C) Payment for designated orphan drugs 
                during 2004 and 2005.--The amount of payment 
                under this subsection for an orphan drug 
                designated by the Secretary under subparagraph 
                (B)(ii)(III) that is furnished as part of a 
                covered OPD service (or group of services) 
                during 2004 and 2005 shall equal such amount as 
                the Secretary may specify.
                  (D) Acquisition cost survey for hospital 
                outpatient drugs.--
                          (i) Annual gao surveys in 2004 and 
                        2005.--
                                  (I) In general.--The 
                                Comptroller General of the 
                                United States shall conduct a 
                                survey in each of 2004 and 2005 
                                to determine the hospital 
                                acquisition cost for each 
                                specified covered outpatient 
                                drug. Not later than April 1, 
                                2005, the Comptroller General 
                                shall furnish data from such 
                                surveys to the Secretary for 
                                use in setting the payment 
                                rates under subparagraph (A) 
                                for 2006.
                                  (II) Recommendations.--Upon 
                                the completion of such surveys, 
                                the Comptroller General shall 
                                recommend to the Secretary the 
                                frequency and methodology of 
                                subsequent surveys to be 
                                conducted by the Secretary 
                                under clause (ii).
                          (ii) Subsequent secretarial 
                        surveys.--The Secretary, taking into 
                        account such recommendations, shall 
                        conduct periodic subsequent surveys to 
                        determine the hospital acquisition cost 
                        for each specified covered outpatient 
                        drug for use in setting the payment 
                        rates under subparagraph (A).
                          (iii) Survey requirements.--The 
                        surveys conducted under clauses (i) and 
                        (ii) shall have a large sample of 
                        hospitals that is sufficient to 
                        generate a statistically significant 
                        estimate of the average hospital 
                        acquisition cost for each specified 
                        covered outpatient drug. With respect 
                        to the surveys conducted under clause 
                        (i), the Comptroller General shall 
                        report to Congress on the justification 
                        for the size of the sample used in 
                        order to assure the validity of such 
                        estimates.
                          (iv) Differentiation in cost.--In 
                        conducting surveys under clause (i), 
                        the Comptroller General shall determine 
                        and report to Congress if there is (and 
                        the extent of any) variation in 
                        hospital acquisition costs for drugs 
                        among hospitals based on the volume of 
                        covered OPD services performed by such 
                        hospitals or other relevant 
                        characteristics of such hospitals (as 
                        defined by the Comptroller General).
                          (v) Comment on proposed rates.--Not 
                        later than 30 days after the date the 
                        Secretary promulgated proposed rules 
                        setting forth the payment rates under 
                        subparagraph (A) for 2006, the 
                        Comptroller General shall evaluate such 
                        proposed rates and submit to Congress a 
                        report regarding the appropriateness of 
                        such rates based on the surveys the 
                        Comptroller General has conducted under 
                        clause (i).
                  (E) Adjustment in payment rates for overhead 
                costs.--
                          (i) Medpac report on drug apc 
                        design.--The Medicare Payment Advisory 
                        Commission shall submit to the 
                        Secretary, not later than July 1, 2005, 
                        a report on adjustment of payment for 
                        ambulatory payment classifications for 
                        specified covered outpatient drugs to 
                        take into account overhead and related 
                        expenses, such as pharmacy services and 
                        handling costs. Such report shall 
                        include--
                                  (I) a description and 
                                analysis of the data available 
                                with regard to such expenses;
                                  (II) a recommendation as to 
                                whether such a payment 
                                adjustment should be made; and
                                  (III) if such adjustment 
                                should be made, a 
                                recommendation regarding the 
                                methodology for making such an 
                                adjustment.
                          (ii) Adjustment authorized.--The 
                        Secretary may adjust the weights for 
                        ambulatory payment classifications for 
                        specified covered outpatient drugs to 
                        take into account the recommendations 
                        contained in the report submitted under 
                        clause (i).
                  (F) Classes of drugs.--For purposes of this 
                paragraph:
                          (i) Sole source drugs.--The term 
                        ``sole source drug'' means--
                                  (I) a biological product (as 
                                defined under section 
                                1861(t)(1)); or
                                  (II) a single source drug (as 
                                defined in section 
                                1927(k)(7)(A)(iv)).
                          (ii) Innovator multiple source 
                        drugs.--The term ``innovator multiple 
                        source drug'' has the meaning given 
                        such term in section 1927(k)(7)(A)(ii).
                          (iii) Noninnovator multiple source 
                        drugs.--The term ``noninnovator 
                        multiple source drug'' has the meaning 
                        given such term in section 
                        1927(k)(7)(A)(iii).
                  (G) Reference average wholesale price.--The 
                term ``reference average wholesale price'' 
                means, with respect to a specified covered 
                outpatient drug, the average wholesale price 
                for the drug as determined under section 
                1842(o) as of May 1, 2003.
                  (H) Inapplicability of expenditures in 
                determining conversion, weighting, and other 
                adjustment factors.--Additional expenditures 
                resulting from this paragraph shall not be 
                taken into account in establishing the 
                conversion, weighting, and other adjustment 
                factors for 2004 and 2005 under paragraph (9), 
                but shall be taken into account for subsequent 
                years.
          (15) Payment for new drugs and biologicals until 
        hcpcs code assigned.--With respect to payment under 
        this part for an outpatient drug or biological that is 
        covered under this part and is furnished as part of 
        covered OPD services for which a HCPCS code has not 
        been assigned, the amount provided for payment for such 
        drug or biological under this part shall be equal to 95 
        percent of the average wholesale price for the drug or 
        biological.
          (16) Miscellaneous provisions.--
                  (A) Application of reclassification of 
                certain hospitals.--If a hospital is being 
                treated as being located in a rural area under 
                section 1886(d)(8)(E), that hospital shall be 
                treated under this subsection as being located 
                in that rural area.
                  (B) Threshold for establishment of separate 
                apcs for drugs.--The Secretary shall reduce the 
                threshold for the establishment of separate 
                ambulatory payment classification groups (APCs) 
                with respect to drugs or biologicals to $50 per 
                administration for drugs and biologicals 
                furnished in 2005 and 2006.
                  (C) Payment for devices of brachytherapy and 
                therapeutic radiopharmaceuticals at charges 
                adjusted to cost.--Notwithstanding the 
                preceding provisions of this subsection, for a 
                device of brachytherapy consisting of a seed or 
                seeds (or radioactive source) furnished on or 
                after January 1, 2004, and before January 1, 
                2010, and for therapeutic radiopharmaceuticals 
                furnished on or after January 1, 2008, and 
                before January 1, 2010, the payment basis for 
                the device or therapeutic radiopharmaceutical 
                under this subsection shall be equal to the 
                hospital's charges for each device or 
                therapeutic radiopharmaceutical furnished, 
                adjusted to cost. Charges for such devices or 
                therapeutic radiopharmaceuticals shall not be 
                included in determining any outlier payment 
                under this subsection.
                  (D) Special payment rule.--
                          (i) In general.--In the case of 
                        covered OPD services furnished on or 
                        after April 1, 2013, in a hospital 
                        described in clause (ii), if--
                                  (I) the payment rate that 
                                would otherwise apply under 
                                this subsection for 
                                stereotactic radiosurgery, 
                                complete course of treatment of 
                                cranial lesion(s) consisting of 
                                1 session that is multi-source 
                                Cobalt 60 based (identified as 
                                of January 1, 2013, by HCPCS 
                                code 77371 (and any succeeding 
                                code) and reimbursed as of such 
                                date under APC 0127 (and any 
                                succeeding classification 
                                group)); exceeds
                                  (II) the payment rate that 
                                would otherwise apply under 
                                this subsection for linear 
                                accelerator based stereotactic 
                                radiosurgery, complete course 
                                of therapy in one session 
                                (identified as of January 1, 
                                2013, by HCPCS code G0173 (and 
                                any succeeding code) and 
                                reimbursed as of such date 
                                under APC 0067 (and any 
                                succeeding classification 
                                group)),
                        the payment rate for the service 
                        described in subclause (I) shall be 
                        reduced to an amount equal to the 
                        payment rate for the service described 
                        in subclause (II).
                          (ii) Hospital described.--A hospital 
                        described in this clause is a hospital 
                        that is not--
                                  (I) located in a rural area 
                                (as defined in section 
                                1886(d)(2)(D));
                                  (II) classified as a rural 
                                referral center under section 
                                1886(d)(5)(C); or
                                  (III) a sole community 
                                hospital (as defined in section 
                                1886(d)(5)(D)(iii)).
                          (iii) Not budget neutral.--In making 
                        any budget neutrality adjustments under 
                        this subsection for 2013 (with respect 
                        to covered OPD services furnished on or 
                        after April 1, 2013, and before January 
                        1, 2014) or a subsequent year, the 
                        Secretary shall not take into account 
                        the reduced expenditures that result 
                        from the application of this 
                        subparagraph.
                  (E) Application of appropriate use criteria 
                for certain imaging services.--For provisions 
                relating to the application of appropriate use 
                criteria for certain imaging services, see 
                section 1834(q).
                  (F) Payment incentive for the transition from 
                traditional x-ray imaging to digital 
                radiography.--Notwithstanding the previous 
                provisions of this subsection:
                          (i) Limitation on payment for film x-
                        ray imaging services.--In the case of 
                        an imaging service that is an X-ray 
                        taken using film and that is furnished 
                        during 2017 or a subsequent year, the 
                        payment amount for such service 
                        (including the X-ray component of a 
                        packaged service) that would otherwise 
                        be determined under this section 
                        (without application of this paragraph 
                        and before application of any other 
                        adjustment under this subsection) for 
                        such year shall be reduced by 20 
                        percent.
                          (ii) Phased-in limitation on payment 
                        for computed radiography imaging 
                        services.--In the case of an imaging 
                        service that is an X-ray taken using 
                        computed radiography technology (as 
                        defined in section 1848(b)(9)(C))--
                                  (I) in the case of such a 
                                service furnished during 2018, 
                                2019, 2020, 2021, or 2022, the 
                                payment amount for such service 
                                (including the X-ray component 
                                of a packaged service) that 
                                would otherwise be determined 
                                under this section (without 
                                application of this paragraph 
                                and before application of any 
                                other adjustment under this 
                                subsection) for such year shall 
                                be reduced by 7 percent; and
                                  (II) in the case of such a 
                                service furnished during 2023 
                                or a subsequent year, the 
                                payment amount for such service 
                                (including the X-ray component 
                                of a packaged service) that 
                                would otherwise be determined 
                                under this section (without 
                                application of this paragraph 
                                and before application of any 
                                other adjustment under this 
                                subsection) for such year shall 
                                be reduced by 10 percent.
                          (iii) Application without regard to 
                        budget neutrality.--The reductions made 
                        under this subparagraph--
                                  (I) shall not be considered 
                                an adjustment under paragraph 
                                (2)(E); and
                                  (II) shall not be implemented 
                                in a budget neutral manner.
                          (iv) Implementation.--In order to 
                        implement this subparagraph, the 
                        Secretary shall adopt appropriate 
                        mechanisms which may include use of 
                        modifiers.
          (17) Quality reporting.--
                  (A) Reduction in update for failure to 
                report.--
                          (i) In general.--For purposes of 
                        paragraph (3)(C)(iv) for 2009 and each 
                        subsequent year, in the case of a 
                        subsection (d) hospital (as defined in 
                        section 1886(d)(1)(B)) that does not 
                        submit, to the Secretary in accordance 
                        with this paragraph, data required to 
                        be submitted on measures selected under 
                        this paragraph with respect to such a 
                        year, the OPD fee schedule increase 
                        factor under paragraph (3)(C)(iv) for 
                        such year shall be reduced by 2.0 
                        percentage points.
                          (ii) Non-cumulative application.--A 
                        reduction under this subparagraph shall 
                        apply only with respect to the year 
                        involved and the Secretary shall not 
                        take into account such reduction in 
                        computing the OPD fee schedule increase 
                        factor for a subsequent year.
                  (B) Form and manner of submission.--Each 
                subsection (d) hospital shall submit data on 
                measures selected under this paragraph to the 
                Secretary in a form and manner, and at a time, 
                specified by the Secretary for purposes of this 
                paragraph.
                  (C) Development of outpatient measures.--
                          (i) In general.--The Secretary shall 
                        develop measures that the Secretary 
                        determines to be appropriate for the 
                        measurement of the quality of care 
                        (including medication errors) furnished 
                        by hospitals in outpatient settings and 
                        that reflect consensus among affected 
                        parties and, to the extent feasible and 
                        practicable, shall include measures set 
                        forth by one or more national consensus 
                        building entities.
                          (ii) Construction.--Nothing in this 
                        paragraph shall be construed as 
                        preventing the Secretary from selecting 
                        measures that are the same as (or a 
                        subset of) the measures for which data 
                        are required to be submitted under 
                        section 1886(b)(3)(B)(viii).
                  (D) Replacement of measures.--For purposes of 
                this paragraph, the Secretary may replace any 
                measures or indicators in appropriate cases, 
                such as where all hospitals are effectively in 
                compliance or the measures or indicators have 
                been subsequently shown not to represent the 
                best clinical practice.
                  (E) Availability of data.--The Secretary 
                shall establish procedures for making data 
                submitted under this paragraph available to the 
                public. Such procedures shall ensure that a 
                hospital has the opportunity to review the data 
                that are to be made public with respect to the 
                hospital prior to such data being made public. 
                The Secretary shall report quality measures of 
                process, structure, outcome, patients' 
                perspectives on care, efficiency, and costs of 
                care that relate to services furnished in 
                outpatient settings in hospitals on the 
                Internet website of the Centers for Medicare & 
                Medicaid Services.
          (18) Authorization of adjustment for cancer 
        hospitals.--
                  (A) Study.--The Secretary shall conduct a 
                study to determine if, under the system under 
                this subsection, costs incurred by hospitals 
                described in section 1886(d)(1)(B)(v) with 
                respect to ambulatory payment classification 
                groups exceed those costs incurred by other 
                hospitals furnishing services under this 
                subsection (as determined appropriate by the 
                Secretary). In conducting the study under this 
                subparagraph, the Secretary shall take into 
                consideration the cost of drugs and biologicals 
                incurred by such hospitals.
                  (B) Authorization of adjustment.--Insofar as 
                the Secretary determines under subparagraph (A) 
                that costs incurred by hospitals described in 
                section 1886(d)(1)(B)(v) exceed those costs 
                incurred by other hospitals furnishing services 
                under this subsection, the Secretary shall 
                provide for an appropriate adjustment under 
                paragraph (2)(E) to reflect those higher costs 
                effective for services furnished on or after 
                January 1, 2011.
          (19) Floor on area wage adjustment factor for 
        hospital outpatient department services in frontier 
        states.--
                  (A) In general.--Subject to subparagraph (B), 
                with respect to covered OPD services furnished 
                on or after January 1, 2011, the area wage 
                adjustment factor applicable under the payment 
                system established under this subsection to any 
                hospital outpatient department which is located 
                in a frontier State (as defined in section 
                1886(d)(3)(E)(iii)(II)) may not be less than 
                1.00. The preceding sentence shall not be 
                applied in a budget neutral manner.
                  (B) Limitation.--This paragraph shall not 
                apply to any hospital outpatient department 
                located in a State that receives a non-labor 
                related share adjustment under section 
                1886(d)(5)(H).
          (20) Not budget neutral application of reduced 
        expenditures resulting from quality incentives for 
        computed tomography.--The Secretary shall not take into 
        account the reduced expenditures that result from the 
        application of section 1834(p) in making any budget 
        neutrality adjustments this subsection.
          (21) Services furnished by an off-campus outpatient 
        department of a provider.--
                  (A) Applicable items and services.--For 
                purposes of paragraph (1)(B)(v) and this 
                paragraph, the term ``applicable items and 
                services'' means items and services other than 
                items and services furnished by a dedicated 
                emergency department (as defined in section 
                489.24(b) of title 42 of the Code of Federal 
                Regulations).
                  (B) Off-campus outpatient department of a 
                provider.--
                          (i) In general.--For purposes of 
                        paragraph (1)(B)(v) and this paragraph, 
                        subject to clause (ii), the term ``off-
                        campus outpatient department of a 
                        provider'' means a department of a 
                        provider (as defined in section 
                        413.65(a)(2) of title 42 of the Code of 
                        Federal Regulations, as in effect as of 
                        the date of the enactment of this 
                        paragraph) that is not located--
                                  (I) on the campus (as defined 
                                in such section 413.65(a)(2)) 
                                of such provider; or
                                  (II) within the distance 
                                (described in such definition 
                                of campus) from a remote 
                                location of a hospital facility 
                                (as defined in such section 
                                413.65(a)(2)).
                          (ii) Exception.--For purposes of 
                        paragraph (1)(B)(v) and this paragraph, 
                        the term ``off-campus outpatient 
                        department of a provider'' shall not 
                        include a department of a provider (as 
                        so defined) that was billing under this 
                        subsection with respect to covered OPD 
                        services furnished prior to the date of 
                        the enactment of this paragraph.
                  (C) Availability of payment under other 
                payment systems.--Payments for applicable items 
                and services furnished by an off-campus 
                outpatient department of a provider that are 
                described in paragraph (1)(B)(v) shall be made 
                under the applicable payment system under this 
                part (other than under this subsection) if the 
                requirements for such payment are otherwise 
                met.
                  (D) Information needed for implementation.--
                Each hospital shall provide to the Secretary 
                such information as the Secretary determines 
                appropriate to implement this paragraph and 
                paragraph (1)(B)(v) (which may include 
                reporting of information on a hospital claim 
                using a code or modifier and reporting 
                information about off-campus outpatient 
                departments of a provider on the enrollment 
                form described in section 1866(j)).
                  (E) Limitations.--There shall be no 
                administrative or judicial review under section 
                1869, section 1878, or otherwise of the 
                following:
                          (i) The determination of the 
                        applicable items and services under 
                        subparagraph (A) and applicable payment 
                        systems under subparagraph (C).
                          (ii) The determination of whether a 
                        department of a provider meets the term 
                        described in subparagraph (B).
                          (iii) Any information that hospitals 
                        are required to report pursuant to 
                        subparagraph (D).
  (u) Incentive Payments for Physician Scarcity Areas.--
          (1) In general.--In the case of physicians' services 
        furnished on or after January 1, 2005, and before July 
        1, 2008--
                  (A) by a primary care physician in a primary 
                care scarcity county (identified under 
                paragraph (4)); or
                  (B) by a physician who is not a primary care 
                physician in a specialist care scarcity county 
                (as so identified),
        in addition to the amount of payment that would 
        otherwise be made for such services under this part, 
        there also shall be paid an amount equal to 5 percent 
        of the payment amount for the service under this part.
          (2) Determination of ratios of physicians to medicare 
        beneficiaries in area.--Based upon available data, the 
        Secretary shall establish for each county or equivalent 
        area in the United States, the following:
                  (A) Number of physicians practicing in the 
                area.--The number of physicians who furnish 
                physicians' services in the active practice of 
                medicine or osteopathy in that county or area, 
                other than physicians whose practice is 
                exclusively for the Federal Government, 
                physicians who are retired, or physicians who 
                only provide administrative services. Of such 
                number, the number of such physicians who are--
                          (i) primary care physicians; or
                          (ii) physicians who are not primary 
                        care physicians.
                  (B) Number of medicare beneficiaries residing 
                in the area.--The number of individuals who are 
                residing in the county and are entitled to 
                benefits under part A or enrolled under this 
                part, or both (in this subsection referred to 
                as ``individuals'').
                  (C) Determination of ratios.--
                          (i) Primary care ratio.--The ratio 
                        (in this paragraph referred to as the 
                        ``primary care ratio'') of the number 
                        of primary care physicians (determined 
                        under subparagraph (A)(i)), to the 
                        number of individuals determined under 
                        subparagraph (B).
                          (ii) Specialist care ratio.--The 
                        ratio (in this paragraph referred to as 
                        the ``specialist care ratio'') of the 
                        number of other physicians (determined 
                        under subparagraph (A)(ii)), to the 
                        number of individuals determined under 
                        subparagraph (B).
          (3) Ranking of counties.--The Secretary shall rank 
        each such county or area based separately on its 
        primary care ratio and its specialist care ratio.
          (4) Identification of counties.--
                  (A) In general.--The Secretary shall 
                identify--
                          (i) those counties and areas (in this 
                        paragraph referred to as ``primary care 
                        scarcity counties'') with the lowest 
                        primary care ratios that represent, if 
                        each such county or area were weighted 
                        by the number of individuals determined 
                        under paragraph (2)(B), an aggregate 
                        total of 20 percent of the total of the 
                        individuals determined under such 
                        paragraph; and
                          (ii) those counties and areas (in 
                        this subsection referred to as 
                        ``specialist care scarcity counties'') 
                        with the lowest specialist care ratios 
                        that represent, if each such county or 
                        area were weighted by the number of 
                        individuals determined under paragraph 
                        (2)(B), an aggregate total of 20 
                        percent of the total of the individuals 
                        determined under such paragraph.
                  (B) Periodic revisions.--The Secretary shall 
                periodically revise the counties or areas 
                identified in subparagraph (A) (but not less 
                often than once every three years) unless the 
                Secretary determines that there is no new data 
                available on the number of physicians 
                practicing in the county or area or the number 
                of individuals residing in the county or area, 
                as identified in paragraph (2).
                  (C) Identification of counties where service 
                is furnished.--For purposes of paying the 
                additional amount specified in paragraph (1), 
                if the Secretary uses the 5-digit postal ZIP 
                Code where the service is furnished, the 
                dominant county of the postal ZIP Code (as 
                determined by the United States Postal Service, 
                or otherwise) shall be used to determine 
                whether the postal ZIP Code is in a scarcity 
                county identified in subparagraph (A) or 
                revised in subparagraph (B).
                  (D) Special rule.--With respect to 
                physicians' services furnished on or after 
                January 1, 2008, and before July 1, 2008, for 
                purposes of this subsection, the Secretary 
                shall use the primary care scarcity counties 
                and the specialty care scarcity counties (as 
                identified under the preceding provisions of 
                this paragraph) that the Secretary was using 
                under this subsection with respect to 
                physicians' services furnished on December 31, 
                2007.
                  (E) Judicial review.--There shall be no 
                administrative or judicial review under section 
                1869, 1878, or otherwise, respecting--
                          116.(i) the identification of a 
                        county or area;
                          (ii) the assignment of a specialty of 
                        any physician under this paragraph;
                          (iii) the assignment of a physician 
                        to a county under paragraph (2); or
                          (iv) the assignment of a postal ZIP 
                        Code to a county or other area under 
                        this subsection.
          (5) Rural census tracts.--To the extent feasible, the 
        Secretary shall treat a rural census tract of a 
        metropolitan statistical area (as determined under the 
        most recent modification of the Goldsmith Modification, 
        originally published in the Federal Register on 
        February 27, 1992 (57 Fed. Reg. 6725)), as an 
        equivalent area for purposes of qualifying as a primary 
        care scarcity county or specialist care scarcity county 
        under this subsection.
          (6) Physician Defined.--For purposes of this 
        paragraph, the term ``physician'' means a physician 
        described in section 1861(r)(1) and the term ``primary 
        care physician'' means a physician who is identified in 
        the available data as a general practitioner, family 
        practice practitioner, general internist, or 
        obstetrician or gynecologist.
          (7) Publication of list of counties; posting on 
        website.--With respect to a year for which a county or 
        area is identified or revised under paragraph (4), the 
        Secretary shall identify such counties or areas as part 
        of the proposed and final rule to implement the 
        physician fee schedule under section 1848 for the 
        applicable year. The Secretary shall post the list of 
        counties identified or revised under paragraph (4) on 
        the Internet website of the Centers for Medicare & 
        Medicaid Services.
  (v) Increase of FQHC Payment Limits.--In the case of services 
furnished by Federally qualified health centers (as defined in 
section 1861(aa)(4)), the Secretary shall establish payment 
limits with respect to such services under this part for 
services furnished--
          (1) in 2010, at the limits otherwise established 
        under this part for such year increased by $5; and
          (2) in a subsequent year, at the limits established 
        under this subsection for the previous year increased 
        by the percentage increase in the MEI (as defined in 
        section 1842(i)(3)) for such subsequent year.
  (w) Methods of Payment.--The Secretary may develop 
alternative methods of payment for items and services provided 
under clinical trials and comparative effectiveness studies 
sponsored or supported by an agency of the Department of Health 
and Human Services, as determined by the Secretary, to those 
that would otherwise apply under this section, to the extent 
such alternative methods are necessary to preserve the 
scientific validity of such trials or studies, such as in the 
case where masking the identity of interventions from patients 
and investigators is necessary to comply with the particular 
trial or study design.
  (x) Incentive Payments for Primary Care Services.--
          (1) In general.--In the case of primary care services 
        furnished on or after January 1, 2011, and before 
        January 1, 2016, by a primary care practitioner, in 
        addition to the amount of payment that would otherwise 
        be made for such services under this part, there also 
        shall be paid (on a monthly or quarterly basis) an 
        amount equal to 10 percent of the payment amount for 
        the service under this part.
          (2) Definitions.--In this subsection:
                  (A) Primary care practitioner.--The term 
                ``primary care practitioner'' means an 
                individual--
                          (i) who--
                                  (I) is a physician (as 
                                described in section 
                                1861(r)(1)) who has a primary 
                                specialty designation of family 
                                medicine, internal medicine, 
                                geriatric medicine, or 
                                pediatric medicine; or
                                  (II) is a nurse practitioner, 
                                clinical nurse specialist, or 
                                physician assistant (as those 
                                terms are defined in section 
                                1861(aa)(5)); and
                          (ii) for whom primary care services 
                        accounted for at least 60 percent of 
                        the allowed charges under this part for 
                        such physician or practitioner in a 
                        prior period as determined appropriate 
                        by the Secretary.
                  (B) Primary care services.--The term 
                ``primary care services'' means services 
                identified, as of January 1, 2009, by the 
                following HCPCS codes (and as subsequently 
                modified by the Secretary):
                          (i) 99201 through 99215.
                          (ii) 99304 through 99340.
                          (iii) 99341 through 99350.
          (3) Coordination with other payments.--The amount of 
        the additional payment for a service under this 
        subsection and subsection (m) shall be determined 
        without regard to any additional payment for the 
        service under subsection (m) and this subsection, 
        respectively. The amount of the additional payment for 
        a service under this subsection and subsection (z) 
        shall be determined without regard to any additional 
        payment for the service under subsection (z) and this 
        subsection, respectively.
          (4) Limitation on review.--There shall be no 
        administrative or judicial review under section 1869, 
        1878, or otherwise, respecting the identification of 
        primary care practitioners under this subsection.
  (y) Incentive Payments for Major Surgical Procedures 
Furnished in Health Professional Shortage Areas.--
          (1) In general.--In the case of major surgical 
        procedures furnished on or after January 1, 2011, and 
        before January 1, 2016, by a general surgeon in an area 
        that is designated (under section 332(a)(1)(A) of the 
        Public Health Service Act) as a health professional 
        shortage area as identified by the Secretary prior to 
        the beginning of the year involved, in addition to the 
        amount of payment that would otherwise be made for such 
        services under this part, there also shall be paid (on 
        a monthly or quarterly basis) an amount equal to 10 
        percent of the payment amount for the service under 
        this part.
          (2) Definitions.--In this subsection:
                  (A) General surgeon.--In this subsection, the 
                term ``general surgeon'' means a physician (as 
                described in section 1861(r)(1)) who has 
                designated CMS specialty code 02-General 
                Surgery as their primary specialty code in the 
                physician's enrollment under section 1866(j).
                  (B) Major surgical procedures.--The term 
                ``major surgical procedures'' means physicians' 
                services which are surgical procedures for 
                which a 10-day or 90-day global period is used 
                for payment under the fee schedule under 
                section 1848(b).
          (3) Coordination with other payments.--The amount of 
        the additional payment for a service under this 
        subsection and subsection (m) shall be determined 
        without regard to any additional payment for the 
        service under subsection (m) and this subsection, 
        respectively. The amount of the additional payment for 
        a service under this subsection and subsection (z) 
        shall be determined without regard to any additional 
        payment for the service under subsection (z) and this 
        subsection, respectively.
          (4) Application.--The provisions of paragraph (2) and 
        (4) of subsection (m) shall apply to the determination 
        of additional payments under this subsection in the 
        same manner as such provisions apply to the 
        determination of additional payments under subsection 
        (m).
  (z) Incentive Payments for Participation in Eligible 
Alternative Payment Models.--
          (1) Payment incentive.--
                  (A) In general.--In the case of covered 
                professional services furnished by an eligible 
                professional during a year that is in the 
                period beginning with 2019 and ending with 2024 
                and for which the professional is a qualifying 
                APM participant with respect to such year, in 
                addition to the amount of payment that would 
                otherwise be made for such covered professional 
                services under this part for such year, there 
                also shall be paid to such professional an 
                amount equal to 5 percent of the estimated 
                aggregate payment amounts for such covered 
                professional services under this part for the 
                preceding year. For purposes of the previous 
                sentence, the payment amount for the preceding 
                year may be an estimation for the full 
                preceding year based on a period of such 
                preceding year that is less than the full year. 
                The Secretary shall establish policies to 
                implement this subparagraph in cases in which 
                payment for covered professional services 
                furnished by a qualifying APM participant in an 
                alternative payment model--
                          (i) is made to an eligible 
                        alternative payment entity rather than 
                        directly to the qualifying APM 
                        participant; or
                          (ii) is made on a basis other than a 
                        fee-for-service basis (such as payment 
                        on a capitated basis).
                  (B) Form of payment.--Payments under this 
                subsection shall be made in a lump sum, on an 
                annual basis, as soon as practicable.
                  (C) Treatment of payment incentive.--Payments 
                under this subsection shall not be taken into 
                account for purposes of determining actual 
                expenditures under an alternative payment model 
                and for purposes of determining or rebasing any 
                benchmarks used under the alternative payment 
                model.
                  (D) Coordination.--The amount of the 
                additional payment under this subsection or 
                subsection (m) shall be determined without 
                regard to any additional payment under 
                subsection (m) and this subsection, 
                respectively. The amount of the additional 
                payment under this subsection or subsection (x) 
                shall be determined without regard to any 
                additional payment under subsection (x) and 
                this subsection, respectively. The amount of 
                the additional payment under this subsection or 
                subsection (y) shall be determined without 
                regard to any additional payment under 
                subsection (y) and this subsection, 
                respectively.
          (2) Qualifying apm participant.--For purposes of this 
        subsection, the term ``qualifying APM participant'' 
        means the following:
                  (A) 2019 and 2020.--With respect to 2019 and 
                2020, an eligible professional for whom the 
                Secretary determines that at least 25 percent 
                of payments under this part for covered 
                professional services furnished by such 
                professional during the most recent period for 
                which data are available (which may be less 
                than a year) were attributable to such services 
                furnished under this part through an eligible 
                alternative payment entity.
                  (B) 2021 and 2022.--With respect to 2021 and 
                2022, an eligible professional described in 
                either of the following clauses:
                          (i) Medicare payment threshold 
                        option.--An eligible professional for 
                        whom the Secretary determines that at 
                        least 50 percent of payments under this 
                        part for covered professional services 
                        furnished by such professional during 
                        the most recent period for which data 
                        are available (which may be less than a 
                        year) were attributable to such 
                        services furnished under this part 
                        through an eligible alternative payment 
                        entity.
                          (ii) Combination all-payer and 
                        medicare payment threshold option.--An 
                        eligible professional--
                                  (I) for whom the Secretary 
                                determines, with respect to 
                                items and services furnished by 
                                such professional during the 
                                most recent period for which 
                                data are available (which may 
                                be less than a year), that at 
                                least 50 percent of the sum 
                                of--
                                          (aa) payments 
                                        described in clause 
                                        (i); and
                                          (bb) all other 
                                        payments, regardless of 
                                        payer (other than 
                                        payments made by the 
                                        Secretary of Defense or 
                                        the Secretary of 
                                        Veterans Affairs and 
                                        other than payments 
                                        made under title XIX in 
                                        a State in which no 
                                        medical home or 
                                        alternative payment 
                                        model is available 
                                        under the State program 
                                        under that title),
                                meet the requirement described 
                                in clause (iii)(I) with respect 
                                to payments described in item 
                                (aa) and meet the requirement 
                                described in clause (iii)(II) 
                                with respect to payments 
                                described in item (bb);
                                  (II) for whom the Secretary 
                                determines at least 25 percent 
                                of payments under this part for 
                                covered professional services 
                                furnished by such professional 
                                during the most recent period 
                                for which data are available 
                                (which may be less than a year) 
                                were attributable to such 
                                services furnished under this 
                                part through an eligible 
                                alternative payment entity; and
                                  (III) who provides to the 
                                Secretary such information as 
                                is necessary for the Secretary 
                                to make a determination under 
                                subclause (I), with respect to 
                                such professional.
                          (iii) Requirement.--For purposes of 
                        clause (ii)(I)--
                                  (I) the requirement described 
                                in this subclause, with respect 
                                to payments described in item 
                                (aa) of such clause, is that 
                                such payments are made to an 
                                eligible alternative payment 
                                entity; and
                                  (II) the requirement 
                                described in this subclause, 
                                with respect to payments 
                                described in item (bb) of such 
                                clause, is that such payments 
                                are made under arrangements in 
                                which--
                                          (aa) quality measures 
                                        comparable to measures 
                                        under the performance 
                                        category described in 
                                        section 
                                        1848(q)(2)(B)(i) apply;
                                          (bb) certified EHR 
                                        technology is used; and
                                          (cc) the eligible 
                                        professional 
                                        participates in an 
                                        entity that--
                                                  (AA) bears 
                                                more than 
                                                nominal 
                                                financial risk 
                                                if actual 
                                                aggregate 
                                                expenditures 
                                                exceeds 
                                                expected 
                                                aggregate 
                                                expenditures; 
                                                or
                                                  (BB) with 
                                                respect to 
                                                beneficiaries 
                                                under title 
                                                XIX, is a 
                                                medical home 
                                                that meets 
                                                criteria 
                                                comparable to 
                                                medical homes 
                                                expanded under 
                                                section 
                                                1115A(c).
                  (C) Beginning in 2023.--With respect to 2023 
                and each subsequent year, an eligible 
                professional described in either of the 
                following clauses:
                          (i) Medicare payment threshold 
                        option.--An eligible professional for 
                        whom the Secretary determines that at 
                        least 75 percent of payments under this 
                        part for covered professional services 
                        furnished by such professional during 
                        the most recent period for which data 
                        are available (which may be less than a 
                        year) were attributable to such 
                        services furnished under this part 
                        through an eligible alternative payment 
                        entity.
                          (ii) Combination all-payer and 
                        medicare payment threshold option.--An 
                        eligible professional--
                                  (I) for whom the Secretary 
                                determines, with respect to 
                                items and services furnished by 
                                such professional during the 
                                most recent period for which 
                                data are available (which may 
                                be less than a year), that at 
                                least 75 percent of the sum 
                                of--
                                          (aa) payments 
                                        described in clause 
                                        (i); and
                                          (bb) all other 
                                        payments, regardless of 
                                        payer (other than 
                                        payments made by the 
                                        Secretary of Defense or 
                                        the Secretary of 
                                        Veterans Affairs and 
                                        other than payments 
                                        made under title XIX in 
                                        a State in which no 
                                        medical home or 
                                        alternative payment 
                                        model is available 
                                        under the State program 
                                        under that title),
                                meet the requirement described 
                                in clause (iii)(I) with respect 
                                to payments described in item 
                                (aa) and meet the requirement 
                                described in clause (iii)(II) 
                                with respect to payments 
                                described in item (bb);
                                  (II) for whom the Secretary 
                                determines at least 25 percent 
                                of payments under this part for 
                                covered professional services 
                                furnished by such professional 
                                during the most recent period 
                                for which data are available 
                                (which may be less than a year) 
                                were attributable to such 
                                services furnished under this 
                                part through an eligible 
                                alternative payment entity; and
                                  (III) who provides to the 
                                Secretary such information as 
                                is necessary for the Secretary 
                                to make a determination under 
                                subclause (I), with respect to 
                                such professional.
                          (iii) Requirement.--For purposes of 
                        clause (ii)(I)--
                                  (I) the requirement described 
                                in this subclause, with respect 
                                to payments described in item 
                                (aa) of such clause, is that 
                                such payments are made to an 
                                eligible alternative payment 
                                entity; and
                                  (II) the requirement 
                                described in this subclause, 
                                with respect to payments 
                                described in item (bb) of such 
                                clause, is that such payments 
                                are made under arrangements in 
                                which--
                                          (aa) quality measures 
                                        comparable to measures 
                                        under the performance 
                                        category described in 
                                        section 
                                        1848(q)(2)(B)(i) apply;
                                          (bb) certified EHR 
                                        technology is used; and
                                          (cc) the eligible 
                                        professional 
                                        participates in an 
                                        entity that--
                                                  (AA) bears 
                                                more than 
                                                nominal 
                                                financial risk 
                                                if actual 
                                                aggregate 
                                                expenditures 
                                                exceeds 
                                                expected 
                                                aggregate 
                                                expenditures; 
                                                or
                                                  (BB) with 
                                                respect to 
                                                beneficiaries 
                                                under title 
                                                XIX, is a 
                                                medical home 
                                                that meets 
                                                criteria 
                                                comparable to 
                                                medical homes 
                                                expanded under 
                                                section 
                                                1115A(c).
                  (D) Use of patient approach.--The Secretary 
                may base the determination of whether an 
                eligible professional is a qualifying APM 
                participant under this subsection and the 
                determination of whether an eligible 
                professional is a partial qualifying APM 
                participant under section 1848(q)(1)(C)(iii) by 
                using counts of patients in lieu of using 
                payments and using the same or similar 
                percentage criteria (as specified in this 
                subsection and such section, respectively), as 
                the Secretary determines appropriate.
          (3) Additional definitions.--In this subsection:
                  (A) Covered professional services.--The term 
                ``covered professional services'' has the 
                meaning given that term in section 
                1848(k)(3)(A).
                  (B) Eligible professional.--The term 
                ``eligible professional'' has the meaning given 
                that term in section 1848(k)(3)(B) and includes 
                a group that includes such professionals.
                  (C) Alternative payment model (apm).--The 
                term ``alternative payment model'' means, other 
                than for purposes of subparagraphs 
                (B)(ii)(I)(bb) and (C)(ii)(I)(bb) of paragraph 
                (2), any of the following:
                          (i) A model under section 1115A 
                        (other than a health care innovation 
                        award).
                          (ii) The shared savings program under 
                        section 1899.
                          (iii) A demonstration under section 
                        1866C.
                          (iv) A demonstration required by 
                        Federal law.
                  (D) Eligible alternative payment entity.--The 
                term ``eligible alternative payment entity'' 
                means, with respect to a year, an entity that--
                          (i) participates in an alternative 
                        payment model that--
                                  (I) requires participants in 
                                such model to use certified EHR 
                                technology (as defined in 
                                subsection (o)(4)); and
                                  (II) provides for payment for 
                                covered professional services 
                                based on quality measures 
                                comparable to measures under 
                                the performance category 
                                described in section 
                                1848(q)(2)(B)(i); and
                          (ii)(I) bears financial risk for 
                        monetary losses under such alternative 
                        payment model that are in excess of a 
                        nominal amount; or
                          (II) is a medical home expanded under 
                        section 1115A(c).
          (4) Limitation.--There shall be no administrative or 
        judicial review under section 1869, 1878, or otherwise, 
        of the following:
                  (A) The determination that an eligible 
                professional is a qualifying APM participant 
                under paragraph (2) and the determination that 
                an entity is an eligible alternative payment 
                entity under paragraph (3)(D).
                  (B) The determination of the amount of the 5 
                percent payment incentive under paragraph 
                (1)(A), including any estimation as part of 
                such determination.
  (z) Medical Review of Spinal Subluxation Services.--
          (1) In general.--The Secretary shall implement a 
        process for the medical review (as described in 
        paragraph (2)) of treatment by a chiropractor described 
        in section 1861(r)(5) by means of manual manipulation 
        of the spine to correct a subluxation (as described in 
        such section) of an individual who is enrolled under 
        this part and apply such process to such services 
        furnished on or after January 1, 2017, focusing on 
        services such as--
                  (A) services furnished by a such a 
                chiropractor whose pattern of billing is 
                aberrant compared to peers; and
                  (B) services furnished by such a chiropractor 
                who, in a prior period, has a services denial 
                percentage in the 85th percentile or greater, 
                taking into consideration the extent that 
                service denials are overturned on appeal.
          (2) Medical review.--
                  (A) Prior authorization medical review.--
                          (i) In general.--Subject to clause 
                        (ii), the Secretary shall use prior 
                        authorization medical review for 
                        services described in paragraph (1) 
                        that are furnished to an individual by 
                        a chiropractor described in section 
                        1861(r)(5) that are part of an episode 
                        of treatment that includes more than 12 
                        services. For purposes of the preceding 
                        sentence, an episode of treatment shall 
                        be determined by the underlying cause 
                        that justifies the need for services, 
                        such as a diagnosis code.
                          (ii) Ending application of prior 
                        authorization medical review.--The 
                        Secretary shall end the application of 
                        prior authorization medical review 
                        under clause (i) to services described 
                        in paragraph (1) by such a chiropractor 
                        if the Secretary determines that the 
                        chiropractor has a low denial rate 
                        under such prior authorization medical 
                        review. The Secretary may subsequently 
                        reapply prior authorization medical 
                        review to such chiropractor if the 
                        Secretary determines it to be 
                        appropriate and the chiropractor has, 
                        in the time period subsequent to the 
                        determination by the Secretary of a low 
                        denial rate with respect to the 
                        chiropractor, furnished such services 
                        described in paragraph (1).
                          (iii) Early request for prior 
                        authorization review permitted.--
                        Nothing in this subsection shall be 
                        construed to prevent such a 
                        chiropractor from requesting prior 
                        authorization for services described in 
                        paragraph (1) that are to be furnished 
                        to an individual before the 
                        chiropractor furnishes the twelfth such 
                        service to such individual for an 
                        episode of treatment.
                  (B) Type of review.--The Secretary may use 
                pre-payment review or post-payment review of 
                services described in section 1861(r)(5) that 
                are not subject to prior authorization medical 
                review under subparagraph (A).
                  (C) Relationship to law enforcement 
                activities.--The Secretary may determine that 
                medical review under this subsection does not 
                apply in the case where potential fraud may be 
                involved.
          (3) No payment without prior authorization.--With 
        respect to a service described in paragraph (1) for 
        which prior authorization medical review under this 
        subsection applies, the following shall apply:
                  (A) Prior authorization determination.--The 
                Secretary shall make a determination, prior to 
                the service being furnished, of whether the 
                service would or would not meet the applicable 
                requirements of section 1862(a)(1)(A).
                  (B) Denial of payment.--Subject to paragraph 
                (5), no payment may be made under this part for 
                the service unless the Secretary determines 
                pursuant to subparagraph (A) that the service 
                would meet the applicable requirements of such 
                section 1862(a)(1)(A).
          (4) Submission of information.--A chiropractor 
        described in section 1861(r)(5) may submit the 
        information necessary for medical review by fax, by 
        mail, or by electronic means. The Secretary shall make 
        available the electronic means described in the 
        preceding sentence as soon as practicable.
          (5) Timeliness.--If the Secretary does not make a 
        prior authorization determination under paragraph 
        (3)(A) within 14 business days of the date of the 
        receipt of medical documentation needed to make such 
        determination, paragraph (3)(B) shall not apply.
          (6) Application of limitation on beneficiary 
        liability.--Where payment may not be made as a result 
        of the application of paragraph (2)(B), section 1879 
        shall apply in the same manner as such section applies 
        to a denial that is made by reason of section 
        1862(a)(1).
          (7) Review by contractors.--The medical review 
        described in paragraph (2) may be conducted by medicare 
        administrative contractors pursuant to section 
        1874A(a)(4)(G) or by any other contractor determined 
        appropriate by the Secretary that is not a recovery 
        audit contractor.
          (8) Multiple services.--The Secretary shall, where 
        practicable, apply the medical review under this 
        subsection in a manner so as to allow an individual 
        described in paragraph (1) to obtain, at a single time 
        rather than on a service-by-service basis, an 
        authorization in accordance with paragraph (3)(A) for 
        multiple services.
          (9) Construction.--With respect to a service 
        described in paragraph (1) that has been affirmed by 
        medical review under this subsection, nothing in this 
        subsection shall be construed to preclude the 
        subsequent denial of a claim for such service that does 
        not meet other applicable requirements under this Act.
          (10) Implementation.--
                  (A) Authority.--The Secretary may implement 
                the provisions of this subsection by interim 
                final rule with comment period.
                  (B) Administration.--Chapter 35 of title 44, 
                United States Code, shall not apply to medical 
                review under this subsection.

           *       *       *       *       *       *       *


                    PAYMENT FOR PHYSICIANS' SERVICES

  Sec. 1848. (a) Payment Based on Fee Schedule.--
          (1) In general.--Effective for all physicians' 
        services (as defined in subsection (j)(3)) furnished 
        under this part during a year (beginning with 1992) for 
        which payment is otherwise made on the basis of a 
        reasonable charge or on the basis of a fee schedule 
        under section 1834(b), payment under this part shall 
        instead be based on the lesser of--
                  (A) the actual charge for the service, or
                  (B) subject to the succeeding provisions of 
                this subsection, the amount determined under 
                the fee schedule established under subsection 
                (b) for services furnished during that year (in 
                this subsection referred to as the ``fee 
                schedule amount'').
          (2) Transition to full fee schedule.--
                  (A) Limiting reductions and increases to 15 
                percent in 1992.--
                          (i) Limit on increase.--In the case 
                        of a service in a fee schedule area (as 
                        defined in subsection (j)(2)) for which 
                        the adjusted historical payment basis 
                        (as defined in subparagraph (D)) is 
                        less than 85 percent of the fee 
                        schedule amount for services furnished 
                        in 1992, there shall be substituted for 
                        the fee schedule amount an amount equal 
                        to the adjusted historical payment 
                        basis plus 15 percent of the fee 
                        schedule amount otherwise established 
                        (without regard to this paragraph).
                          (ii) Limit in reduction.--In the case 
                        of a service in a fee schedule area for 
                        which the adjusted historical payment 
                        basis exceeds 115 percent of the fee 
                        schedule amount for services furnished 
                        in 1992, there shall be substituted for 
                        the fee schedule amount an amount equal 
                        to the adjusted historical payment 
                        basis minus 15 percent of the fee 
                        schedule amount otherwise established 
                        (without regard to this paragraph).
                  (B) Special rule for 1993, 1994, and 1995.--
                If a physicians' service in a fee schedule area 
                is subject to the provisions of subparagraph 
                (A) in 1992, for physicians' services furnished 
                in the area--
                          (i) during 1993, there shall be 
                        substituted for the fee schedule amount 
                        an amount equal to the sum of--
                                  (I) 75 percent of the fee 
                                schedule amount determined 
                                under subparagraph (A), 
                                adjusted by the update 
                                established under subsection 
                                (d)(3) for 1993, and
                                  (II) 25 percent of the fee 
                                schedule amount determined 
                                under paragraph (1) for 1993 
                                without regard to this 
                                paragraph;
                          (ii) during 1994, there shall be 
                        substituted for the fee schedule amount 
                        an amount equal to the sum of--
                                  (I) 67 percent of the fee 
                                schedule amount determined 
                                under clause (i), adjusted by 
                                the update established under 
                                subsection (d)(3) for 1994 and 
                                as adjusted under subsection 
                                (c)(2)(F)(ii) and under section 
                                13515(b) of the Omnibus Budget 
                                Reconciliation Act of 1993, and
                                  (II) 33 percent of the fee 
                                schedule amount determined 
                                under paragraph (1) for 1994 
                                without regard to this 
                                paragraph; and
                          (iii) during 1995, there shall be 
                        substituted for the fee schedule amount 
                        an amount equal to the sum of--
                                  (I) 50 percent of the fee 
                                schedule amount determined 
                                under clause (ii) adjusted by 
                                the update established under 
                                subsection (d)(3) for 1995, and
                                  (II) 50 percent of the fee 
                                schedule amount determined 
                                under paragraph (1) for 1995 
                                without regard to this 
                                paragraph.
                  (C) Special rule for anesthesia and radiology 
                services.--With respect to physicians' services 
                which are anesthesia services, the Secretary 
                shall provide for a transition in the same 
                manner as a transition is provided for other 
                services under subparagraph (B). With respect 
                to radiology services, ``109 percent'' and ``9 
                percent'' shall be substituted for ``115 
                percent'' and ``15 percent'', respectively, in 
                subparagraph (A)(ii).
                  (D) Adjusted historical payment basis 
                defined.--
                          (i) In general.--In this paragraph, 
                        the term ``adjusted historical payment 
                        basis'' means, with respect to a 
                        physicians' service furnished in a fee 
                        schedule area, the weighted average 
                        prevailing charge applied in the area 
                        for the service in 1991 (as determined 
                        by the Secretary without regard to 
                        physician specialty and as adjusted to 
                        reflect payments for services with 
                        customary charges below the prevailing 
                        charge or other payment limitations 
                        imposed by law or regulation) adjusted 
                        by the update established under 
                        subsection (d)(3) for 1992.
                          (ii) Application to radiology 
                        services.--In applying clause (i) in 
                        the case of physicians' services which 
                        are radiology services (including 
                        radiologist services, as defined in 
                        section 1834(b)(6)), but excluding 
                        nuclear medicine services that are 
                        subject to section 6105(b) of the 
                        Omnibus Budget Reconciliation Act of 
                        1989, there shall be substituted for 
                        the weighted average prevailing charge 
                        the amount provided under the fee 
                        schedule established for the service 
                        for the fee schedule area under section 
                        1834(b).
                          (iii) Nuclear medicine services.--In 
                        applying clause (i) in the case of 
                        physicians' services which are nuclear 
                        medicine services, there shall be 
                        substituted for the weighted average 
                        prevailing charge the amount provided 
                        under section 6105(b) of the Omnibus 
                        Budget Reconciliation Act of 1989.
          (3) Incentives for participating physicians and 
        suppliers.--In applying paragraph (1)(B) in the case of 
        a nonparticipating physician or a nonparticipating 
        supplier or other person, the fee schedule amount shall 
        be 95 percent of such amount otherwise applied under 
        this subsection (without regard to this paragraph). In 
        the case of physicians' services (including services 
        which the Secretary excludes pursuant to subsection 
        (j)(3)) of a nonparticipating physician, supplier, or 
        other person for which payment is made under this part 
        on a basis other than the fee schedule amount, the 
        payment shall be based on 95 percent of the payment 
        basis for such services furnished by a participating 
        physician, supplier, or other person.
          (4) Special rule for medical direction.--
                  (A) In general.--With respect to physicians' 
                services furnished on or after January 1, 1994, 
                and consisting of medical direction of two, 
                three, or four concurrent anesthesia cases, 
                except as provided in paragraph (5), the fee 
                schedule amount to be applied shall be equal to 
                one-half of the amount described in 
                subparagraph (B).
                  (B) Amount.--The amount described in this 
                subparagraph, for a physician's medical 
                direction of the performance of anesthesia 
                services, is the following percentage of the 
                fee schedule amount otherwise applicable under 
                this section if the anesthesia services were 
                personally performed by the physician alone:
                          (i) For services furnished during 
                        1994, 120 percent.
                          (ii) For services furnished during 
                        1995, 115 percent.
                          (iii) For services furnished during 
                        1996, 110 percent.
                          (iv) For services furnished during 
                        1997, 105 percent.
                          (v) For services furnished after 
                        1997, 100 percent.
          (5) Incentives for electronic prescribing.--
                  (A) Adjustment.--
                          (i) In general.--Subject to 
                        subparagraph (B) and subsection 
                        (m)(2)(B), with respect to covered 
                        professional services furnished by an 
                        eligible professional during 2012, 2013 
                        or 2014, if the eligible professional 
                        is not a successful electronic 
                        prescriber for the reporting period for 
                        the year (as determined under 
                        subsection (m)(3)(B)), the fee schedule 
                        amount for such services furnished by 
                        such professional during the year 
                        (including the fee schedule amount for 
                        purposes of determining a payment based 
                        on such amount) shall be equal to the 
                        applicable percent of the fee schedule 
                        amount that would otherwise apply to 
                        such services under this subsection 
                        (determined after application of 
                        paragraph (3) but without regard to 
                        this paragraph).
                          (ii) Applicable percent.--For 
                        purposes of clause (i), the term 
                        ``applicable percent'' means--
                                  (I) for 2012, 99 percent;
                                  (II) for 2013, 98.5 percent; 
                                and
                                  (III) for 2014, 98 percent.
                  (B) Significant hardship exception.--The 
                Secretary may, on a case-by-case basis, exempt 
                an eligible professional from the application 
                of the payment adjustment under subparagraph 
                (A) if the Secretary determines, subject to 
                annual renewal, that compliance with the 
                requirement for being a successful electronic 
                prescriber would result in a significant 
                hardship, such as in the case of an eligible 
                professional who practices in a rural area 
                without sufficient Internet access.
                  (C) Application.--
                          (i) Physician reporting system 
                        rules.--Paragraphs (5), (6), and (8) of 
                        subsection (k) shall apply for purposes 
                        of this paragraph in the same manner as 
                        they apply for purposes of such 
                        subsection.
                          (ii) Incentive payment validation 
                        rules.--Clauses (ii) and (iii) of 
                        subsection (m)(5)(D) shall apply for 
                        purposes of this paragraph in a similar 
                        manner as they apply for purposes of 
                        such subsection.
                  (D) Definitions.--For purposes of this 
                paragraph:
                          (i) Eligible professional; covered 
                        professional services.--The terms 
                        ``eligible professional'' and ``covered 
                        professional services'' have the 
                        meanings given such terms in subsection 
                        (k)(3).
                          (ii) Physician reporting system.--The 
                        term ``physician reporting system'' 
                        means the system established under 
                        subsection (k).
                          (iii) Reporting period.--The term 
                        ``reporting period'' means, with 
                        respect to a year, a period specified 
                        by the Secretary.
          (6) Special rule for teaching anesthesiologists.--
        With respect to physicians' services furnished on or 
        after January 1, 2010, in the case of teaching 
        anesthesiologists involved in the training of physician 
        residents in a single anesthesia case or two concurrent 
        anesthesia cases, the fee schedule amount to be applied 
        shall be 100 percent of the fee schedule amount 
        otherwise applicable under this section if the 
        anesthesia services were personally performed by the 
        teaching anesthesiologist alone and paragraph (4) shall 
        not apply if--
                  (A) the teaching anesthesiologist is present 
                during all critical or key portions of the 
                anesthesia service or procedure involved; and
                  (B) the teaching anesthesiologist (or another 
                anesthesiologist with whom the teaching 
                anesthesiologist has entered into an 
                arrangement) is immediately available to 
                furnish anesthesia services during the entire 
                procedure.
          (7) Incentives for meaningful use of certified ehr 
        technology.--
                  (A) Adjustment.--
                          (i) In general.--Subject to 
                        subparagraphs (B) and (D), with respect 
                        to covered professional services 
                        furnished by an eligible professional 
                        during each of 2015 through 2018, if 
                        the eligible professional is not a 
                        meaningful EHR user (as determined 
                        under subsection (o)(2)) for an EHR 
                        reporting period for the year, the fee 
                        schedule amount for such services 
                        furnished by such professional during 
                        the year (including the fee schedule 
                        amount for purposes of determining a 
                        payment based on such amount) shall be 
                        equal to the applicable percent of the 
                        fee schedule amount that would 
                        otherwise apply to such services under 
                        this subsection (determined after 
                        application of paragraph (3) but 
                        without regard to this paragraph).
                          (ii) Applicable percent.--Subject to 
                        clause (iii), for purposes of clause 
                        (i), the term ``applicable percent'' 
                        means--
                                  (I) for 2015, 99 percent (or, 
                                in the case of an eligible 
                                professional who was subject to 
                                the application of the payment 
                                adjustment under section 
                                1848(a)(5) for 2014, 98 
                                percent);
                                  (II) for 2016, 98 percent; 
                                and
                                  (III) for 2017 and 2018, 97 
                                percent.
                          (iii) Authority to decrease 
                        applicable percentage for 2018.--For 
                        2018, if the Secretary finds that the 
                        proportion of eligible professionals 
                        who are meaningful EHR users (as 
                        determined under subsection (o)(2)) is 
                        less than 75 percent, the applicable 
                        percent shall be decreased by 1 
                        percentage point from the applicable 
                        percent in the preceding year.
                  (B) Significant hardship exception.--The 
                Secretary may, on a case-by-case basis (and, 
                with respect to the payment adjustment under 
                subparagraph (A) for 2017, for categories of 
                eligible professionals, as established by the 
                Secretary and posted on the Internet website of 
                the Centers for Medicare & Medicaid Services 
                prior to December 15, 2015, an application for 
                which must be submitted to the Secretary by not 
                later than March 15, 2016), exempt an eligible 
                professional from the application of the 
                payment adjustment under subparagraph (A) if 
                the Secretary determines, subject to annual 
                renewal, that compliance with the requirement 
                for being a meaningful EHR user would result in 
                a significant hardship, such as in the case of 
                an eligible professional who practices in a 
                rural area without sufficient Internet access. 
                In no case may an eligible professional be 
                granted an exemption under this subparagraph 
                for more than 5 years.
                  (C) Application of physician reporting system 
                rules.--Paragraphs (5), (6), and (8) of 
                subsection (k) shall apply for purposes of this 
                paragraph in the same manner as they apply for 
                purposes of such subsection.
                  (D) Non-application to hospital-based 
                eligible professionals.--No payment adjustment 
                may be made under subparagraph (A) in the case 
                of hospital-based eligible professionals (as 
                defined in subsection (o)(1)(C)(ii)).
                  (E) Definitions.--For purposes of this 
                paragraph:
                          (i) Covered professional services.--
                        The term ``covered professional 
                        services'' has the meaning given such 
                        term in subsection (k)(3).
                          (ii) EHR reporting period.--The term 
                        ``EHR reporting period'' means, with 
                        respect to a year, a period (or 
                        periods) specified by the Secretary.
                          (iii) Eligible professional.--The 
                        term ``eligible professional'' means a 
                        physician, as defined in section 
                        1861(r).
          (8) Incentives for quality reporting.--
                  (A) Adjustment.--
                          (i) In general.--With respect to 
                        covered professional services furnished 
                        by an eligible professional during each 
                        of 2015 through 2018, if the eligible 
                        professional does not satisfactorily 
                        submit data on quality measures for 
                        covered professional services for the 
                        quality reporting period for the year 
                        (as determined under subsection 
                        (m)(3)(A)), the fee schedule amount for 
                        such services furnished by such 
                        professional during the year (including 
                        the fee schedule amount for purposes of 
                        determining a payment based on such 
                        amount) shall be equal to the 
                        applicable percent of the fee schedule 
                        amount that would otherwise apply to 
                        such services under this subsection 
                        (determined after application of 
                        paragraphs (3), (5), and (7), but 
                        without regard to this paragraph).
                          (ii) Applicable percent.--For 
                        purposes of clause (i), the term 
                        ``applicable percent'' means--
                                  (I) for 2015, 98.5 percent; 
                                and
                                  (II) for 2016, 2017, and 
                                2018, 98 percent.
                  (B) Application.--
                          (i) Physician reporting system 
                        rules.--Paragraphs (5), (6), and (8) of 
                        subsection (k) shall apply for purposes 
                        of this paragraph in the same manner as 
                        they apply for purposes of such 
                        subsection.
                          (ii) Incentive payment validation 
                        rules.--Clauses (ii) and (iii) of 
                        subsection (m)(5)(D) shall apply for 
                        purposes of this paragraph in a similar 
                        manner as they apply for purposes of 
                        such subsection.
                  (C) Definitions.--For purposes of this 
                paragraph:
                          (i) Eligible professional; covered 
                        professional services.--The terms 
                        ``eligible professional'' and ``covered 
                        professional services'' have the 
                        meanings given such terms in subsection 
                        (k)(3).
                          (ii) Physician reporting system.--The 
                        term ``physician reporting system'' 
                        means the system established under 
                        subsection (k).
                          (iii) Quality reporting period.--The 
                        term ``quality reporting period'' 
                        means, with respect to a year, a period 
                        specified by the Secretary.
          (9) Information reporting on services included in 
        global surgical packages.--With respect to services for 
        which a physician is required to report information in 
        accordance with subsection (c)(8)(B)(i), the Secretary 
        may through rulemaking delay payment of 5 percent of 
        the amount that would otherwise be payable under the 
        physician fee schedule under this section for such 
        services until the information so required is reported.
  (b) Establishment of Fee Schedules.--
          (1) In general.--Before November 1 of the preceding 
        year, for each year beginning with 1998, subject to 
        subsection (p), the Secretary shall establish, by 
        regulation, fee schedules that establish payment 
        amounts for all physicians' services furnished in all 
        fee schedule areas (as defined in subsection (j)(2)) 
        for the year. Except as provided in paragraph (2), each 
        such payment amount for a service shall be equal to the 
        product of--
                  (A) the relative value for the service (as 
                determined in subsection (c)(2)),
                  (B) the conversion factor (established under 
                subsection (d)) for the year, and
                  (C) the geographic adjustment factor 
                (established under subsection (e)(2)) for the 
                service for the fee schedule area.
          (2) Treatment of radiology services and anesthesia 
        services.--
                  (A) Radiology services.--With respect to 
                radiology services (including radiologist 
                services, as defined in section 1834(b)(6)), 
                the Secretary shall base the relative values on 
                the relative value scale developed under 
                section 1834(b)(1)(A), with appropriate 
                modifications of the relative values to assure 
                that the relative values established for 
                radiology services which are similar or related 
                to other physicians' services are consistent 
                with the relative values established for those 
                similar or related services.
                  (B) Anesthesia services.--In establishing the 
                fee schedule for anesthesia services for which 
                a relative value guide has been established 
                under section 4048(b) of the Omnibus Budget 
                Reconciliation Act of 1987, the Secretary shall 
                use, to the extent practicable, such relative 
                value guide, with appropriate adjustment of the 
                conversion factor, in a manner to assure that 
                the fee schedule amounts for anesthesia 
                services are consistent with the fee schedule 
                amounts for other services determined by the 
                Secretary to be of comparable value. In 
                applying the previous sentence, the Secretary 
                shall adjust the conversion factor by 
                geographic adjustment factors in the same 
                manner as such adjustment is made under 
                paragraph (1)(C).
                  (C) Consultation.--The Secretary shall 
                consult with the Physician Payment Review 
                Commission and organizations representing 
                physicians or suppliers who furnish radiology 
                services and anesthesia services in applying 
                subparagraphs (A) and (B).
          (3) Treatment of interpretation of 
        electrocardiograms.--The Secretary--
                  (A) shall make separate payment under this 
                section for the interpretation of 
                electrocardiograms performed or ordered to be 
                performed as part of or in conjunction with a 
                visit to or a consultation with a physician, 
                and
                  (B) shall adjust the relative values 
                established for visits and consultations under 
                subsection (c) so as not to include relative 
                value units for interpretations of 
                electrocardiograms in the relative value for 
                visits and consultations.
          (4) Special rule for imaging services.--
                  (A) In general.--In the case of imaging 
                services described in subparagraph (B) 
                furnished on or after January 1, 2007, if--
                          (i) the technical component 
                        (including the technical component 
                        portion of a global fee) of the service 
                        established for a year under the fee 
                        schedule described in paragraph (1) 
                        without application of the geographic 
                        adjustment factor described in 
                        paragraph (1)(C), exceeds
                          (ii) the Medicare OPD fee schedule 
                        amount established under the 
                        prospective payment system for hospital 
                        outpatient department services under 
                        paragraph (3)(D) of section 1833(t) for 
                        such service for such year, determined 
                        without regard to geographic adjustment 
                        under paragraph (2)(D) of such section,
                the Secretary shall substitute the amount 
                described in clause (ii), adjusted by the 
                geographic adjustment factor described in 
                paragraph (1)(C), for the fee schedule amount 
                for such technical component for such year.
                  (B) Imaging services described.--For purposes 
                of this paragraph, imaging services described 
                in this subparagraph are imaging and computer-
                assisted imaging services, including X-ray, 
                ultrasound (including echocardiography), 
                nuclear medicine (including positron emission 
                tomography), magnetic resonance imaging, 
                computed tomography, and fluoroscopy, but 
                excluding diagnostic and screening mammography, 
                and for 2010, 2011, and the first 2 months of 
                2012, dual-energy x-ray absorptiometry services 
                (as described in paragraph (6)).
                  (C) Adjustment in imaging utilization rate.--
                With respect to fee schedules established for 
                2011, 2012, and 2013, in the methodology for 
                determining practice expense relative value 
                units for expensive diagnostic imaging 
                equipment under the final rule published by the 
                Secretary in the Federal Register on November 
                25, 2009 (42 CFR 410 et al.), the Secretary 
                shall use a 75 percent assumption instead of 
                the utilization rates otherwise established in 
                such final rule. With respect to fee schedules 
                established for 2014 and subsequent years, in 
                such methodology, the Secretary shall use a 90 
                percent utilization rate.
                  (D) Adjustment in technical component 
                discount on single-session imaging involving 
                consecutive body parts.--For services furnished 
                on or after July 1, 2010, the Secretary shall 
                increase the reduction in payments attributable 
                to the multiple procedure payment reduction 
                applicable to the technical component for 
                imaging under the final rule published by the 
                Secretary in the Federal Register on November 
                21, 2005 (part 405 of title 42, Code of Federal 
                Regulations) from 25 percent to 50 percent.
          (5) Treatment of intensive cardiac rehabilitation 
        program.--
                  (A) In general.--In the case of an intensive 
                cardiac rehabilitation program described in 
                section 1861(eee)(4), the Secretary shall 
                substitute the Medicare OPD fee schedule amount 
                established under the prospective payment 
                system for hospital outpatient department 
                service under paragraph (3)(D) of section 
                1833(t) for cardiac rehabilitation (under HCPCS 
                codes 93797 and 93798 for calendar year 2007, 
                or any succeeding HCPCS codes for cardiac 
                rehabilitation).
                  (B) Definition of session.--Each of the 
                services described in subparagraphs (A) through 
                (E) of section 1861(eee)(3), when furnished for 
                one hour, is a separate session of intensive 
                cardiac rehabilitation.
                  (C) Multiple sessions per day.--Payment may 
                be made for up to 6 sessions per day of the 
                series of 72 one-hour sessions of intensive 
                cardiac rehabilitation services described in 
                section 1861(eee)(4)(B).
          (6) Treatment of bone mass scans.--For dual-energy x-
        ray absorptiometry services (identified in 2006 by 
        HCPCS codes 76075 and 76077 (and any succeeding codes)) 
        furnished during 2010, 2011, and the first 2 months of 
        2012, instead of the payment amount that would 
        otherwise be determined under this section for such 
        years, the payment amount shall be equal to 70 percent 
        of the product of--
                  (A) the relative value for the service (as 
                determined in subsection (c)(2)) for 2006;
                  (B) the conversion factor (established under 
                subsection (d)) for 2006; and
                  (C) the geographic adjustment factor 
                (established under subsection (e)(2)) for the 
                service for the fee schedule area for 2010, 
                2011, and the first 2 months of 2012, 
                respectively.
          (7) Adjustment in discount for certain multiple 
        therapy services.--In the case of therapy services 
        furnished on or after January 1, 2011, and before April 
        1, 2013, and for which payment is made under fee 
        schedules established under this section, instead of 
        the 25 percent multiple procedure payment reduction 
        specified in the final rule published by the Secretary 
        in the Federal Register on November 29, 2010, the 
        reduction percentage shall be 20 percent. In the case 
        of such services furnished on or after April 1, 2013, 
        and for which payment is made under such fee schedules, 
        instead of the 25 percent multiple procedure payment 
        reduction specified in such final rule, the reduction 
        percentage shall be 50 percent.
          (8) Encouraging care management for individuals with 
        chronic care needs.--
                  (A) In general.--In order to encourage the 
                management of care for individuals with chronic 
                care needs the Secretary shall, subject to 
                subparagraph (B), make payment (as the 
                Secretary determines to be appropriate) under 
                this section for chronic care management 
                services furnished on or after January 1, 2015, 
                by a physician (as defined in section 
                1861(r)(1)), physician assistant or nurse 
                practitioner (as defined in section 
                1861(aa)(5)(A)), clinical nurse specialist (as 
                defined in section 1861(aa)(5)(B)), or 
                certified nurse midwife (as defined in section 
                1861(gg)(2)).
                  (B) Policies relating to payment.--In 
                carrying out this paragraph, with respect to 
                chronic care management services, the Secretary 
                shall--
                          (i) make payment to only one 
                        applicable provider for such services 
                        furnished to an individual during a 
                        period;
                          (ii) not make payment under 
                        subparagraph (A) if such payment would 
                        be duplicative of payment that is 
                        otherwise made under this title for 
                        such services; and
                          (iii) not require that an annual 
                        wellness visit (as defined in section 
                        1861(hhh)) or an initial preventive 
                        physical examination (as defined in 
                        section 1861(ww)) be furnished as a 
                        condition of payment for such 
                        management services.
          (9) Special rule to incentivize transition from 
        traditional x-ray imaging to digital radiography.--
                  (A) Limitation on payment for film x-ray 
                imaging services.--In the case of an imaging 
                service (including the imaging portion of a 
                service) that is an X-ray taken using film and 
                that is furnished during 2017 or a subsequent 
                year, the payment amount for the technical 
                component (including the technical component 
                portion of a global service) of such service 
                that would otherwise be determined under this 
                section (without application of this paragraph 
                and before application of any other adjustment 
                under this section) for such year shall be 
                reduced by 20 percent.
                  (B) Phased-in limitation on payment for 
                computed radiography imaging services.--In the 
                case of an imaging service (including the 
                imaging portion of a service) that is an X-ray 
                taken using computed radiography technology--
                          (i) in the case of such a service 
                        furnished during 2018, 2019, 2020, 
                        2021, or 2022, the payment amount for 
                        the technical component (including the 
                        technical component portion of a global 
                        service) of such service that would 
                        otherwise be determined under this 
                        section (without application of this 
                        paragraph and before application of any 
                        other adjustment under this section) 
                        for such year shall be reduced by 7 
                        percent; and
                          (ii) in the case of such a service 
                        furnished during 2023 or a subsequent 
                        year, the payment amount for the 
                        technical component (including the 
                        technical component portion of a global 
                        service) of such service that would 
                        otherwise be determined under this 
                        section (without application of this 
                        paragraph and before application of any 
                        other adjustment under this section) 
                        for such year shall be reduced by 10 
                        percent.
                  (C) Computed radiography technology 
                defined.--For purposes of this paragraph, the 
                term ``computed radiography technology'' means 
                cassette-based imaging which utilizes an 
                imaging plate to create the image involved.
                  (D) Implementation.--In order to implement 
                this paragraph, the Secretary shall adopt 
                appropriate mechanisms which may include use of 
                modifiers.
          (10) Reduction of discount in payment for 
        professional component of multiple imaging services.--
        In the case of the professional component of imaging 
        services furnished on or after January 1, 2017, instead 
        of the 25 percent reduction for multiple procedures 
        specified in the final rule published by the Secretary 
        in the Federal Register on November 28, 2011, as 
        amended in the final rule published by the Secretary in 
        the Federal Register on November 16, 2012, the 
        reduction percentage shall be 5 percent.
          (11) Special rule for certain radiation therapy 
        services.--The code definitions, the work relative 
        value units under subsection (c)(2)(C)(i), and the 
        direct inputs for the practice expense relative value 
        units under subsection (c)(2)(C)(ii) for radiation 
        treatment delivery and related imaging services 
        (identified in 2016 by HCPCS G-codes G6001 through 
        G6015) for the fee schedule established under this 
        subsection for services furnished in 2017 and 2018 
        shall be the same as such definitions, units, and 
        inputs for such services for the fee schedule 
        established for services furnished in 2016.
  (c) Determination of Relative Values for Physicians' 
Services.--
          (1) Division of physicians' services into 
        components.--In this section, with respect to a 
        physicians' service:
                  (A) Work component defined.--The term ``work 
                component'' means the portion of the resources 
                used in furnishing the service that reflects 
                physician time and intensity in furnishing the 
                service. Such portion shall--
                          (i) include activities before and 
                        after direct patient contact, and
                          (ii) be defined, with respect to 
                        surgical procedures, to reflect a 
                        global definition including pre-
                        operative and post-operative 
                        physicians' services.
                  (B) Practice expense component defined.--The 
                term ``practice expense component'' means the 
                portion of the resources used in furnishing the 
                service that reflects the general categories of 
                expenses (such as office rent and wages of 
                personnel, but excluding malpractice expenses) 
                comprising practice expenses.
                  (C) Malpractice component defined.--The term 
                ``malpractice component'' means the portion of 
                the resources used in furnishing the service 
                that reflects malpractice expenses in 
                furnishing the service.
          (2) Determination of relative values.--
                  (A) In general.--
                          (i) Combination of units for 
                        components.--The Secretary shall 
                        develop a methodology for combining the 
                        work, practice expense, and malpractice 
                        relative value units, determined under 
                        subparagraph (C), for each service in a 
                        manner to produce a single relative 
                        value for that service. Such relative 
                        values are subject to adjustment under 
                        subparagraph (F)(i) and section 
                        13515(b) of the Omnibus Budget 
                        Reconciliation Act of 1993.
                          (ii) Extrapolation.--The Secretary 
                        may use extrapolation and other 
                        techniques to determine the number of 
                        relative value units for physicians' 
                        services for which specific data are 
                        not available and shall take into 
                        account recommendations of the 
                        Physician Payment Review Commission and 
                        the results of consultations with 
                        organizations representing physicians 
                        who provide such services.
                  (B) Periodic review and adjustments in 
                relative values.--
                          (i) Periodic review.--The Secretary, 
                        not less often than every 5 years, 
                        shall review the relative values 
                        established under this paragraph for 
                        all physicians' services.
                          (ii) Adjustments.--
                                  (I) In general.--The 
                                Secretary shall, to the extent 
                                the Secretary determines to be 
                                necessary and subject to 
                                subclause (II) and paragraph 
                                (7), adjust the number of such 
                                units to take into account 
                                changes in medical practice, 
                                coding changes, new data on 
                                relative value components, or 
                                the addition of new procedures. 
                                The Secretary shall publish an 
                                explanation of the basis for 
                                such adjustments.
                                  (II) Limitation on annual 
                                adjustments.--Subject to 
                                clauses (iv) and (v), the 
                                adjustments under subclause (I) 
                                for a year may not cause the 
                                amount of expenditures under 
                                this part for the year to 
                                differ by more than $20,000,000 
                                from the amount of expenditures 
                                under this part that would have 
                                been made if such adjustments 
                                had not been made.
                          (iii) Consultation.--The Secretary, 
                        in making adjustments under clause 
                        (ii), shall consult with the Medicare 
                        Payment Advisory Commission and 
                        organizations representing physicians.
                          (iv) Exemption of certain additional 
                        expenditures from budget neutrality.--
                        The additional expenditures 
                        attributable to--
                                  (I) subparagraph (H) shall 
                                not be taken into account in 
                                applying clause (ii)(II) for 
                                2004;
                                  (II) subparagraph (I) insofar 
                                as it relates to a physician 
                                fee schedule for 2005 or 2006 
                                shall not be taken into account 
                                in applying clause (ii)(II) for 
                                drug administration services 
                                under the fee schedule for such 
                                year for a specialty described 
                                in subparagraph (I)(ii)(II);
                                  (III) subparagraph (J) 
                                insofar as it relates to a 
                                physician fee schedule for 2005 
                                or 2006 shall not be taken into 
                                account in applying clause 
                                (ii)(II) for drug 
                                administration services under 
                                the fee schedule for such year; 
                                and
                                  (IV) subsection (b)(6) shall 
                                not be taken into account in 
                                applying clause (ii)(II) for 
                                2010, 2011, or the first 2 
                                months of 2012.
                          (v) Exemption of certain reduced 
                        expenditures from budget-neutrality 
                        calculation.--The following reduced 
                        expenditures, as estimated by the 
                        Secretary, shall not be taken into 
                        account in applying clause (ii)(II):
                                  (I) Reduced payment for 
                                multiple imaging procedures.--
                                Effective for fee schedules 
                                established beginning with 
                                2007, reduced expenditures 
                                attributable to the multiple 
                                procedure payment reduction for 
                                imaging under the final rule 
                                published by the Secretary in 
                                the Federal Register on 
                                November 21, 2005 (42 CFR 405, 
                                et al.) insofar as it relates 
                                to the physician fee schedules 
                                for 2006 and 2007.
                                  (II) OPD payment cap for 
                                imaging services.--Effective 
                                for fee schedules established 
                                beginning with 2007, reduced 
                                expenditures attributable to 
                                subsection (b)(4).
                                  (III) Change in utilization 
                                rate for certain imaging 
                                services.--Effective for fee 
                                schedules established beginning 
                                with 2011, reduced expenditures 
                                attributable to the changes in 
                                the utilization rate applicable 
                                to 2011 and 2014, as described 
                                in the first and second 
                                sentence, respectively, of 
                                subsection (b)(4)(C).
                                  (VI) Additional reduced 
                                payment for multiple imaging 
                                procedures.--Effective for fee 
                                schedules established beginning 
                                with 2010 (but not applied for 
                                services furnished prior to 
                                July 1, 2010), reduced 
                                expenditures attributable to 
                                the increase in the multiple 
                                procedure payment reduction 
                                from 25 to 50 percent (as 
                                described in subsection 
                                (b)(4)(D)).
                                  (VII) Reduced expenditures 
                                for multiple therapy 
                                services.--Effective for fee 
                                schedules established beginning 
                                with 2011, reduced expenditures 
                                attributable to the multiple 
                                procedure payment reduction for 
                                therapy services (as described 
                                in subsection (b)(7)).
                                  (VIII) Reduced expenditures 
                                attributable to application of 
                                quality incentives for computed 
                                tomography.--Effective for fee 
                                schedules established beginning 
                                with 2016, reduced expenditures 
                                attributable to the application 
                                of the quality incentives for 
                                computed tomography under 
                                section 1834(p)
                                  (IX) Reductions for misvalued 
                                services if target not met.--
                                Effective for fee schedules 
                                beginning with 2016, reduced 
                                expenditures attributable to 
                                the application of the target 
                                recapture amount described in 
                                subparagraph (O)(iii).
                                  (X) Reduced expenditures 
                                attributable to incentives to 
                                transition to digital 
                                radiography.--Effective for fee 
                                schedules established beginning 
                                with 2017, reduced expenditures 
                                attributable to subparagraph 
                                (A) of subsection (b)(9) and 
                                effective for fee schedules 
                                established beginning with 
                                2018, reduced expenditures 
                                attributable to subparagraph 
                                (B) of such subsection.
                                  (XI) Discount in payment for 
                                professional component of 
                                imaging services.--Effective 
                                for fee schedules established 
                                beginning with 2017, reduced 
                                expenditures attributable to 
                                subsection (b)(10).
                          (vi) Alternative application of 
                        budget-neutrality adjustment.--
                        Notwithstanding subsection (d)(9)(A), 
                        effective for fee schedules established 
                        beginning with 2009, with respect to 
                        the 5-year review of work relative 
                        value units used in fee schedules for 
                        2007 and 2008, in lieu of continuing to 
                        apply budget-neutrality adjustments 
                        required under clause (ii) for 2007 and 
                        2008 to work relative value units, the 
                        Secretary shall apply such budget-
                        neutrality adjustments to the 
                        conversion factor otherwise determined 
                        for years beginning with 2009.
                  (C) Computation of relative value units for 
                components.--For purposes of this section for 
                each physicians' service--
                          (i) Work relative value units.--The 
                        Secretary shall determine a number of 
                        work relative value units for the 
                        service or group of services based on 
                        the relative resources incorporating 
                        physician time and intensity required 
                        in furnishing the service or group of 
                        services.
                          (ii) Practice expense relative value 
                        units.--The Secretary shall determine a 
                        number of practice expense relative 
                        value units for the service for years 
                        before 1999 equal to the product of--
                                  (I) the base allowed charges 
                                (as defined in subparagraph 
                                (D)) for the service, and
                                  (II) the practice expense 
                                percentage for the service (as 
                                determined under paragraph 
                                (3)(C)(ii)),
                        and for years beginning with 1999 based 
                        on the relative practice expense 
                        resources involved in furnishing the 
                        service or group of services. For 1999, 
                        such number of units shall be 
                        determined based 75 percent on such 
                        product and based 25 percent on the 
                        relative practice expense resources 
                        involved in furnishing the service. For 
                        2000, such number of units shall be 
                        determined based 50 percent on such 
                        product and based 50 percent on such 
                        relative practice expense resources. 
                        For 2001, such number of units shall be 
                        determined based 25 percent on such 
                        product and based 75 percent on such 
                        relative practice expense resources. 
                        For a subsequent year, such number of 
                        units shall be determined based 
                        entirely on such relative practice 
                        expense resources.
                          (iii) Malpractice relative value 
                        units.--The Secretary shall determine a 
                        number of malpractice relative value 
                        units for the service or group of 
                        services for years before 2000 equal to 
                        the product of--
                                  (I) the base allowed charges 
                                (as defined in subparagraph 
                                (D)) for the service or group 
                                of services, and
                                  (II) the malpractice 
                                percentage for the service or 
                                group of services (as 
                                determined under paragraph 
                                (3)(C)(iii)),
                        and for years beginning with 2000 based 
                        on the malpractice expense resources 
                        involved in furnishing the service or 
                        group of services.
                  (D) Base allowed charges defined.--In this 
                paragraph, the term ``base allowed charges'' 
                means, with respect to a physician's service, 
                the national average allowed charges for the 
                service under this part for services furnished 
                during 1991, as estimated by the Secretary 
                using the most recent data available.
                  (E) Reduction in practice expense relative 
                value units for certain services.--
                          (i) In general.--Subject to clause 
                        (ii), the Secretary shall reduce the 
                        practice expense relative value units 
                        applied to services described in clause 
                        (iii) furnished in--
                                  (I) 1994, by 25 percent of 
                                the number by which the number 
                                of practice expense relative 
                                value units (determined for 
                                1994 without regard to this 
                                subparagraph) exceeds the 
                                number of work relative value 
                                units determined for 1994,
                                  (II) 1995, by an additional 
                                25 percent of such excess, and
                                  (III) 1996, by an additional 
                                25 percent of such excess.
                          (ii) Floor on reductions.--The 
                        practice expense relative value units 
                        for a physician's service shall not be 
                        reduced under this subparagraph to a 
                        number less than 128 percent of the 
                        number of work relative value units.
                          (iii) Services covered.--For purposes 
                        of clause (i), the services described 
                        in this clause are physicians' services 
                        that are not described in clause (iv) 
                        and for which--
                                  (I) there are work relative 
                                value units, and
                                  (II) the number of practice 
                                expense relative value units 
                                (determined for 1994) exceeds 
                                128 percent of the number of 
                                work relative value units 
                                (determined for such year).
                          (iv) Excluded services.--For purposes 
                        of clause (iii), the services described 
                        in this clause are services which the 
                        Secretary determines at least 75 
                        percent of which are provided under 
                        this title in an office setting.
                  (F) Budget neutrality adjustments.--The 
                Secretary--
                          (i) shall reduce the relative values 
                        for all services (other than anesthesia 
                        services) established under this 
                        paragraph (and in the case of 
                        anesthesia services, the conversion 
                        factor established by the Secretary for 
                        such services) by such percentage as 
                        the Secretary determines to be 
                        necessary so that, beginning in 1996, 
                        the amendment made by section 13514(a) 
                        of the Omnibus Budget Reconciliation 
                        Act of 1993 would not result in 
                        expenditures under this section that 
                        exceed the amount of such expenditures 
                        that would have been made if such 
                        amendment had not been made, and
                          (ii) shall reduce the amounts 
                        determined under subsection 
                        (a)(2)(B)(ii)(I) by such percentage as 
                        the Secretary determines to be required 
                        to assure that, taking into account the 
                        reductions made under clause (i), the 
                        amendment made by section 13514(a) of 
                        the Omnibus Budget Reconciliation Act 
                        of 1993 would not result in 
                        expenditures under this section in 1994 
                        that exceed the amount of such 
                        expenditures that would have been made 
                        if such amendment had not been made.
                  (G) Adjustments in relative value units for 
                1998.--
                          (i) In general.--The Secretary 
                        shall--
                                  (I) subject to clauses (iv) 
                                and (v), reduce the practice 
                                expense relative value units 
                                applied to any services 
                                described in clause (ii) 
                                furnished in 1998 to a number 
                                equal to 110 percent of the 
                                number of work relative value 
                                units, and
                                  (II) increase the practice 
                                expense relative value units 
                                for office visit procedure 
                                codes during 1998 by a uniform 
                                percentage which the Secretary 
                                estimates will result in an 
                                aggregate increase in payments 
                                for such services equal to the 
                                aggregate decrease in payments 
                                by reason of subclause (I).
                          (ii) Services covered.--For purposes 
                        of clause (i), the services described 
                        in this clause are physicians' services 
                        that are not described in clause (iii) 
                        and for which--
                                  (I) there are work relative 
                                value units, and
                                  (II) the number of practice 
                                expense relative value units 
                                (determined for 1998) exceeds 
                                110 percent of the number of 
                                work relative value units 
                                (determined for such year).
                          (iii) Excluded services.--For 
                        purposes of clause (ii), the services 
                        described in this clause are services 
                        which the Secretary determines at least 
                        75 percent of which are provided under 
                        this title in an office setting.
                          (iv) Limitation on aggregate 
                        reallocation.--If the application of 
                        clause (i)(I) would result in an 
                        aggregate amount of reductions under 
                        such clause in excess of $390,000,000, 
                        such clause shall be applied by 
                        substituting for 110 percent such 
                        greater percentage as the Secretary 
                        estimates will result in the aggregate 
                        amount of such reductions equaling 
                        $390,000,000.
                          (v) No reduction for certain 
                        services.--Practice expense relative 
                        value units for a procedure performed 
                        in an office or in a setting out of an 
                        office shall not be reduced under 
                        clause (i) if the in-office or out-of-
                        office practice expense relative value, 
                        respectively, for the procedure would 
                        increase under the proposed rule on 
                        resource-based practice expenses issued 
                        by the Secretary on June 18, 1997 (62 
                        Federal Register 33158 et seq.).
                  (H) Adjustments in practice expense relative 
                value units for certain drug administration 
                services beginning in 2004.--
                          (i) Use of survey data.--In 
                        establishing the physician fee schedule 
                        under subsection (b) with respect to 
                        payments for services furnished on or 
                        after January 1, 2004, the Secretary 
                        shall, in determining practice expense 
                        relative value units under this 
                        subsection, utilize a survey submitted 
                        to the Secretary as of January 1, 2003, 
                        by a physician specialty organization 
                        pursuant to section 212 of the 
                        Medicare, Medicaid, and SCHIP Balanced 
                        Budget Refinement Act of 1999 if the 
                        survey--
                                  (I) covers practice expenses 
                                for oncology drug 
                                administration services; and
                                  (II) meets criteria 
                                established by the Secretary 
                                for acceptance of such surveys.
                          (ii) Pricing of clinical oncology 
                        nurses in practice expense 
                        methodology.--If the survey described 
                        in clause (i) includes data on wages, 
                        salaries, and compensation of clinical 
                        oncology nurses, the Secretary shall 
                        utilize such data in the methodology 
                        for determining practice expense 
                        relative value units under subsection 
                        (c).
                          (iii) Work relative value units for 
                        certain drug administration services.--
                        In establishing the relative value 
                        units under this paragraph for drug 
                        administration services described in 
                        clause (iv) furnished on or after 
                        January 1, 2004, the Secretary shall 
                        establish work relative value units 
                        equal to the work relative value units 
                        for a level 1 office medical visit for 
                        an established patient.
                          (iv) Drug administration services 
                        described.--The drug administration 
                        services described in this clause are 
                        physicians' services--
                                  (I) which are classified as 
                                of October 1, 2003, within any 
                                of the following groups of 
                                procedures: therapeutic or 
                                diagnostic infusions (excluding 
                                chemotherapy); chemotherapy 
                                administration services; and 
                                therapeutic, prophylactic, or 
                                diagnostic injections;
                                  (II) for which there are no 
                                work relative value units 
                                assigned under this subsection 
                                as of such date; and
                                  (III) for which national 
                                relative value units have been 
                                assigned under this subsection 
                                as of such date.
                  (I) Adjustments in practice expense relative 
                value units for certain drug administration 
                services beginning with 2005.--
                          (i) In general.--In establishing the 
                        physician fee schedule under subsection 
                        (b) with respect to payments for 
                        services furnished on or after January 
                        1, 2005 or 2006, the Secretary shall 
                        adjust the practice expense relative 
                        value units for such year consistent 
                        with clause (ii).
                          (ii) Use of supplemental survey 
                        data.--
                                  (I) In general.--Subject to 
                                subclause (II), if a specialty 
                                submits to the Secretary by not 
                                later than March 1, 2004, for 
                                2005, or March 1, 2005, for 
                                2006, data that includes 
                                expenses for the administration 
                                of drugs and biologicals for 
                                which the payment amount is 
                                determined pursuant to section 
                                1842(o), the Secretary shall 
                                use such supplemental survey 
                                data in carrying out this 
                                subparagraph for the years 
                                involved insofar as they are 
                                collected and provided by 
                                entities and organizations 
                                consistent with the criteria 
                                established by the Secretary 
                                pursuant to section 212(a) of 
                                the Medicare, Medicaid, and 
                                SCHIP Balanced Budget 
                                Refinement Act of 1999.
                                  (II) Limitation on 
                                specialty.--Subclause (I) shall 
                                apply to a specialty only 
                                insofar as not less than 40 
                                percent of payments for the 
                                specialty under this title in 
                                2002 are attributable to the 
                                administration of drugs and 
                                biologicals, as determined by 
                                the Secretary.
                                  (III) Application.--This 
                                clause shall not apply with 
                                respect to a survey to which 
                                subparagraph (H)(i) applies.
                  (J) Provisions for appropriate reporting and 
                billing for physicians' services associated 
                with the administration of covered outpatient 
                drugs and biologicals.--
                          (i) Evaluation of codes.--The 
                        Secretary shall promptly evaluate 
                        existing drug administration codes for 
                        physicians' services to ensure accurate 
                        reporting and billing for such 
                        services, taking into account levels of 
                        complexity of the administration and 
                        resource consumption.
                          (ii) Use of existing processes.--In 
                        carrying out clause (i), the Secretary 
                        shall use existing processes for the 
                        consideration of coding changes and, to 
                        the extent coding changes are made, 
                        shall use such processes in 
                        establishing relative values for such 
                        services.
                          (iii) Implementation.--In carrying 
                        out clause (i), the Secretary shall 
                        consult with representatives of 
                        physician specialties affected by the 
                        implementation of section 1847A or 
                        section 1847B, and shall take such 
                        steps within the Secretary's authority 
                        to expedite such considerations under 
                        clause (ii).
                          (iv) Subsequent, budget neutral 
                        adjustments permitted.--Nothing in 
                        subparagraph (H) or (I) or this 
                        subparagraph shall be construed as 
                        preventing the Secretary from providing 
                        for adjustments in practice expense 
                        relative value units under (and 
                        consistent with) subparagraph (B) for 
                        years after 2004, 2005, or 2006, 
                        respectively.
                  (K) Potentially misvalued codes.--
                          (i) In general.--The Secretary 
                        shall--
                                  (I) periodically identify 
                                services as being potentially 
                                misvalued using criteria 
                                specified in clause (ii); and
                                  (II) review and make 
                                appropriate adjustments to the 
                                relative values established 
                                under this paragraph for 
                                services identified as being 
                                potentially misvalued under 
                                subclause (I).
                          (ii) Identification of potentially 
                        misvalued codes.--For purposes of 
                        identifying potentially misvalued codes 
                        pursuant to clause (i)(I), the 
                        Secretary shall examine codes (and 
                        families of codes as appropriate) based 
                        on any or all of the following 
                        criteria:
                                  (I) Codes that have 
                                experienced the fastest growth.
                                  (II) Codes that have 
                                experienced substantial changes 
                                in practice expenses.
                                  (III) Codes that describe new 
                                technologies or services within 
                                an appropriate time period 
                                (such as 3 years) after the 
                                relative values are initially 
                                established for such codes.
                                  (IV) Codes which are multiple 
                                codes that are frequently 
                                billed in conjunction with 
                                furnishing a single service.
                                  (V) Codes with low relative 
                                values, particularly those that 
                                are often billed multiple times 
                                for a single treatment.
                                  (VI) Codes that have not been 
                                subject to review since 
                                implementation of the fee 
                                schedule.
                                  (VII) Codes that account for 
                                the majority of spending under 
                                the physician fee schedule.
                                  (VIII) Codes for services 
                                that have experienced a 
                                substantial change in the 
                                hospital length of stay or 
                                procedure time.
                                  (IX) Codes for which there 
                                may be a change in the typical 
                                site of service since the code 
                                was last valued.
                                  (X) Codes for which there is 
                                a significant difference in 
                                payment for the same service 
                                between different sites of 
                                service.
                                  (XI) Codes for which there 
                                may be anomalies in relative 
                                values within a family of 
                                codes.
                                  (XII) Codes for services 
                                where there may be efficiencies 
                                when a service is furnished at 
                                the same time as other 
                                services.
                                  (XIII) Codes with high intra-
                                service work per unit of time.
                                  (XIV) Codes with high 
                                practice expense relative value 
                                units.
                                  (XV) Codes with high cost 
                                supplies.
                                  (XVI) Codes as determined 
                                appropriate by the Secretary.
                          (iii) Review and adjustments.--
                                  (I) The Secretary may use 
                                existing processes to receive 
                                recommendations on the review 
                                and appropriate adjustment of 
                                potentially misvalued services 
                                described in clause (i)(II).
                                  (II) The Secretary may 
                                conduct surveys, other data 
                                collection activities, studies, 
                                or other analyses as the 
                                Secretary determines to be 
                                appropriate to facilitate the 
                                review and appropriate 
                                adjustment described in clause 
                                (i)(II).
                                  (III) The Secretary may use 
                                analytic contractors to 
                                identify and analyze services 
                                identified under clause (i)(I), 
                                conduct surveys or collect 
                                data, and make recommendations 
                                on the review and appropriate 
                                adjustment of services 
                                described in clause (i)(II).
                                  (IV) The Secretary may 
                                coordinate the review and 
                                appropriate adjustment 
                                described in clause (i)(II) 
                                with the periodic review 
                                described in subparagraph (B).
                                  (V) As part of the review and 
                                adjustment described in clause 
                                (i)(II), including with respect 
                                to codes with low relative 
                                values described in clause 
                                (ii), the Secretary may make 
                                appropriate coding revisions 
                                (including using existing 
                                processes for consideration of 
                                coding changes) which may 
                                include consolidation of 
                                individual services into 
                                bundled codes for payment under 
                                the fee schedule under 
                                subsection (b).
                                  (VI) The provisions of 
                                subparagraph (B)(ii)(II) and 
                                paragraph (7) shall apply to 
                                adjustments to relative value 
                                units made pursuant to this 
                                subparagraph in the same manner 
                                as such provisions apply to 
                                adjustments under subparagraph 
                                (B)(ii)(I).
                          (iv) Treatment of certain radiation 
                        therapy services.--Radiation treatment 
                        delivery and related imaging services 
                        identified under subsection (b)(11) 
                        shall not be considered as potentially 
                        misvalued services for purposes of this 
                        subparagraph and subparagraph (O) for 
                        2017 and 2018.
                  (L) Validating relative value units.--
                          (i) In general.--The Secretary shall 
                        establish a process to validate 
                        relative value units under the fee 
                        schedule under subsection (b).
                          (ii) Components and elements of 
                        work.--The process described in clause 
                        (i) may include validation of work 
                        elements (such as time, mental effort 
                        and professional judgment, technical 
                        skill and physical effort, and stress 
                        due to risk) involved with furnishing a 
                        service and may include validation of 
                        the pre-, post-, and intra-service 
                        components of work.
                          (iii) Scope of codes.--The validation 
                        of work relative value units shall 
                        include a sampling of codes for 
                        services that is the same as the codes 
                        listed under subparagraph (K)(ii).
                          (iv) Methods.--The Secretary may 
                        conduct the validation under this 
                        subparagraph using methods described in 
                        subclauses (I) through (V) of 
                        subparagraph (K)(iii) as the Secretary 
                        determines to be appropriate.
                          (v) Adjustments.--The Secretary shall 
                        make appropriate adjustments to the 
                        work relative value units under the fee 
                        schedule under subsection (b). The 
                        provisions of subparagraph (B)(ii)(II) 
                        shall apply to adjustments to relative 
                        value units made pursuant to this 
                        subparagraph in the same manner as such 
                        provisions apply to adjustments under 
                        subparagraph (B)(ii)(II).
                  (M) Authority to collect and use information 
                on physicians' services in the determination of 
                relative values.--
                          (i) Collection of information.--
                        Notwithstanding any other provision of 
                        law, the Secretary may collect or 
                        obtain information on the resources 
                        directly or indirectly related to 
                        furnishing services for which payment 
                        is made under the fee schedule 
                        established under subsection (b). Such 
                        information may be collected or 
                        obtained from any eligible professional 
                        or any other source.
                          (ii) Use of information.--
                        Notwithstanding any other provision of 
                        law, subject to clause (v), the 
                        Secretary may (as the Secretary 
                        determines appropriate) use information 
                        collected or obtained pursuant to 
                        clause (i) in the determination of 
                        relative values for services under this 
                        section.
                          (iii) Types of information.--The 
                        types of information described in 
                        clauses (i) and (ii) may, at the 
                        Secretary's discretion, include any or 
                        all of the following:
                                  (I) Time involved in 
                                furnishing services.
                                  (II) Amounts and types of 
                                practice expense inputs 
                                involved with furnishing 
                                services.
                                  (III) Prices (net of any 
                                discounts) for practice expense 
                                inputs, which may include paid 
                                invoice prices or other 
                                documentation or records.
                                  (IV) Overhead and accounting 
                                information for practices of 
                                physicians and other suppliers.
                                  (V) Any other element that 
                                would improve the valuation of 
                                services under this section.
                          (iv) Information collection 
                        mechanisms.--Information may be 
                        collected or obtained pursuant to this 
                        subparagraph from any or all of the 
                        following:
                                  (I) Surveys of physicians, 
                                other suppliers, providers of 
                                services, manufacturers, and 
                                vendors.
                                  (II) Surgical logs, billing 
                                systems, or other practice or 
                                facility records.
                                  (III) Electronic health 
                                records.
                                  (IV) Any other mechanism 
                                determined appropriate by the 
                                Secretary.
                          (v) Transparency of use of 
                        information.--
                                  (I) In general.--Subject to 
                                subclauses (II) and (III), if 
                                the Secretary uses information 
                                collected or obtained under 
                                this subparagraph in the 
                                determination of relative 
                                values under this subsection, 
                                the Secretary shall disclose 
                                the information source and 
                                discuss the use of such 
                                information in such 
                                determination of relative 
                                values through notice and 
                                comment rulemaking.
                                  (II) Thresholds for use.--The 
                                Secretary may establish 
                                thresholds in order to use such 
                                information, including the 
                                exclusion of information 
                                collected or obtained from 
                                eligible professionals who use 
                                very high resources (as 
                                determined by the Secretary) in 
                                furnishing a service.
                                  (III) Disclosure of 
                                information.--The Secretary 
                                shall make aggregate 
                                information available under 
                                this subparagraph but shall not 
                                disclose information in a form 
                                or manner that identifies an 
                                eligible professional or a 
                                group practice, or information 
                                collected or obtained pursuant 
                                to a nondisclosure agreement.
                          (vi) Incentive to participate.--The 
                        Secretary may provide for such payments 
                        under this part to an eligible 
                        professional that submits such 
                        solicited information under this 
                        subparagraph as the Secretary 
                        determines appropriate in order to 
                        compensate such eligible professional 
                        for such submission. Such payments 
                        shall be provided in a form and manner 
                        specified by the Secretary.
                          (vii) Administration.--Chapter 35 of 
                        title 44, United States Code, shall not 
                        apply to information collected or 
                        obtained under this subparagraph.
                          (viii) Definition of eligible 
                        professional.--In this subparagraph, 
                        the term ``eligible professional'' has 
                        the meaning given such term in 
                        subsection (k)(3)(B).
                          (ix) Funding.--For purposes of 
                        carrying out this subparagraph, in 
                        addition to funds otherwise 
                        appropriated, the Secretary shall 
                        provide for the transfer, from the 
                        Federal Supplementary Medical Insurance 
                        Trust Fund under section 1841, of 
                        $2,000,000 to the Centers for Medicare 
                        & Medicaid Services Program Management 
                        Account for each fiscal year beginning 
                        with fiscal year 2014. Amounts 
                        transferred under the preceding 
                        sentence for a fiscal year shall be 
                        available until expended.
                  (N) Authority for alternative approaches to 
                establishing practice expense relative 
                values.--The Secretary may establish or adjust 
                practice expense relative values under this 
                subsection using cost, charge, or other data 
                from suppliers or providers of services, 
                including information collected or obtained 
                under subparagraph (M).
                  (O) Target for relative value adjustments for 
                misvalued services.--With respect to fee 
                schedules established for each of 2016 through 
                2018, the following shall apply:
                          (i) Determination of net reduction in 
                        expenditures.--For each year, the 
                        Secretary shall determine the estimated 
                        net reduction in expenditures under the 
                        fee schedule under this section with 
                        respect to the year as a result of 
                        adjustments to the relative values 
                        established under this paragraph for 
                        misvalued codes.
                          (ii) Budget neutral redistribution of 
                        funds if target met and counting 
                        overages towards the target for the 
                        succeeding year.--If the estimated net 
                        reduction in expenditures determined 
                        under clause (i) for the year is equal 
                        to or greater than the target for the 
                        year--
                                  (I) reduced expenditures 
                                attributable to such 
                                adjustments shall be 
                                redistributed for the year in a 
                                budget neutral manner in 
                                accordance with subparagraph 
                                (B)(ii)(II); and
                                  (II) the amount by which such 
                                reduced expenditures exceeds 
                                the target for the year shall 
                                be treated as a reduction in 
                                expenditures described in 
                                clause (i) for the succeeding 
                                year, for purposes of 
                                determining whether the target 
                                has or has not been met under 
                                this subparagraph with respect 
                                to that year.
                          (iii) Exemption from budget 
                        neutrality if target not met.--If the 
                        estimated net reduction in expenditures 
                        determined under clause (i) for the 
                        year is less than the target for the 
                        year, reduced expenditures in an amount 
                        equal to the target recapture amount 
                        shall not be taken into account in 
                        applying subparagraph (B)(ii)(II) with 
                        respect to fee schedules beginning with 
                        2016.
                          (iv) Target recapture amount.--For 
                        purposes of clause (iii), the target 
                        recapture amount is, with respect to a 
                        year, an amount equal to the difference 
                        between--
                                  (I) the target for the year; 
                                and
                                  (II) the estimated net 
                                reduction in expenditures 
                                determined under clause (i) for 
                                the year.
                          (v) Target.--For purposes of this 
                        subparagraph, with respect to a year, 
                        the target is calculated as 0.5 percent 
                        (or, for 2016, 1.0 percent) of the 
                        estimated amount of expenditures under 
                        the fee schedule under this section for 
                        the year.
          (3) Component percentages.--For purposes of paragraph 
        (2), the Secretary shall determine a work percentage, a 
        practice expense percentage, and a malpractice 
        percentage for each physician's service as follows:
                  (A) Division of services by specialty.--For 
                each physician's service or class of 
                physicians' services, the Secretary shall 
                determine the average percentage of each such 
                service or class of services that is performed, 
                nationwide, under this part by physicians in 
                each of the different physician specialties (as 
                identified by the Secretary).
                  (B) Division of specialty by component.--The 
                Secretary shall determine the average 
                percentage division of resources, among the 
                work component, the practice expense component, 
                and the malpractice component, used by 
                physicians in each of such specialties in 
                furnishing physicians' services. Such 
                percentages shall be based on national data 
                that describe the elements of physician 
                practice costs and revenues, by physician 
                specialty. The Secretary may use extrapolation 
                and other techniques to determine practice 
                costs and revenues for specialties for which 
                adequate data are not available.
                  (C) Determination of component percentages.--
                          (i) Work percentage.--The work 
                        percentage for a service (or class of 
                        services) is equal to the sum (for all 
                        physician specialties) of--
                                  (I) the average percentage 
                                division for the work component 
                                for each physician specialty 
                                (determined under subparagraph 
                                (B)), multiplied by
                                  (II) the proportion 
                                (determined under subparagraph 
                                (A)) of such service (or 
                                services) performed by 
                                physicians in that specialty.
                          (ii) Practice expense percentage.--
                        For years before 2002, the practice 
                        expense percentage for a service (or 
                        class of services) is equal to the sum 
                        (for all physician specialties) of--
                                  (I) the average percentage 
                                division for the practice 
                                expense component for each 
                                physician specialty (determined 
                                under subparagraph (B)), 
                                multiplied by
                                  (II) the proportion 
                                (determined under subparagraph 
                                (A)) of such service (or 
                                services) performed by 
                                physicians in that specialty.
                          (iii) Malpractice percentage.--For 
                        years before 1999, the malpractice 
                        percentage for a service (or class of 
                        services) is equal to the sum (for all 
                        physician specialties) of--
                                  (I) the average percentage 
                                division for the malpractice 
                                component for each physician 
                                specialty (determined under 
                                subparagraph (B)), multiplied 
                                by
                                  (II) the proportion 
                                (determined under subparagraph 
                                (A)) of such service (or 
                                services) performed by 
                                physicians in that specialty.
                  (D) Periodic recomputation.--The Secretary 
                may, from time to time, provide for the 
                recomputation of work percentages, practice 
                expense percentages, and malpractice 
                percentages determined under this paragraph.
          (4) Ancillary policies.--The Secretary may establish 
        ancillary policies (with respect to the use of 
        modifiers, local codes, and other matters) as may be 
        necessary to implement this section.
          (5) Coding.--The Secretary shall establish a uniform 
        procedure coding system for the coding of all 
        physicians' services. The Secretary shall provide for 
        an appropriate coding structure for visits and 
        consultations. The Secretary may incorporate the use of 
        time in the coding for visits and consultations. The 
        Secretary, in establishing such coding system, shall 
        consult with the Physician Payment Review Commission 
        and other organizations representing physicians.
          (6) No variation for specialists.--The Secretary may 
        not vary the conversion factor or the number of 
        relative value units for a physicians' service based on 
        whether the physician furnishing the service is a 
        specialist or based on the type of specialty of the 
        physician.
          (7) Phase-in of significant relative value unit (rvu) 
        reductions.--Effective for fee schedules established 
        beginning with 2016, for services that are not new or 
        revised codes, if the total relative value units for a 
        service for a year would otherwise be decreased by an 
        estimated amount equal to or greater than 20 percent as 
        compared to the total relative value units for the 
        previous year, the applicable adjustments in work, 
        practice expense, and malpractice relative value units 
        shall be phased-in over a 2-year period.
          (8) Global surgical packages.--
                  (A) Prohibition of implementation of rule 
                regarding global surgical packages.--
                          (i) In general.--The Secretary shall 
                        not implement the policy established in 
                        the final rule published on November 
                        13, 2014 (79 Fed. Reg. 67548 et seq.), 
                        that requires the transition of all 10-
                        day and 90-day global surgery packages 
                        to 0-day global periods.
                          (ii) Construction.--Nothing in clause 
                        (i) shall be construed to prevent the 
                        Secretary from revaluing misvalued 
                        codes for specific surgical services or 
                        assigning values to new or revised 
                        codes for surgical services.
                  (B) Collection of data on services included 
                in global surgical packages.--
                          (i) In general.--Subject to clause 
                        (ii), the Secretary shall through 
                        rulemaking develop and implement a 
                        process to gather, from a 
                        representative sample of physicians, 
                        beginning not later than January 1, 
                        2017, information needed to value 
                        surgical services. Such information 
                        shall include the number and level of 
                        medical visits furnished during the 
                        global period and other items and 
                        services related to the surgery and 
                        furnished during the global period, as 
                        appropriate. Such information shall be 
                        reported on claims at the end of the 
                        global period or in another manner 
                        specified by the Secretary. For 
                        purposes of carrying out this paragraph 
                        (other than clause (iii)), the 
                        Secretary shall transfer from the 
                        Federal Supplemental Medical Insurance 
                        Trust Fund under section 1841 
                        $2,000,000 to the Center for Medicare & 
                        Medicaid Services Program Management 
                        Account for fiscal year 2015. Amounts 
                        transferred under the previous sentence 
                        shall remain available until expended.
                          (ii) Reassessment and potential 
                        sunset.--Every 4 years, the Secretary 
                        shall reassess the value of the 
                        information collected pursuant to 
                        clause (i). Based on such a 
                        reassessment and by regulation, the 
                        Secretary may discontinue the 
                        requirement for collection of 
                        information under such clause if the 
                        Secretary determines that the Secretary 
                        has adequate information from other 
                        sources, such as qualified clinical 
                        data registries, surgical logs, billing 
                        systems or other practice or facility 
                        records, and electronic health records, 
                        in order to accurately value global 
                        surgical services under this section.
                          (iii) Inspector general audit.--The 
                        Inspector General of the Department of 
                        Health and Human Services shall audit a 
                        sample of the information reported 
                        under clause (i) to verify the accuracy 
                        of the information so reported.
                  (C) Improving accuracy of pricing for 
                surgical services.--For years beginning with 
                2019, the Secretary shall use the information 
                reported under subparagraph (B)(i) as 
                appropriate and other available data for the 
                purpose of improving the accuracy of valuation 
                of surgical services under the physician fee 
                schedule under this section.
  (d) Conversion Factors.--
          (1) Establishment.--
                  (A) In general.--The conversion factor for 
                each year shall be the conversion factor 
                established under this subsection for the 
                previous year (or, in the case of 1992, 
                specified in subparagraph (B)) adjusted by the 
                update (established under paragraph (3)) for 
                the year involved (for years before 2001) and, 
                for years beginning with 2001 and ending with 
                2025, multiplied by the update (established 
                under paragraph (4) or a subsequent paragraph) 
                for the year involved. There shall be two 
                separate conversion factors for each year 
                beginning with 2026, one for items and services 
                furnished by a qualifying APM participant (as 
                defined in section 1833(z)(2)) (referred to in 
                this subsection as the ``qualifying APM 
                conversion factor'') and the other for other 
                items and services (referred to in this 
                subsection as the ``nonqualifying APM 
                conversion factor''), equal to the respective 
                conversion factor for the previous year (or, in 
                the case of 2026, equal to the single 
                conversion factor for 2025) multiplied by the 
                update established under paragraph (20) for 
                such respective conversion factor for such 
                year.
                  (B) Special provision for 1992.--For purposes 
                of subparagraph (A), the conversion factor 
                specified in this subparagraph is a conversion 
                factor (determined by the Secretary) which, if 
                this section were to apply during 1991 using 
                such conversion factor, would result in the 
                same aggregate amount of payments under this 
                part for physicians' services as the estimated 
                aggregate amount of the payments under this 
                part for such services in 1991.
                  (C) Special rules for 1998.--Except as 
                provided in subparagraph (D), the single 
                conversion factor for 1998 under this 
                subsection shall be the conversion factor for 
                primary care services for 1997, increased by 
                the Secretary's estimate of the weighted 
                average of the three separate updates that 
                would otherwise occur were it not for the 
                enactment of chapter 1 of subtitle F of title 
                IV of the Balanced Budget Act of 1997.
                  (D) Special rules for anesthesia services.--
                The separate conversion factor for anesthesia 
                services for a year shall be equal to 46 
                percent of the single conversion factor (or, 
                beginning with 2026, applicable conversion 
                factor) established for other physicians' 
                services, except as adjusted for changes in 
                work, practice expense, or malpractice relative 
                value units.
                  (E) Publication and dissemination of 
                information.--The Secretary shall--
                          (i) cause to have published in the 
                        Federal Register not later than 
                        November 1 of each year (beginning with 
                        2000) the conversion factor which will 
                        apply to physicians' services for the 
                        succeeding year, the update determined 
                        under paragraph (4) for such succeeding 
                        year, and the allowed expenditures 
                        under such paragraph for such 
                        succeeding year; and
                          (ii) make available to the Medicare 
                        Payment Advisory Commission and the 
                        public by March 1 of each year 
                        (beginning with 2000) an estimate of 
                        the sustainable growth rate and of the 
                        conversion factor which will apply to 
                        physicians' services for the succeeding 
                        year and data used in making such 
                        estimate.
          (3) Update for 1999 and 2000.--
                  (A) In general.--Unless otherwise provided by 
                law, subject to subparagraph (D) and the 
                budget-neutrality factor determined by the 
                Secretary under subsection (c)(2)(B)(ii), the 
                update to the single conversion factor 
                established in paragraph (1)(C) for 1999 and 
                2000 is equal to the product of--
                          (i) 1 plus the Secretary's estimate 
                        of the percentage increase in the MEI 
                        (as defined in section 1842(i)(3)) for 
                        the year (divided by 100), and
                          (ii) 1 plus the Secretary's estimate 
                        of the update adjustment factor for the 
                        year (divided by 100),
                minus 1 and multiplied by 100.
                  (B) Update adjustment factor.--For purposes 
                of subparagraph (A)(ii), the ``update 
                adjustment factor'' for a year is equal (as 
                estimated by the Secretary) to--
                          (i) the difference between (I) the 
                        sum of the allowed expenditures for 
                        physicians' services (as determined 
                        under subparagraph (C)) for the period 
                        beginning April 1, 1997, and ending on 
                        March 31 of the year involved, and (II) 
                        the amount of actual expenditures for 
                        physicians' services furnished during 
                        the period beginning April 1, 1997, and 
                        ending on March 31 of the preceding 
                        year; divided by
                          (ii) the actual expenditures for 
                        physicians' services for the 12-month 
                        period ending on March 31 of the 
                        preceding year, increased by the 
                        sustainable growth rate under 
                        subsection (f) for the fiscal year 
                        which begins during such 12-month 
                        period.
                  (C) Determination of allowed expenditures.--
                For purposes of this paragraph and paragraph 
                (4), the allowed expenditures for physicians' 
                services for the 12-month period ending with 
                March 31 of--
                          (i) 1997 is equal to the actual 
                        expenditures for physicians' services 
                        furnished during such 12-month period, 
                        as estimated by the Secretary; or
                          (ii) a subsequent year is equal to 
                        the allowed expenditures for 
                        physicians' services for the previous 
                        year, increased by the sustainable 
                        growth rate under subsection (f) for 
                        the fiscal year which begins during 
                        such 12-month period.
                  (D) Restriction on variation from medicare 
                economic index.--Notwithstanding the amount of 
                the update adjustment factor determined under 
                subparagraph (B) for a year, the update in the 
                conversion factor under this paragraph for the 
                year may not be--
                          (i) greater than 100 times the 
                        following amount: (1.03 + (MEI 
                        percentage/100)) -1; or
                          (ii) less than 100 times the 
                        following amount: (0.93 + (MEI 
                        percentage/100)) -1,
                where ``MEI percentage'' means the Secretary's 
                estimate of the percentage increase in the MEI 
                (as defined in section 1842(i)(3)) for the year 
                involved.
          (4) Update for years beginning with 2001 and ending 
        with 2014.--
                  (A) In general.--Unless otherwise provided by 
                law, subject to the budget-neutrality factor 
                determined by the Secretary under subsection 
                (c)(2)(B)(ii) and subject to adjustment under 
                subparagraph (F), the update to the single 
                conversion factor established in paragraph 
                (1)(C) for a year beginning with 2001 and 
                ending with 2014 is equal to the product of--
                          (i) 1 plus the Secretary's estimate 
                        of the percentage increase in the MEI 
                        (as defined in section 1842(i)(3)) for 
                        the year (divided by 100); and
                          (ii) 1 plus the Secretary's estimate 
                        of the update adjustment factor under 
                        subparagraph (B) for the year.
                  (B) Update adjustment factor.--For purposes 
                of subparagraph (A)(ii), subject to 
                subparagraph (D) and the succeeding paragraphs 
                of this subsection, the ``update adjustment 
                factor'' for a year is equal (as estimated by 
                the Secretary) to the sum of the following:
                          (i) Prior year adjustment 
                        component.--An amount determined by--
                                  (I) computing the difference 
                                (which may be positive or 
                                negative) between the amount of 
                                the allowed expenditures for 
                                physicians' services for the 
                                prior year (as determined under 
                                subparagraph (C)) and the 
                                amount of the actual 
                                expenditures for such services 
                                for that year;
                                  (II) dividing that difference 
                                by the amount of the actual 
                                expenditures for such services 
                                for that year; and
                                  (III) multiplying that 
                                quotient by 0.75.
                          (ii) Cumulative adjustment 
                        component.--An amount determined by--
                                  (I) computing the difference 
                                (which may be positive or 
                                negative) between the amount of 
                                the allowed expenditures for 
                                physicians' services (as 
                                determined under subparagraph 
                                (C)) from April 1, 1996, 
                                through the end of the prior 
                                year and the amount of the 
                                actual expenditures for such 
                                services during that period;
                                  (II) dividing that difference 
                                by actual expenditures for such 
                                services for the prior year as 
                                increased by the sustainable 
                                growth rate under subsection 
                                (f) for the year for which the 
                                update adjustment factor is to 
                                be determined; and
                                  (III) multiplying that 
                                quotient by 0.33.
                  (C) Determination of allowed expenditures.--
                For purposes of this paragraph:
                          (i) Period up to april 1, 1999.--The 
                        allowed expenditures for physicians' 
                        services for a period before April 1, 
                        1999, shall be the amount of the 
                        allowed expenditures for such period as 
                        determined under paragraph (3)(C).
                          (ii) Transition to calendar year 
                        allowed expenditures.--Subject to 
                        subparagraph (E), the allowed 
                        expenditures for--
                                  (I) the 9-month period 
                                beginning April 1, 1999, shall 
                                be the Secretary's estimate of 
                                the amount of the allowed 
                                expenditures that would be 
                                permitted under paragraph 
                                (3)(C) for such period; and
                                  (II) the year of 1999, shall 
                                be the Secretary's estimate of 
                                the amount of the allowed 
                                expenditures that would be 
                                permitted under paragraph 
                                (3)(C) for such year.
                          (iii) Years beginning with 2000.--The 
                        allowed expenditures for a year 
                        (beginning with 2000) is equal to the 
                        allowed expenditures for physicians' 
                        services for the previous year, 
                        increased by the sustainable growth 
                        rate under subsection (f) for the year 
                        involved.
                  (D) Restriction on update adjustment 
                factor.--The update adjustment factor 
                determined under subparagraph (B) for a year 
                may not be less than -0.07 or greater than 
                0.03.
                  (E) Recalculation of allowed expenditures for 
                updates beginning with 2001.--For purposes of 
                determining the update adjustment factor for a 
                year beginning with 2001, the Secretary shall 
                recompute the allowed expenditures for previous 
                periods beginning on or after April 1, 1999, 
                consistent with subsection (f)(3).
                  (F) Transitional adjustment designed to 
                provide for budget neutrality.--Under this 
                subparagraph the Secretary shall provide for an 
                adjustment to the update under subparagraph 
                (A)--
                          (i) for each of 2001, 2002, 2003, and 
                        2004, of -0.2 percent; and
                          (ii) for 2005 of +0.8 percent.
          (5) Update for 2004 and 2005.--The update to the 
        single conversion factor established in paragraph 
        (1)(C) for each of 2004 and 2005 shall be not less than 
        1.5 percent.
          (6) Update for 2006.--The update to the single 
        conversion factor established in paragraph (1)(C) for 
        2006 shall be 0 percent.
          (7) Conversion factor for 2007.--
                  (A) In general.--The conversion factor that 
                would otherwise be applicable under this 
                subsection for 2007 shall be the amount of such 
                conversion factor divided by the product of--
                          (i) 1 plus the Secretary's estimate 
                        of the percentage increase in the MEI 
                        (as defined in section 1842(i)(3)) for 
                        2007 (divided by 100); and
                          (ii) 1 plus the Secretary's estimate 
                        of the update adjustment factor under 
                        paragraph (4)(B) for 2007.
                  (B) No effect on computation of conversion 
                factor for 2008.--The conversion factor under 
                this subsection shall be computed under 
                paragraph (1)(A) for 2008 as if subparagraph 
                (A) had never applied.
          (8) Update for 2008.--
                  (A) In general.--Subject to paragraph (7)(B), 
                in lieu of the update to the single conversion 
                factor established in paragraph (1)(C) that 
                would otherwise apply for 2008, the update to 
                the single conversion factor shall be 0.5 
                percent.
                  (B) No effect on computation of conversion 
                factor for 2009.--The conversion factor under 
                this subsection shall be computed under 
                paragraph (1)(A) for 2009 and subsequent years 
                as if subparagraph (A) had never applied.
          (9) Update for 2009.--
                  (A) In general.--Subject to paragraphs (7)(B) 
                and (8)(B), in lieu of the update to the single 
                conversion factor established in paragraph 
                (1)(C) that would otherwise apply for 2009, the 
                update to the single conversion factor shall be 
                1.1 percent.
                  (B) No effect on computation of conversion 
                factor for 2010 and subsequent years.--The 
                conversion factor under this subsection shall 
                be computed under paragraph (1)(A) for 2010 and 
                subsequent years as if subparagraph (A) had 
                never applied.
          (10) Update for January through may of 2010.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), and (9)(B), in lieu of the 
                update to the single conversion factor 
                established in paragraph (1)(C) that would 
                otherwise apply for 2010 for the period 
                beginning on January 1, 2010, and ending on May 
                31, 2010, the update to the single conversion 
                factor shall be 0 percent for 2010.
                  (B) No effect on computation of conversion 
                factor for remaining portion of 2010 and 
                subsequent years.--The conversion factor under 
                this subsection shall be computed under 
                paragraph (1)(A) for the period beginning on 
                June 1, 2010, and ending on December 31, 2010, 
                and for 2011 and subsequent years as if 
                subparagraph (A) had never applied.
          (11) Update for june through december of 2010.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), (9)(B), and (10)(B), in lieu of 
                the update to the single conversion factor 
                established in paragraph (1)(C) that would 
                otherwise apply for 2010 for the period 
                beginning on June 1, 2010, and ending on 
                December 31, 2010, the update to the single 
                conversion factor shall be 2.2 percent.
                  (B) No effect on computation of conversion 
                factor for 2011 and subsequent years.--The 
                conversion factor under this subsection shall 
                be computed under paragraph (1)(A) for 2011 and 
                subsequent years as if subparagraph (A) had 
                never applied.
          (12) Update for 2011.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), (9)(B), (10)(B), and (11)(B), 
                in lieu of the update to the single conversion 
                factor established in paragraph (1)(C) that 
                would otherwise apply for 2011, the update to 
                the single conversion factor shall be 0 
                percent.
                  (B) No effect on computation of conversion 
                factor for 2012 and subsequent years.--The 
                conversion factor under this subsection shall 
                be computed under paragraph (1)(A) for 2012 and 
                subsequent years as if subparagraph (A) had 
                never applied.
          (13) Update for 2012.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), (9)(B), (10)(B), (11)(B), and 
                (12)(B), in lieu of the update to the single 
                conversion factor established in paragraph 
                (1)(C) that would otherwise apply for 2012, the 
                update to the single conversion factor shall be 
                zero percent.
                  (B) No effect on computation of conversion 
                factor for 2013 and subsequent years.--The 
                conversion factor under this subsection shall 
                be computed under paragraph (1)(A) for 2013 and 
                subsequent years as if subparagraph (A) had 
                never applied.
          (14) Update for 2013.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), (9)(B), (10)(B), (11)(B), 
                (12)(B), and (13)(B), in lieu of the update to 
                the single conversion factor established in 
                paragraph (1)(C) that would otherwise apply for 
                2013, the update to the single conversion 
                factor for such year shall be zero percent.
                  (B) No effect on computation of conversion 
                factor for 2014 and subsequent years.--The 
                conversion factor under this subsection shall 
                be computed under paragraph (1)(A) for 2014 and 
                subsequent years as if subparagraph (A) had 
                never applied.
          (15) Update for 2014.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), (9)(B), (10)(B), (11)(B), 
                (12)(B), (13)(B), and (14)(B), in lieu of the 
                update to the single conversion factor 
                established in paragraph (1)(C) that would 
                otherwise apply for 2014, the update to the 
                single conversion factor shall be 0.5 percent.
                  (B) No effect on computation of conversion 
                factor for subsequent years.--The conversion 
                factor under this subsection shall be computed 
                under paragraph (1)(A) for 2015 and subsequent 
                years as if subparagraph (A) had never applied.
          (16) Update for january through june of 2015.--
        Subject to paragraphs (7)(B), (8)(B), (9)(B), (10)(B), 
        (11)(B), (12)(B), (13)(B), (14)(B), and (15)(B), in 
        lieu of the update to the single conversion factor 
        established in paragraph (1)(C) that would otherwise 
        apply for 2015 for the period beginning on January 1, 
        2015, and ending on June 30, 2015, the update to the 
        single conversion factor shall be 0.0 percent.
          (17) Update for july through december of 2015.--The 
        update to the single conversion factor established in 
        paragraph (1)(C) for the period beginning on July 1, 
        2015, and ending on December 31, 2015, shall be 0.5 
        percent.
          (18) Update for 2016 through 2019.--The update to the 
        single conversion factor established in paragraph 
        (1)(C) for 2016 and each subsequent year through 2019 
        shall be 0.5 percent.
          (19) Update for 2020 through 2025.--The update to the 
        single conversion factor established in paragraph 
        (1)(C) for 2020 and each subsequent year through 2025 
        shall be 0.0 percent.
          (20) Update for 2026 and subsequent years.--For 2026 
        and each subsequent year, the update to the qualifying 
        APM conversion factor established under paragraph 
        (1)(A) is 0.75 percent, and the update to the 
        nonqualifying APM conversion factor established under 
        such paragraph is 0.25 percent.
  (e) Geographic Adjustment Factors.--
          (1) Establishment of geographic indices.--
                  (A) In general.--Subject to subparagraphs 
                (B), (C), (E), (G), (H), and (I), the Secretary 
                shall establish--
                          (i) an index which reflects the 
                        relative costs of the mix of goods and 
                        services comprising practice expenses 
                        (other than malpractice expenses) in 
                        the different fee schedule areas 
                        compared to the national average of 
                        such costs,
                          (ii) an index which reflects the 
                        relative costs of malpractice expenses 
                        in the different fee schedule areas 
                        compared to the national average of 
                        such costs, and
                          (iii) an index which reflects \1/4\ 
                        of the difference between the relative 
                        value of physicians' work effort in 
                        each of the different fee schedule 
                        areas and the national average of such 
                        work effort.
                  (B) Class-specific geographic cost-of-
                practice indices.--The Secretary may establish 
                more than one index under subparagraph (A)(i) 
                in the case of classes of physicians' services, 
                if, because of differences in the mix of goods 
                and services comprising practice expenses for 
                the different classes of services, the 
                application of a single index under such clause 
                to different classes of such services would be 
                substantially inequitable.
                  (C) Periodic review and adjustments in 
                geographic adjustment factors.--The Secretary, 
                not less often than every 3 years, shall, in 
                consultation with appropriate representatives 
                of physicians, review the indices established 
                under subparagraph (A) and the geographic index 
                values applied under this subsection for all 
                fee schedule areas. Based on such review, the 
                Secretary may revise such index and adjust such 
                index values, except that, if more than 1 year 
                has elapsed since the date of the last previous 
                adjustment, the adjustment to be applied in the 
                first year of the next adjustment shall be \1/
                2\ of the adjustment that otherwise would be 
                made.
                  (D) Use of recent data.--In establishing 
                indices and index values under this paragraph, 
                the Secretary shall use the most recent data 
                available relating to practice expenses, 
                malpractice expenses, and physician work effort 
                in different fee schedule areas.
                  (E) Floor at 1.0 on work geographic index.--
                After calculating the work geographic index in 
                subparagraph (A)(iii), for purposes of payment 
                for services furnished on or after January 1, 
                2004, and before January 1, 2018, the Secretary 
                shall increase the work geographic index to 
                1.00 for any locality for which such work 
                geographic index is less than 1.00.
                  (G) Floor for practice expense, malpractice, 
                and work geographic indices for services 
                furnished in alaska.--For purposes of payment 
                for services furnished in Alaska on or after 
                January 1, 2004, and before January 1, 2006, 
                after calculating the practice expense, 
                malpractice, and work geographic indices in 
                clauses (i), (ii), and (iii) of subparagraph 
                (A) and in subparagraph (B), the Secretary 
                shall increase any such index to 1.67 if such 
                index would otherwise be less than 1.67. For 
                purposes of payment for services furnished in 
                the State described in the preceding sentence 
                on or after January 1, 2009, after calculating 
                the work geographic index in subparagraph 
                (A)(iii), the Secretary shall increase the work 
                geographic index to 1.5 if such index would 
                otherwise be less than 1.5
                  (H) Practice expense geographic adjustment 
                for 2010 and subsequent years.--
                          (i) For 2010.--Subject to clause 
                        (iii), for services furnished during 
                        2010, the employee wage and rent 
                        portions of the practice expense 
                        geographic index described in 
                        subparagraph (A)(i) shall reflect \1/2\ 
                        of the difference between the relative 
                        costs of employee wages and rents in 
                        each of the different fee schedule 
                        areas and the national average of such 
                        employee wages and rents.
                          (ii) For 2011.--Subject to clause 
                        (iii), for services furnished during 
                        2011, the employee wage and rent 
                        portions of the practice expense 
                        geographic index described in 
                        subparagraph (A)(i) shall reflect \1/2\ 
                        of the difference between the relative 
                        costs of employee wages and rents in 
                        each of the different fee schedule 
                        areas and the national average of such 
                        employee wages and rents.
                          (iii) Hold harmless.--The practice 
                        expense portion of the geographic 
                        adjustment factor applied in a fee 
                        schedule area for services furnished in 
                        2010 or 2011 shall not, as a result of 
                        the application of clause (i) or (ii), 
                        be reduced below the practice expense 
                        portion of the geographic adjustment 
                        factor under subparagraph (A)(i) (as 
                        calculated prior to the application of 
                        such clause (i) or (ii), respectively) 
                        for such area for such year.
                          (iv) Analysis.--The Secretary shall 
                        analyze current methods of establishing 
                        practice expense geographic adjustments 
                        under subparagraph (A)(i) and evaluate 
                        data that fairly and reliably 
                        establishes distinctions in the costs 
                        of operating a medical practice in the 
                        different fee schedule areas. Such 
                        analysis shall include an evaluation of 
                        the following:
                                  (I) The feasibility of using 
                                actual data or reliable survey 
                                data developed by medical 
                                organizations on the costs of 
                                operating a medical practice, 
                                including office rents and non-
                                physician staff wages, in 
                                different fee schedule areas.
                                  (II) The office expense 
                                portion of the practice expense 
                                geographic adjustment described 
                                in subparagraph (A)(i), 
                                including the extent to which 
                                types of office expenses are 
                                determined in local markets 
                                instead of national markets.
                                  (III) The weights assigned to 
                                each of the categories within 
                                the practice expense geographic 
                                adjustment described in 
                                subparagraph (A)(i).
                          (v) Revision for 2012 and subsequent 
                        years.--As a result of the analysis 
                        described in clause (iv), the Secretary 
                        shall, not later than January 1, 2012, 
                        make appropriate adjustments to the 
                        practice expense geographic adjustment 
                        described in subparagraph (A)(i) to 
                        ensure accurate geographic adjustments 
                        across fee schedule areas, including--
                                  (I) basing the office rents 
                                component and its weight on 
                                office expenses that vary among 
                                fee schedule areas; and
                                  (II) considering a 
                                representative range of 
                                professional and non-
                                professional personnel employed 
                                in a medical office based on 
                                the use of the American 
                                Community Survey data or other 
                                reliable data for wage 
                                adjustments.
                        Such adjustments shall be made without 
                        regard to adjustments made pursuant to 
                        clauses (i) and (ii) and shall be made 
                        in a budget neutral manner.
                  (I) Floor for practice expense index for 
                services furnished in frontier states.--
                          (i) In general.--Subject to clause 
                        (ii), for purposes of payment for 
                        services furnished in a frontier State 
                        (as defined in section 
                        1886(d)(3)(E)(iii)(II)) on or after 
                        January 1, 2011, after calculating the 
                        practice expense index in subparagraph 
                        (A)(i), the Secretary shall increase 
                        any such index to 1.00 if such index 
                        would otherwise be less that 1.00. The 
                        preceding sentence shall not be applied 
                        in a budget neutral manner.
                          (ii) Limitation.--This subparagraph 
                        shall not apply to services furnished 
                        in a State that receives a non-labor 
                        related share adjustment under section 
                        1886(d)(5)(H).
          (2) Computation of geographic adjustment factor.--For 
        purposes of subsection (b)(1)(C), for all physicians' 
        services for each fee schedule area the Secretary shall 
        establish a geographic adjustment factor equal to the 
        sum of the geographic cost-of-practice adjustment 
        factor (specified in paragraph (3)), the geographic 
        malpractice adjustment factor (specified in paragraph 
        (4)), and the geographic physician work adjustment 
        factor (specified in paragraph (5)) for the service and 
        the area.
          (3) Geographic cost-of-practice adjustment factor.--
        For purposes of paragraph (2), the ``geographic cost-
        of-practice adjustment factor'', for a service for a 
        fee schedule area, is the product of--
                  (A) the proportion of the total relative 
                value for the service that reflects the 
                relative value units for the practice expense 
                component, and
                  (B) the geographic cost-of-practice index 
                value for the area for the service, based on 
                the index established under paragraph (1)(A)(i) 
                or (1)(B) (as the case may be).
          (4) Geographic malpractice adjustment factor.--For 
        purposes of paragraph (2), the ``geographic malpractice 
        adjustment factor'', for a service for a fee schedule 
        area, is the product of--
                  (A) the proportion of the total relative 
                value for the service that reflects the 
                relative value units for the malpractice 
                component, and
                  (B) the geographic malpractice index value 
                for the area, based on the index established 
                under paragraph (1)(A)(ii).
          (5) Geographic physician work adjustment factor.--For 
        purposes of paragraph (2), the ``geographic physician 
        work adjustment factor'', for a service for a fee 
        schedule area, is the product of--
                  (A) the proportion of the total relative 
                value for the service that reflects the 
                relative value units for the work component, 
                and
                  (B) the geographic physician work index value 
                for the area, based on the index established 
                under paragraph (1)(A)(iii).
          (6) Use of msas as fee schedule areas in 
        california.--
                  (A) In general.--Subject to the succeeding 
                provisions of this paragraph and 
                notwithstanding the previous provisions of this 
                subsection, for services furnished on or after 
                January 1, 2017, the fee schedule areas used 
                for payment under this section applicable to 
                California shall be the following:
                          (i) Each Metropolitan Statistical 
                        Area (each in this paragraph referred 
                        to as an ``MSA''), as defined by the 
                        Director of the Office of Management 
                        and Budget as of December 31 of the 
                        previous year, shall be a fee schedule 
                        area.
                          (ii) All areas not included in an MSA 
                        shall be treated as a single rest-of-
                        State fee schedule area.
                  (B) Transition for msas previously in rest-
                of-state payment locality or in locality 3.--
                          (i) In general.--For services 
                        furnished in California during a year 
                        beginning with 2017 and ending with 
                        2021 in an MSA in a transition area (as 
                        defined in subparagraph (D)), subject 
                        to subparagraph (C), the geographic 
                        index values to be applied under this 
                        subsection for such year shall be equal 
                        to the sum of the following:
                                  (I) Current law component.--
                                The old weighting factor 
                                (described in clause (ii)) for 
                                such year multiplied by the 
                                geographic index values under 
                                this subsection for the fee 
                                schedule area that included 
                                such MSA that would have 
                                applied in such area (as 
                                estimated by the Secretary) if 
                                this paragraph did not apply.
                                  (II) MSA-based component.--
                                The MSA-based weighting factor 
                                (described in clause (iii)) for 
                                such year multiplied by the 
                                geographic index values 
                                computed for the fee schedule 
                                area under subparagraph (A) for 
                                the year (determined without 
                                regard to this subparagraph).
                          (ii) Old weighting factor.--The old 
                        weighting factor described in this 
                        clause--
                                  (I) for 2017, is \5/6\; and
                                  (II) for each succeeding 
                                year, is the old weighting 
                                factor described in this clause 
                                for the previous year minus \1/
                                6\.
                          (iii) MSA-based weighting factor.--
                        The MSA-based weighting factor 
                        described in this clause for a year is 
                        1 minus the old weighting factor under 
                        clause (ii) for that year.
                  (C) Hold harmless.--For services furnished in 
                a transition area in California during a year 
                beginning with 2017, the geographic index 
                values to be applied under this subsection for 
                such year shall not be less than the 
                corresponding geographic index values that 
                would have applied in such transition area (as 
                estimated by the Secretary) if this paragraph 
                did not apply.
                  (D) Transition area defined.--In this 
                paragraph, the term ``transition area'' means 
                each of the following fee schedule areas for 
                2013:
                          (i) The rest-of-State payment 
                        locality.
                          (ii) Payment locality 3.
                  (E) References to fee schedule areas.--
                Effective for services furnished on or after 
                January 1, 2017, for California, any reference 
                in this section to a fee schedule area shall be 
                deemed a reference to a fee schedule area 
                established in accordance with this paragraph.
  (f) Sustainable Growth Rate.--
          (1) Publication.--The Secretary shall cause to have 
        published in the Federal Register not later than--
                  (A) November 1, 2000, the sustainable growth 
                rate for 2000 and 2001; and
                  (B) November 1 of each succeeding year 
                through 2014 the sustainable growth rate for 
                such succeeding year and each of the preceding 
                2 years.
          (2) Specification of growth rate.--The sustainable 
        growth rate for all physicians' services for a fiscal 
        year (beginning with fiscal year 1998 and ending with 
        fiscal year 2000) and a year beginning with 2000 and 
        ending with 2014 shall be equal to the product of--
                  (A) 1 plus the Secretary's estimate of the 
                weighted average percentage increase (divided 
                by 100) in the fees for all physicians' 
                services in the applicable period involved,
                  (B) 1 plus the Secretary's estimate of the 
                percentage change (divided by 100) in the 
                average number of individuals enrolled under 
                this part (other than Medicare+Choice plan 
                enrollees) from the previous applicable period 
                to the applicable period involved,
                  (C) 1 plus the Secretary's estimate of the 
                annual average percentage growth in real gross 
                domestic product per capita (divided by 100) 
                during the 10-year period ending with the 
                applicable period involved, and
                  (D) 1 plus the Secretary's estimate of the 
                percentage change (divided by 100) in 
                expenditures for all physicians' services in 
                the applicable period (compared with the 
                previous applicable period) which will result 
                from changes in law and regulations, determined 
                without taking into account estimated changes 
                in expenditures resulting from the update 
                adjustment factor determined under subsection 
                (d)(3)(B) or (d)(4)(B), as the case may be,
        minus 1 and multiplied by 100.
          (3) Data to be used.--For purposes of determining the 
        update adjustment factor under subsection (d)(4)(B) for 
        a year beginning with 2001, the sustainable growth 
        rates taken into consideration in the determination 
        under paragraph (2) shall be determined as follows:
                  (A) For 2001.--For purposes of such 
                calculations for 2001, the sustainable growth 
                rates for fiscal year 2000 and the years 2000 
                and 2001 shall be determined on the basis of 
                the best data available to the Secretary as of 
                September 1, 2000.
                  (B) For 2002.--For purposes of such 
                calculations for 2002, the sustainable growth 
                rates for fiscal year 2000 and for years 2000, 
                2001, and 2002 shall be determined on the basis 
                of the best data available to the Secretary as 
                of September 1, 2001.
                  (C) For 2003 and succeeding years.--For 
                purposes of such calculations for a year after 
                2002--
                          (i) the sustainable growth rates for 
                        that year and the preceding 2 years 
                        shall be determined on the basis of the 
                        best data available to the Secretary as 
                        of September 1 of the year preceding 
                        the year for which the calculation is 
                        made; and
                          (ii) the sustainable growth rate for 
                        any year before a year described in 
                        clause (i) shall be the rate as most 
                        recently determined for that year under 
                        this subsection.
        Nothing in this paragraph shall be construed as 
        affecting the sustainable growth rates established for 
        fiscal year 1998 or fiscal year 1999.
          (4) Definitions.--In this subsection:
                  (A) Services included in physicians' 
                services.--The term ``physicians' services'' 
                includes other items and services (such as 
                clinical diagnostic laboratory tests and 
                radiology services), specified by the 
                Secretary, that are commonly performed or 
                furnished by a physician or in a physician's 
                office, but does not include services furnished 
                to a Medicare+Choice plan enrollee.
                  (B) Medicare+choice plan enrollee.--The term 
                ``Medicare+Choice plan enrollee'' means, with 
                respect to a fiscal year, an individual 
                enrolled under this part who has elected to 
                receive benefits under this title for the 
                fiscal year through a Medicare+Choice plan 
                offered under part C, and also includes an 
                individual who is receiving benefits under this 
                part through enrollment with an eligible 
                organization with a risk-sharing contract under 
                section 1876.
                  (C) Applicable period.--The term ``applicable 
                period'' means--
                          (i) a fiscal year, in the case of 
                        fiscal year 1998, fiscal year 1999, and 
                        fiscal year 2000; or
                          (ii) a calendar year with respect to 
                        a year beginning with 2000;
                as the case may be.
  (g) Limitation on Beneficiary Liability.--
          (1) Limitation on actual charges.--
                  (A) In general.--In the case of a 
                nonparticipating physician or nonparticipating 
                supplier or other person (as defined in section 
                1842(i)(2)) who does not accept payment on an 
                assignment-related basis for a physician's 
                service furnished with respect to an individual 
                enrolled under this part, the following rules 
                apply:
                          (i) Application of limiting charge.--
                        No person may bill or collect an actual 
                        charge for the service in excess of the 
                        limiting charge described in paragraph 
                        (2) for such service.
                          (ii) No liability for excess 
                        charges.--No person is liable for 
                        payment of any amounts billed for the 
                        service in excess of such limiting 
                        charge.
                          (iii) Correction of excess charges.--
                        If such a physician, supplier, or other 
                        person bills, but does not collect, an 
                        actual charge for a service in 
                        violation of clause (i), the physician, 
                        supplier, or other person shall reduce 
                        on a timely basis the actual charge 
                        billed for the service to an amount not 
                        to exceed the limiting charge for the 
                        service.
                          (iv) Refund of excess collections.--
                        If such a physician, supplier, or other 
                        person collects an actual charge for a 
                        service in violation of clause (i), the 
                        physician, supplier, or other person 
                        shall provide on a timely basis a 
                        refund to the individual charged in the 
                        amount by which the amount collected 
                        exceeded the limiting charge for the 
                        service. The amount of such a refund 
                        shall be reduced to the extent the 
                        individual has an outstanding balance 
                        owed by the individual to the 
                        physician.
                  (B) Sanctions.--If a physician, supplier, or 
                other person--
                          (i) knowingly and willfully bills or 
                        collects for services in violation of 
                        subparagraph (A)(i) on a repeated 
                        basis, or
                          (ii) fails to comply with clause 
                        (iii) or (iv) of subparagraph (A) on a 
                        timely basis,
                the Secretary may apply sanctions against the 
                physician, supplier, or other person in 
                accordance with paragraph (2) of section 
                1842(j). In applying this subparagraph, 
                paragraph (4) of such section applies in the 
                same manner as such paragraph applies to such 
                section and any reference in such section to a 
                physician is deemed also to include a reference 
                to a supplier or other person under this 
                subparagraph.
                  (C) Timely basis.--For purposes of this 
                paragraph, a correction of a bill for an excess 
                charge or refund of an amount with respect to a 
                violation of subparagraph (A)(i) in the case of 
                a service is considered to be provided ``on a 
                timely basis'', if the reduction or refund is 
                made not later than 30 days after the date the 
                physician, supplier, or other person is 
                notified by the carrier under this part of such 
                violation and of the requirements of 
                subparagraph (A).
          (2) Limiting charge defined.--
                  (A) For 1991.--For physicians' services of a 
                physician furnished during 1991, other than 
                radiologist services subject to section 
                1834(b), the ``limiting charge'' shall be the 
                same percentage (or, if less, 25 percent) above 
                the recognized payment amount under this part 
                with respect to the physician (as a 
                nonparticipating physician) as the percentage 
                by which--
                          (i) the maximum allowable actual 
                        charge (as determined under section 
                        1842(j)(1)(C) as of December 31, 1990, 
                        or, if less, the maximum actual charge 
                        otherwise permitted for the service 
                        under this part as of such date) for 
                        the service of the physician, exceeds
                          (ii) the recognized payment amount 
                        for the service of the physician (as a 
                        nonparticipating physician) as of such 
                        date.
In the case of evaluation and management services (as specified 
in section 1842(b)(16)(B)(ii)), the preceding sentence shall be 
applied by substituting ``40 percent'' for ``25 percent''.
                  (B) For 1992.--For physicians' services 
                furnished during 1992, other than radiologist 
                services subject to section 1834(b), the 
                ``limiting charge'' shall be the same 
                percentage (or, if less, 20 percent) above the 
                recognized payment amount under this part for 
                nonparticipating physicians as the percentage 
                by which--
                          (i) the limiting charge (as 
                        determined under subparagraph (A) as of 
                        December 31, 1991) for the service, 
                        exceeds
                          (ii) the recognized payment amount 
                        for the service for nonparticipating 
                        physicians as of such date.
                  (C) After 1992.--For physicians' services 
                furnished in a year after 1992, the ``limiting 
                charge'' shall be 115 percent of the recognized 
                payment amount under this part for 
                nonparticipating physicians or for 
                nonparticipating suppliers or other persons.
                  (D) Recognized payment amount.--In this 
                section, the term ``recognized payment amount'' 
                means, for services furnished on or after 
                January 1, 1992, the fee schedule amount 
                determined under subsection (a) (or, if payment 
                under this part is made on a basis other than 
                the fee schedule under this section, 95 percent 
                of the other payment basis), and, for services 
                furnished during 1991, the applicable 
                percentage (as defined in section 
                1842(b)(4)(A)(iv)) of the prevailing charge (or 
                fee schedule amount) for nonparticipating 
                physicians for that year.
          (3) Limitation on charges for medicare beneficiaries 
        eligible for medicaid benefits.--
                  (A) In general.--Payment for physicians' 
                services furnished on or after April 1, 1990, 
                to an individual who is enrolled under this 
                part and eligible for any medical assistance 
                (including as a qualified medicare beneficiary, 
                as defined in section 1905(p)(1)) with respect 
                to such services under a State plan approved 
                under title XIX may only be made on an 
                assignment-related basis and the provisions of 
                section 1902(n)(3)(A) apply to further limit 
                permissible charges under this section.
                  (B) Penalty.--A person may not bill for 
                physicians' services subject to subparagraph 
                (A) other than on an assignment-related basis. 
                No person is liable for payment of any amounts 
                billed for such a service in violation of the 
                previous sentence. If a person knowingly and 
                willfully bills for physicians' services in 
                violation of the first sentence, the Secretary 
                may apply sanctions against the person in 
                accordance with section 1842(j)(2).
          (4) Physician submission of claims.--
                  (A) In general.--For services furnished on or 
                after September 1, 1990, within 1 year after 
                the date of providing a service for which 
                payment is made under this part on a reasonable 
                charge or fee schedule basis, a physician, 
                supplier, or other person (or an employer or 
                facility in the cases described in section 
                1842(b)(6)(A))--
                          (i) shall complete and submit a claim 
                        for such service on a standard claim 
                        form specified by the Secretary to the 
                        carrier on behalf of a beneficiary, and
                          (ii) may not impose any charge 
                        relating to completing and submitting 
                        such a form.
                  (B) Penalty.--(i) With respect to an assigned 
                claim wherever a physician, provider, supplier 
                or other person (or an employer or facility in 
                the cases described in section 1842(b)(6)(A)) 
                fails to submit such a claim as required in 
                subparagraph (A), the Secretary shall reduce by 
                10 percent the amount that would otherwise be 
                paid for such claim under this part.
                  (ii) If a physician, supplier, or other 
                person (or an employer or facility in the cases 
                described in section 1842(b)(6)(A)) fails to 
                submit a claim required to be submitted under 
                subparagraph (A) or imposes a charge in 
                violation of such subparagraph, the Secretary 
                shall apply the sanction with respect to such a 
                violation in the same manner as a sanction may 
                be imposed under section 1842(p)(3) for a 
                violation of section 1842(p)(1).
          (5) Electronic billing; direct deposit.--The 
        Secretary shall encourage and develop a system 
        providing for expedited payment for claims submitted 
        electronically. The Secretary shall also encourage and 
        provide incentives allowing for direct deposit as 
        payments for services furnished by participating 
        physicians. The Secretary shall provide physicians with 
        such technical information as necessary to enable such 
        physicians to submit claims electronically. The 
        Secretary shall submit a plan to Congress on this 
        paragraph by May 1, 1990.
          (6) Monitoring of charges.--
                  (A) In general.--The Secretary shall 
                monitor--
                          (i) the actual charges of 
                        nonparticipating physicians for 
                        physicians' services furnished on or 
                        after January 1, 1991, to individuals 
                        enrolled under this part, and
                          (ii) changes (by specialty, type of 
                        service, and geographic area) in (I) 
                        the proportion of expenditures for 
                        physicians' services provided under 
                        this part by participating physicians, 
                        (II) the proportion of expenditures for 
                        such services for which payment is made 
                        under this part on an assignment-
                        related basis, and (III) the amounts 
                        charged above the recognized payment 
                        amounts under this part.
                  (B) Report.--The Secretary shall, by not 
                later than April 15 of each year (beginning in 
                1992), report to the Congress information on 
                the extent to which actual charges exceed 
                limiting charges, the number and types of 
                services involved, and the average amount of 
                excess charges and information regarding the 
                changes described in subparagraph (A)(ii).
                  (C) Plan.--If the Secretary finds that there 
                has been a significant decrease in the 
                proportions described in subclauses (I) and 
                (II) of subparagraph (A)(ii) or an increase in 
                the amounts described in subclause (III) of 
                that subparagraph, the Secretary shall develop 
                a plan to address such a problem and transmit 
                to Congress recommendations regarding the plan. 
                The Medicare Payment Advisory Commission shall 
                review the Secretary's plan and recommendations 
                and transmit to Congress its comments regarding 
                such plan and recommendations.
          (7) Monitoring of utilization and access.--
                  (A) In general.--The Secretary shall 
                monitor--
                          (i) changes in the utilization of and 
                        access to services furnished under this 
                        part within geographic, population, and 
                        service related categories,
                          (ii) possible sources of 
                        inappropriate utilization of services 
                        furnished under this part which 
                        contribute to the overall level of 
                        expenditures under this part, and
                          (iii) factors underlying these 
                        changes and their interrelationships.
                  (B) Report.--The Secretary shall by not later 
                than April 15, of each year (beginning with 
                1991) report to the Congress on the changes 
                described in subparagraph (A)(i) and shall 
                include in the report an examination of the 
                factors (including factors relating to 
                different services and specific categories and 
                groups of services and geographic and 
                demographic variations in utilization) which 
                may contribute to such changes.
                  (C) Recommendations.--The Secretary shall 
                include in each annual report under 
                subparagraph (B) recommendations--
                          (i) addressing any identified 
                        patterns of inappropriate utilization,
                          (ii) on utilization review,
                          (iii) on physician education or 
                        patient education,
                          (iv) addressing any problems of 
                        beneficiary access to care made evident 
                        by the monitoring process, and
                          (v) on such other matters as the 
                        Secretary deems appropriate.
                The Medicare Payment Advisory Commission shall 
                comment on the Secretary's recommendations and 
                in developing its comments, the Commission 
                shall convene and consult a panel of physician 
                experts to evaluate the implications of medical 
                utilization patterns for the quality of and 
                access to patient care.
  (h) Sending Information to Physicians.--Before the beginning 
of each year (beginning with 1992), the Secretary shall send to 
each physician or nonparticipating supplier or other person 
furnishing physicians' services (as defined in section 
1848(j)(3)) furnishing physicians' services under this part, 
for services commonly performed by the physician, supplier, or 
other person, information on fee schedule amounts that apply 
for the year in the fee schedule area for participating and 
non-participating physicians, and the maximum amount that may 
be charged consistent with subsection (g)(2). Such information 
shall be transmitted in conjunction with notices to physicians, 
suppliers, and other persons under section 1842(h) (relating to 
the participating physician program) for a year.
  (i) Miscellaneous Provisions.--
          (1) Restriction on administrative and judicial 
        review.--There shall be no administrative or judicial 
        review under section 1869 or otherwise of--
                  (A) the determination of the adjusted 
                historical payment basis (as defined in 
                subsection (a)(2)(D)(i)),
                  (B) the determination of relative values and 
                relative value units under subsection (c), 
                including adjustments under subsections 
                (c)(2)(F), (c)(2)(H), and (c)(2)(I) and section 
                13515(b) of the Omnibus Budget Reconciliation 
                Act of 1993,
                  (C) the determination of conversion factors 
                under subsection (d), including without 
                limitation a prospective redetermination of the 
                sustainable growth rates for any or all 
                previous fiscal years,
                  (D) the establishment of geographic 
                adjustment factors under subsection (e),
                  (E) the establishment of the system for the 
                coding of physicians' services under this 
                section, and
                  (F) the collection and use of information in 
                the determination of relative values under 
                subsection (c)(2)(M).
          (2) Assistants-at-surgery.--
                  (A) In general.--Subject to subparagraph (B), 
                in the case of a surgical service furnished by 
                a physician, if payment is made separately 
                under this part for the services of a physician 
                serving as an assistant-at-surgery, the fee 
                schedule amount shall not exceed 16 percent of 
                the fee schedule amount otherwise determined 
                under this section for the global surgical 
                service involved.
                  (B) Denial of payment in certain cases.--If 
                the Secretary determines, based on the most 
                recent data available, that for a surgical 
                procedure (or class of surgical procedures) the 
                national average percentage of such procedure 
                performed under this part which involve the use 
                of a physician as an assistant at surgery is 
                less than 5 percent, no payment may be made 
                under this part for services of an assistant at 
                surgery involved in the procedure.
          (3) No comparability adjustment.--For physicians' 
        services for which payment under this part is 
        determined under this section--
                  (A) a carrier may not make any adjustment in 
                the payment amount under section 1842(b)(3)(B) 
                on the basis that the payment amount is higher 
                than the charge applicable, for comparable 
                services and under comparable circumstances, to 
                the policyholders and subscribers of the 
                carrier,
                  (B) no payment adjustment may be made under 
                section 1842(b)(8), and
                  (C) section 1842(b)(9) shall not apply.
  (j) Definitions.--In this section:
          (1) Category.--For services furnished before January 
        1, 1998, the term ``category'' means, with respect to 
        physicians' services, surgical services (as defined by 
        the Secretary and including anesthesia services), 
        primary care services (as defined in section 
        1842(i)(4)), and all other physicians' services. The 
        Secretary shall define surgical services and publish 
        such definitions in the Federal Register no later than 
        May 1, 1990, after consultation with organizations 
        representing physicians.
          (2) Fee schedule area.--Except as provided in 
        subsection (e)(6)(D), the term ``fee schedule area'' 
        means a locality used under section 1842(b) for 
        purposes of computing payment amounts for physicians' 
        services.
          (3) Physicians' services.--The term ``physicians' 
        services'' includes items and services described in 
        paragraphs (1), (2)(A), (2)(D), (2)(G), (2)(P) (with 
        respect to services described in subparagraphs (A) and 
        (C) of section 1861(oo)(2)), (2)(R) (with respect to 
        services described in suparagraphs (B), (C), and (D) of 
        section 1861(pp)(1)), (2)(S), (2)(W), (2)(AA), (2)(DD), 
        (2)(EE), (2)(FF) (including administration of the 
        health risk assessment), (3), (4), (13), (14) (with 
        respect to services described in section 1861(nn)(2)), 
        and (15) of section 1861(s) (other than clinical 
        diagnostic laboratory tests and, except for purposes of 
        subsection (a)(3), (g), and (h) such other items and 
        services as the Secretary may specify).
          (4) Practice expenses.--The term ``practice 
        expenses'' includes all expenses for furnishing 
        physicians' services, excluding malpractice expenses, 
        physician compensation, and other physician fringe 
        benefits.
  (k) Quality Reporting System.--
          (1) In general.--The Secretary shall implement a 
        system for the reporting by eligible professionals of 
        data on quality measures specified under paragraph (2). 
        Such data shall be submitted in a form and manner 
        specified by the Secretary (by program instruction or 
        otherwise), which may include submission of such data 
        on claims under this part.
          (2) Use of consensus-based quality measures.--
                  (A) For 2007.--
                          (i) In general.--For purposes of 
                        applying this subsection for the 
                        reporting of data on quality measures 
                        for covered professional services 
                        furnished during the period beginning 
                        July 1, 2007, and ending December 31, 
                        2007, the quality measures specified 
                        under this paragraph are the measures 
                        identified as 2007 physician quality 
                        measures under the Physician Voluntary 
                        Reporting Program as published on the 
                        public website of the Centers for 
                        Medicare & Medicaid Services as of the 
                        date of the enactment of this 
                        subsection, except as may be changed by 
                        the Secretary based on the results of a 
                        consensus-based process in January of 
                        2007, if such change is published on 
                        such website by not later than April 1, 
                        2007.
                          (ii) Subsequent refinements in 
                        application permitted.--The Secretary 
                        may, from time to time (but not later 
                        than July 1, 2007), publish on such 
                        website (without notice or opportunity 
                        for public comment) modifications or 
                        refinements (such as code additions, 
                        corrections, or revisions) for the 
                        application of quality measures 
                        previously published under clause (i), 
                        but may not, under this clause, change 
                        the quality measures under the 
                        reporting system.
                          (iii) Implementation.--
                        Notwithstanding any other provision of 
                        law, the Secretary may implement by 
                        program instruction or otherwise this 
                        subsection for 2007.
                  (B) For 2008 and 2009.--
                          (i) In general.--For purposes of 
                        reporting data on quality measures for 
                        covered professional services furnished 
                        during 2008 and 2009, the quality 
                        measures specified under this paragraph 
                        for covered professional services shall 
                        be measures that have been adopted or 
                        endorsed by a consensus organization 
                        (such as the National Quality Forum or 
                        AQA), that include measures that have 
                        been submitted by a physician 
                        specialty, and that the Secretary 
                        identifies as having used a consensus-
                        based process for developing such 
                        measures. Such measures shall include 
                        structural measures, such as the use of 
                        electronic health records and 
                        electronic prescribing technology.
                          (ii) Proposed set of measures.--Not 
                        later than August 15 of each of 2007 
                        and 2008, the Secretary shall publish 
                        in the Federal Register a proposed set 
                        of quality measures that the Secretary 
                        determines are described in clause (i) 
                        and would be appropriate for eligible 
                        professionals to use to submit data to 
                        the Secretary in 2008 or 2009, as 
                        applicable. The Secretary shall provide 
                        for a period of public comment on such 
                        set of measures.
                          (iii) Final set of measures.--Not 
                        later than November 15 of each of 2007 
                        and 2008, the Secretary shall publish 
                        in the Federal Register a final set of 
                        quality measures that the Secretary 
                        determines are described in clause (i) 
                        and would be appropriate for eligible 
                        professionals to use to submit data to 
                        the Secretary in 2008 or 2009, as 
                        applicable.
                  (C) For 2010 and subsequent years.--
                          (i) In general.--Subject to clause 
                        (ii), for purposes of reporting data on 
                        quality measures for covered 
                        professional services furnished during 
                        2010 and each subsequent year, subject 
                        to subsection (m)(3)(C), the quality 
                        measures (including electronic 
                        prescribing quality measures) specified 
                        under this paragraph shall be such 
                        measures selected by the Secretary from 
                        measures that have been endorsed by the 
                        entity with a contract with the 
                        Secretary under section 1890(a).
                          (ii) Exception.--In the case of a 
                        specified area or medical topic 
                        determined appropriate by the Secretary 
                        for which a feasible and practical 
                        measure has not been endorsed by the 
                        entity with a contract under section 
                        1890(a), the Secretary may specify a 
                        measure that is not so endorsed as long 
                        as due consideration is given to 
                        measures that have been endorsed or 
                        adopted by a consensus organization 
                        identified by the Secretary, such as 
                        the AQA alliance.
                  (D) Opportunity to provide input on measures 
                for 2009 and subsequent years.--For each 
                quality measure (including an electronic 
                prescribing quality measure) adopted by the 
                Secretary under subparagraph (B) (with respect 
                to 2009) or subparagraph (C), the Secretary 
                shall ensure that eligible professionals have 
                the opportunity to provide input during the 
                development, endorsement, or selection of 
                measures applicable to services they furnish.
          (3) Covered professional services and eligible 
        professionals defined.--For purposes of this 
        subsection:
                  (A) Covered professional services.--The term 
                ``covered professional services'' means 
                services for which payment is made under, or is 
                based on, the fee schedule established under 
                this section and which are furnished by an 
                eligible professional.
                  (B) Eligible professional.--The term 
                ``eligible professional'' means any of the 
                following:
                          (i) A physician.
                          (ii) A practitioner described in 
                        section 1842(b)(18)(C).
                          (iii) A physical or occupational 
                        therapist or a qualified speech-
                        language pathologist.
                          (iv) Beginning with 2009, a qualified 
                        audiologist (as defined in section 
                        1861(ll)(3)(B)).
          (4) Use of registry-based reporting.--As part of the 
        publication of proposed and final quality measures for 
        2008 under clauses (ii) and (iii) of paragraph (2)(B), 
        the Secretary shall address a mechanism whereby an 
        eligible professional may provide data on quality 
        measures through an appropriate medical registry (such 
        as the Society of Thoracic Surgeons National Database) 
        or through a Maintenance of Certification program 
        operated by a specialty body of the American Board of 
        Medical Specialties that meets the criteria for such a 
        registry, as identified by the Secretary.
          (5) Identification units.--For purposes of applying 
        this subsection, the Secretary may identify eligible 
        professionals through billing units, which may include 
        the use of the Provider Identification Number, the 
        unique physician identification number (described in 
        section 1833(q)(1)), the taxpayer identification 
        number, or the National Provider Identifier. For 
        purposes of applying this subsection for 2007, the 
        Secretary shall use the taxpayer identification number 
        as the billing unit.
          (6) Education and outreach.--The Secretary shall 
        provide for education and outreach to eligible 
        professionals on the operation of this subsection.
          (7) Limitations on review.--There shall be no 
        administrative or judicial review under section 1869, 
        section 1878, or otherwise, of the development and 
        implementation of the reporting system under paragraph 
        (1), including identification of quality measures under 
        paragraph (2) and the application of paragraphs (4) and 
        (5).
          (8) Implementation.--The Secretary shall carry out 
        this subsection acting through the Administrator of the 
        Centers for Medicare & Medicaid Services.
          (9) Continued application for purposes of mips and 
        for certain professionals volunteering to report.--The 
        Secretary shall, in accordance with subsection 
        (q)(1)(F), carry out the provisions of this 
        subsection--
                  (A) for purposes of subsection (q); and
                  (B) for eligible professionals who are not 
                MIPS eligible professionals (as defined in 
                subsection (q)(1)(C)) for the year involved.
  (l) Physician Assistance and Quality Initiative Fund.--
          (1) Establishment.--The Secretary shall establish 
        under this subsection a Physician Assistance and 
        Quality Initiative Fund (in this subsection referred to 
        as the ``Fund'') which shall be available to the 
        Secretary for physician payment and quality improvement 
        initiatives, which may include application of an 
        adjustment to the update of the conversion factor under 
        subsection (d).
          (2) Funding.--
                  (A) Amount available.--
                          (i) In general.--Subject to clause 
                        (ii), there shall be available to the 
                        Fund the following amounts:
                                  (I) For expenditures during 
                                2008, an amount equal to 
                                $150,500,000.
                                  (II) For expenditures during 
                                2009, an amount equal to 
                                $24,500,000.
                          (ii) Limitations on expenditures.--
                                  (I) 2008.--The amount 
                                available for expenditures 
                                during 2008 shall be reduced as 
                                provided by subparagraph (A) of 
                                section 225(c)(1) and section 
                                524 of the Departments of 
                                Labor, Health and Human 
                                Services, and Education, and 
                                Related Agencies Appropriations 
                                Act, 2008 (division G of the 
                                Consolidated Appropriations 
                                Act, 2008).
                                  (II) 2009.--The amount 
                                available for expenditures 
                                during 2009 shall be reduced as 
                                provided by subparagraph (B) of 
                                such section 225(c)(1).
                  (B) Timely obligation of all available funds 
                for services.--The Secretary shall provide for 
                expenditures from the Fund in a manner designed 
                to provide (to the maximum extent feasible) for 
                the obligation of the entire amount available 
                for expenditures, after application of 
                subparagraph (A)(ii), during--
                          (i) 2008 for payment with respect to 
                        physicians' services furnished during 
                        2008; and
                          (ii) 2009 for payment with respect to 
                        physicians' services furnished during 
                        2009.
                  (C) Payment from trust fund.--The amount 
                specified in subparagraph (A) shall be 
                available to the Fund, as expenditures are made 
                from the Fund, from the Federal Supplementary 
                Medical Insurance Trust Fund under section 
                1841.
                  (D) Funding limitation.--Amounts in the Fund 
                shall be available in advance of appropriations 
                in accordance with subparagraph (B) but only if 
                the total amount obligated from the Fund does 
                not exceed the amount available to the Fund 
                under subparagraph (A). The Secretary may 
                obligate funds from the Fund only if the 
                Secretary determines (and the Chief Actuary of 
                the Centers for Medicare & Medicaid Services 
                and the appropriate budget officer certify) 
                that there are available in the Fund sufficient 
                amounts to cover all such obligations incurred 
                consistent with the previous sentence.
                  (E) Construction.--In the case that 
                expenditures from the Fund are applied to, or 
                otherwise affect, a conversion factor under 
                subsection (d) for a year, the conversion 
                factor under such subsection shall be computed 
                for a subsequent year as if such application or 
                effect had never occurred.
  (m) Incentive Payments for Quality Reporting.--
          (1) Incentive payments.--
                  (A) In general.--For 2007 through 2014, with 
                respect to covered professional services 
                furnished during a reporting period by an 
                eligible professional, if--
                          (i) there are any quality measures 
                        that have been established under the 
                        physician reporting system that are 
                        applicable to any such services 
                        furnished by such professional for such 
                        reporting period;
                          (ii) the eligible professional 
                        satisfactorily submits (as determined 
                        under this subsection) to the Secretary 
                        data on such quality measures in 
                        accordance with such reporting system 
                        for such reporting period,
                in addition to the amount otherwise paid under 
                this part, there also shall be paid to the 
                eligible professional (or to an employer or 
                facility in the cases described in clause (A) 
                of section 1842(b)(6)) or, in the case of a 
                group practice under paragraph (3)(C), to the 
                group practice, from the Federal Supplementary 
                Medical Insurance Trust Fund established under 
                section 1841 an amount equal to the applicable 
                quality percent of the Secretary's estimate 
                (based on claims submitted not later than 2 
                months after the end of the reporting period) 
                of the allowed charges under this part for all 
                such covered professional services furnished by 
                the eligible professional (or, in the case of a 
                group practice under paragraph (3)(C), by the 
                group practice) during the reporting period.
                  (B) Applicable quality percent.--For purposes 
                of subparagraph (A), the term ``applicable 
                quality percent'' means--
                          (i) for 2007 and 2008, 1.5 percent; 
                        and
                          (ii) for 2009 and 2010, 2.0 percent;
                          (iii) for 2011, 1.0 percent; and
                          (iv) for 2012, 2013, and 2014, 0.5 
                        percent.
          (2) Incentive payments for electronic prescribing.--
                  (A) In general.--Subject to subparagraph (D), 
                for 2009 through 2013, with respect to covered 
                professional services furnished during a 
                reporting period by an eligible professional, 
                if the eligible professional is a successful 
                electronic prescriber for such reporting 
                period, in addition to the amount otherwise 
                paid under this part, there also shall be paid 
                to the eligible professional (or to an employer 
                or facility in the cases described in clause 
                (A) of section 1842(b)(6)) or, in the case of a 
                group practice under paragraph (3)(C), to the 
                group practice, from the Federal Supplementary 
                Medical Insurance Trust Fund established under 
                section 1841 an amount equal to the applicable 
                electronic prescribing percent of the 
                Secretary's estimate (based on claims submitted 
                not later than 2 months after the end of the 
                reporting period) of the allowed charges under 
                this part for all such covered professional 
                services furnished by the eligible professional 
                (or, in the case of a group practice under 
                paragraph (3)(C), by the group practice) during 
                the reporting period.
                  (B) Limitation with respect to electronic 
                prescribing quality measures.--The provisions 
                of this paragraph and subsection (a)(5) shall 
                not apply to an eligible professional (or, in 
                the case of a group practice under paragraph 
                (3)(C), to the group practice) if, for the 
                reporting period (or, for purposes of 
                subsection (a)(5), for the reporting period for 
                a year)--
                          (i) the allowed charges under this 
                        part for all covered professional 
                        services furnished by the eligible 
                        professional (or group, as applicable) 
                        for the codes to which the electronic 
                        prescribing quality measure applies (as 
                        identified by the Secretary and 
                        published on the Internet website of 
                        the Centers for Medicare & Medicaid 
                        Services as of January 1, 2008, and as 
                        subsequently modified by the Secretary) 
                        are less than 10 percent of the total 
                        of the allowed charges under this part 
                        for all such covered professional 
                        services furnished by the eligible 
                        professional (or the group, as 
                        applicable); or
                          (ii) if determined appropriate by the 
                        Secretary, the eligible professional 
                        does not submit (including both 
                        electronically and nonelectronically) a 
                        sufficient number (as determined by the 
                        Secretary) of prescriptions under part 
                        D.
                If the Secretary makes the determination to 
                apply clause (ii) for a period, then clause (i) 
                shall not apply for such period.
                  (C) Applicable electronic prescribing 
                percent.--For purposes of subparagraph (A), the 
                term ``applicable electronic prescribing 
                percent'' means--
                          (i) for 2009 and 2010, 2.0 percent;
                          (ii) for 2011 and 2012, 1.0 percent; 
                        and
                          (iii) for 2013, 0.5 percent.
                  (D) Limitation with respect to ehr incentive 
                payments.--The provisions of this paragraph 
                shall not apply to an eligible professional 
                (or, in the case of a group practice under 
                paragraph (3)(C), to the group practice) if, 
                for the EHR reporting period the eligible 
                professional (or group practice) receives an 
                incentive payment under subsection (o)(1)(A) 
                with respect to a certified EHR technology (as 
                defined in subsection (o)(4)) that has the 
                capability of electronic prescribing.
          (3) Satisfactory reporting and successful electronic 
        prescriber and described.--
                  (A) In general.--For purposes of paragraph 
                (1), an eligible professional shall be treated 
                as satisfactorily submitting data on quality 
                measures for covered professional services for 
                a reporting period (or, for purposes of 
                subsection (a)(8), for the quality reporting 
                period for the year) if quality measures have 
                been reported as follows:
                          (i) Three or fewer quality measures 
                        applicable.--If there are no more than 
                        3 quality measures that are provided 
                        under the physician reporting system 
                        and that are applicable to such 
                        services of such professional furnished 
                        during the period, each such quality 
                        measure has been reported under such 
                        system in at least 80 percent of the 
                        cases in which such measure is 
                        reportable under the system.
                          (ii) Four or more quality measures 
                        applicable.--If there are 4 or more 
                        quality measures that are provided 
                        under the physician reporting system 
                        and that are applicable to such 
                        services of such professional 
                        furnishedduring the period, at least 3 
                        such quality measures have been 
                        reported under such system in at least 
                        80 percent of the cases in which the 
                        respective measure is reportable under 
                        the system.
                For years after 2008, quality measures for 
                purposes of this subparagraph shall not include 
                electronic prescribing quality measures.
                  (B) Successful electronic prescriber.--
                          (i) In general.--For purposes of 
                        paragraph (2) and subsection (a)(5), an 
                        eligible professional shall be treated 
                        as a successful electronic prescriber 
                        for a reporting period (or, for 
                        purposes of subsection (a)(5), for the 
                        reporting period for a year) if the 
                        eligible professional meets the 
                        requirement described in clause (ii), 
                        or, if the Secretary determines 
                        appropriate, the requirement described 
                        in clause (iii). If the Secretary makes 
                        the determination under the preceding 
                        sentence to apply the requirement 
                        described in clause (iii) for a period, 
                        then the requirement described in 
                        clause (ii) shall not apply for such 
                        period.
                          (ii) Requirement for submitting data 
                        on electronic prescribing quality 
                        measures.--The requirement described in 
                        this clause is that, with respect to 
                        covered professional services furnished 
                        by an eligible professional during a 
                        reporting period (or, for purposes of 
                        subsection (a)(5), for the reporting 
                        period for a year), if there are any 
                        electronic prescribing quality measures 
                        that have been established under the 
                        physician reporting system and are 
                        applicable to any such services 
                        furnished by such professional for the 
                        period, such professional reported each 
                        such measure under such system in at 
                        least 50 percent of the cases in which 
                        such measure is reportable by such 
                        professional under such system.
                          (iii) Requirement for electronically 
                        prescribing under part d.--The 
                        requirement described in this clause is 
                        that the eligible professional 
                        electronically submitted a sufficient 
                        number (as determined by the Secretary) 
                        of prescriptions under part D during 
                        the reporting period (or, for purposes 
                        of subsection (a)(5), for the reporting 
                        period for a year).
                          (iv) Use of part d data.--
                        Notwithstanding sections 1860D-
                        15(d)(2)(B) and 1860D-15(f)(2), the 
                        Secretary may use data regarding drug 
                        claims submitted for purposes of 
                        section 1860D-15 that are necessary for 
                        purposes of clause (iii), paragraph 
                        (2)(B)(ii), and paragraph (5)(G).
                          (v) Standards for electronic 
                        prescribing.--To the extent 
                        practicable, in determining whether 
                        eligible professionals meet the 
                        requirements under clauses (ii) and 
                        (iii) for purposes of clause (i), the 
                        Secretary shall ensure that eligible 
                        professionals utilize electronic 
                        prescribing systems in compliance with 
                        standards established for such systems 
                        pursuant to the Part D Electronic 
                        Prescribing Program under section 
                        1860D-4(e).
                  (C) Satisfactory reporting measures for group 
                practices.--
                          (i) In general.--By January 1, 2010, 
                        the Secretary shall establish and have 
                        in place a process under which eligible 
                        professionals in a group practice (as 
                        defined by the Secretary) shall be 
                        treated as satisfactorily submitting 
                        data on quality measures under 
                        subparagraph (A) and as meeting the 
                        requirement described in subparagraph 
                        (B)(ii) for covered professional 
                        services for a reporting period (or, 
                        for purposes of subsection (a)(5), for 
                        a reporting period for a year, or, for 
                        purposes of subsection (a)(8), for a 
                        quality reporting period for the year) 
                        if, in lieu of reporting measures under 
                        subsection (k)(2)(C), the group 
                        practice reports measures determined 
                        appropriate by the Secretary, such as 
                        measures that target high-cost chronic 
                        conditions and preventive care, in a 
                        form and manner, and at a time, 
                        specified by the Secretary.
                          (ii) Statistical sampling model.--The 
                        process under clause (i) shall provide 
                        and, for 2016 and subsequent years, may 
                        provide for the use of a statistical 
                        sampling model to submit data on 
                        measures, such as the model used under 
                        the Physician Group Practice 
                        demonstration project under section 
                        1866A.
                          (iii) No double payments.--Payments 
                        to a group practice under this 
                        subsection by reason of the process 
                        under clause (i) shall be in lieu of 
                        the payments that would otherwise be 
                        made under this subsection to eligible 
                        professionals in the group practice for 
                        satisfactorily submitting data on 
                        quality measures.
                  (D) Satisfactory reporting measures through 
                participation in a qualified clinical data 
                registry.--For 2014 and subsequent years, the 
                Secretary shall treat an eligible professional 
                as satisfactorily submitting data on quality 
                measures under subparagraph (A) and, for 2016 
                and subsequent years, subparagraph (A) or (C) 
                if, in lieu of reporting measures under 
                subsection (k)(2)(C), the eligible professional 
                is satisfactorily participating, as determined 
                by the Secretary, in a qualified clinical data 
                registry (as described in subparagraph (E)) for 
                the year.
                  (E) Qualified clinical data registry.--
                          (i) In general.--The Secretary shall 
                        establish requirements for an entity to 
                        be considered a qualified clinical data 
                        registry. Such requirements shall 
                        include a requirement that the entity 
                        provide the Secretary with such 
                        information, at such times, and in such 
                        manner, as the Secretary determines 
                        necessary to carry out this subsection.
                          (ii) Considerations.--In establishing 
                        the requirements under clause (i), the 
                        Secretary shall consider whether an 
                        entity--
                                  (I) has in place mechanisms 
                                for the transparency of data 
                                elements and specifications, 
                                risk models, and measures;
                                  (II) requires the submission 
                                of data from participants with 
                                respect to multiple payers;
                                  (III) provides timely 
                                performance reports to 
                                participants at the individual 
                                participant level; and
                                  (IV) supports quality 
                                improvement initiatives for 
                                participants.
                          (iii) Measures.--With respect to 
                        measures used by a qualified clinical 
                        data registry--
                                  (I) sections 1890(b)(7) and 
                                1890A(a) shall not apply; and
                                  (II) measures endorsed by the 
                                entity with a contract with the 
                                Secretary under section 1890(a) 
                                may be used.
                          (iv) Consultation.--In carrying out 
                        this subparagraph, the Secretary shall 
                        consult with interested parties.
                          (v) Determination.--The Secretary 
                        shall establish a process to determine 
                        whether or not an entity meets the 
                        requirements established under clause 
                        (i). Such process may involve one or 
                        both of the following:
                                  (I) A determination by the 
                                Secretary.
                                  (II) A designation by the 
                                Secretary of one or more 
                                independent organizations to 
                                make such determination.
                  (F) Authority to revise satisfactorily 
                reporting data.--For years after 2009, the 
                Secretary, in consultation with stakeholders 
                and experts, may revise the criteria under this 
                subsection for satisfactorily submitting data 
                on quality measures under subparagraph (A) and 
                the criteria for submitting data on electronic 
                prescribing quality measures under subparagraph 
                (B)(ii).
          (4) Form of payment.--The payment under this 
        subsection shall be in the form of a single 
        consolidated payment.
          (5) Application.--
                  (A) Physician reporting system rules.--
                Paragraphs (5), (6),and (8) of subsection (k) 
                shall apply for purposes of this subsection in 
                the same manner as they apply for purposes of 
                such subsection.
                  (B) Coordination with other bonus payments.--
                The provisions of this subsection shall not be 
                taken into account in applying subsections (m) 
                and (u) of section 1833 and any payment under 
                such subsections shall not be taken into 
                account in computing allowable charges under 
                this subsection.
                  (C) Implementation.--Notwithstanding any 
                other provision of law, for 2007, 2008, and 
                2009, the Secretary may implement by program 
                instruction or otherwise this subsection.
                  (D) Validation.--
                          (i) In general.--Subject to the 
                        succeeding provisions of this 
                        subparagraph, for purposes of 
                        determining whether a measure is 
                        applicable to the covered professional 
                        services of an eligible professional 
                        under this subsection for 2007 and 288, 
                        the Secretary shall presume that if an 
                        eligible professional submits data for 
                        a measure, such measure is applicable 
                        to such professional.
                          (ii) Method.--The Secretary may 
                        establish procedures to validate (by 
                        sampling or other means as the 
                        Secretary determines to be appropriate) 
                        whether measures applicable to covered 
                        professional services of an eligible 
                        professional have been reported.
                          (iii) Denial of payment authority.--
                        If the Secretary determines that an 
                        eligible professional (or, in the case 
                        of a group practice under paragraph 
                        (3)(C), the group practice) has not 
                        reported measures applicable to covered 
                        professional services of such 
                        professional, the Secretary shall not 
                        pay the incentive payment under this 
                        subsection. If such payments for such 
                        period have already been made, the 
                        Secretary shall recoup such payments 
                        from the eligible professional (or the 
                        group practice).
                  (E) Limitations on review.--
                          Except as provided in subparagraph 
                        (I), there shall be no administrative 
                        or judicial review under 1869, section 
                        1878, or otherwise of
                          (i) the determination of measures 
                        applicable to services furnished by 
                        eligible professionals under this 
                        subsection;
                          (ii) the determination of 
                        satisfactory reporting under this 
                        subsection;
                          (iii) the determination of a 
                        successful electronic prescriber under 
                        paragraph (3), the limitation under 
                        paragraph (2)(B), and the exception 
                        under subsection (a)(5)(B); and
                          (iv) the determination of any 
                        incentive payment under this subsection 
                        and the payment adjustment under 
                        paragraphs (5)(A) and (8)(A) of 
                        subsection (a).
                  (F) Extension.--For 2008 through reporting 
                periods occurring in 2015, the Secretary shall 
                establish and, for reporting periods occurring 
                in 2016 and subsequent years, the Secretary may 
                establish alternative criteria for 
                satisfactorily reporting under this subsection 
                and alternative reporting periods under 
                paragraph (6)(C) for reporting groups of 
                measures under subsection (k)(2)(B) and for 
                reporting using the method specified in 
                subsection (k)(4).
                  (G) Posting on website.--The Secretary shall 
                post on the Internet website of the Centers for 
                Medicare & Medicaid Services, in an easily 
                understandable format, a list of the names of 
                the following:
                          (i) The eligible professionals (or, 
                        in the case of reporting under 
                        paragraph (3)(C), the group practices) 
                        who satisfactorily submitted data on 
                        quality measures under this subsection.
                          (ii) The eligible professionals (or, 
                        in the case of reporting under 
                        paragraph (3)(C), the group practices) 
                        who are successful electronic 
                        prescribers.
                  (H) Feedback.--The Secretary shall provide 
                timely feedback to eligible professionals on 
                the performance of the eligible professional 
                with respect to satisfactorily submitting data 
                on quality measures under this subsection.
                  (I) Informal appeals process.--The Secretary 
                shall, by not later than January 1, 2011, 
                establish and have in place an informal process 
                for eligible professionals to seek a review of 
                the determination that an eligible professional 
                did not satisfactorily submit data on quality 
                measures under this subsection.
          (6) Definitions.--For purposes of this subsection:
                  (A) Eligible professional; covered 
                professional services.--The terms ``eligible 
                professional'' and ``covered professional 
                services'' have the meanings given such termsin 
                subsection (k)(3).
                  (B) Physician reporting system.--The term 
                ``physician reporting system'' means the system 
                established under subsection (k).
                  (C) Reporting period.--
                          (i) In general.--Subject to clauses 
                        (ii) and (iii), the term ``reporting 
                        period'' means--
                                  (I) for 2007, the period 
                                beginning on July 1, 2007, and 
                                ending on December 31, 2007; 
                                and
                                  (II) for 2008 and subsequent 
                                years, the entire year.
                          (ii) Authority to revise reporting 
                        period.--For years after 2009, the 
                        Secretary may revise the reporting 
                        period under clause (i) if the 
                        Secretary determines such revision is 
                        appropriate, produces valid results on 
                        measures reported, and is consistent 
                        with the goals of maximizing scientific 
                        validity and reducing administrative 
                        burden. If the Secretary revises such 
                        period pursuant to the preceding 
                        sentence, the term ``reporting period'' 
                        shall mean such revised period.
                          (iii) Reference.--Any reference in 
                        this subsection to a reporting period 
                        with respect to the application of 
                        subsection (a)(5) (a)(8) shall be 
                        deemed a reference to the reporting 
                        period under subsection (a)(5)(D)(iii) 
                        or the quality reporting period under 
                        subsection (a)(8)(D)(iii), 
                        respectively.
          (7) Integration of physician quality reporting and 
        ehr reporting.--Not later than January 1, 2012, the 
        Secretary shall develop a plan to integrate reporting 
        on quality measures under this subsection with 
        reporting requirements under subsection (o) relating to 
        the meaningful use of electronic health records. Such 
        integration shall consist of the following:
                  (A) The selection of measures, the reporting 
                of which would both demonstrate--
                          (i) meaningful use of an electronic 
                        health record for purposes of 
                        subsection (o); and
                          (ii) quality of care furnished to an 
                        individual.
                  (B) Such other activities as specified by the 
                Secretary.
          (8) Additional incentive payment.--
                  (A) In general.--For 2011 through 2014, if an 
                eligible professional meets the requirements 
                described in subparagraph (B), the applicable 
                quality percent for such year, as described in 
                clauses (iii) and (iv) of paragraph (1)(B), 
                shall be increased by 0.5 percentage points.
                  (B) Requirements described.--In order to 
                qualify for the additional incentive payment 
                described in subparagraph (A), an eligible 
                professional shall meet the following 
                requirements:
                          (i) The eligible professional shall--
                                  (I) satisfactorily submit 
                                data on quality measures for 
                                purposes of paragraph (1) for a 
                                year; and
                                  (II) have such data submitted 
                                on their behalf through a 
                                Maintenance of Certification 
                                Program (as defined in 
                                subparagraph (C)(i)) that 
                                meets--
                                          (aa) the criteria for 
                                        a registry (as 
                                        described in subsection 
                                        (k)(4)); or
                                          (bb) an alternative 
                                        form and manner 
                                        determined appropriate 
                                        by the Secretary.
                          (ii) The eligible professional, more 
                        frequently than is required to qualify 
                        for or maintain board certification 
                        status--
                                  (I) participates in such a 
                                Maintenance of Certification 
                                program for a year; and
                                  (II) successfully completes a 
                                qualified Maintenance of 
                                Certification Program practice 
                                assessment (as defined in 
                                subparagraph (C)(ii)) for such 
                                year.
                          (iii) A Maintenance of Certification 
                        program submits to the Secretary, on 
                        behalf of the eligible professional, 
                        information--
                                  (I) in a form and manner 
                                specified by the Secretary, 
                                that the eligible professional 
                                has successfully met the 
                                requirements of clause (ii) 
                                (which may be in the form of a 
                                structural measure);
                                  (II) if requested by the 
                                Secretary, on the survey of 
                                patient experience with care 
                                (as described in subparagraph 
                                (C)(ii)(II)); and
                                  (III) as the Secretary may 
                                require, on the methods, 
                                measures, and data used under 
                                the Maintenance of 
                                Certification Program and the 
                                qualified Maintenance of 
                                Certification Program practice 
                                assessment.
                  (C) Definitions.--For purposes of this 
                paragraph:
                          (i) The term ``Maintenance of 
                        Certification Program'' means a 
                        continuous assessment program, such as 
                        qualified American Board of Medical 
                        Specialties Maintenance of 
                        Certification program or an equivalent 
                        program (as determined by the 
                        Secretary), that advances quality and 
                        the lifelong learning and self-
                        assessment of board certified specialty 
                        physicians by focusing on the 
                        competencies of patient care, medical 
                        knowledge, practice-based learning, 
                        interpersonal and communication skills 
                        and professionalism. Such a program 
                        shall include the following:
                                  (I) The program requires the 
                                physician to maintain a valid, 
                                unrestricted medical license in 
                                the United States.
                                  (II) The program requires a 
                                physician to participate in 
                                educational and self-assessment 
                                programs that require an 
                                assessment of what was learned.
                                  (III) The program requires a 
                                physician to demonstrate, 
                                through a formalized, secure 
                                examination, that the physician 
                                has the fundamental diagnostic 
                                skills, medical knowledge, and 
                                clinical judgment to provide 
                                quality care in their 
                                respective specialty.
                                  (IV) The program requires 
                                successful completion of a 
                                qualified Maintenance of 
                                Certification Program practice 
                                assessment as described in 
                                clause (ii).
                          (ii) The term ``qualified Maintenance 
                        of Certification Program practice 
                        assessment'' means an assessment of a 
                        physician's practice that--
                                  (I) includes an initial 
                                assessment of an eligible 
                                professional's practice that is 
                                designed to demonstrate the 
                                physician's use of evidence-
                                based medicine;
                                  (II) includes a survey of 
                                patient experience with care; 
                                and
                                  (III) requires a physician to 
                                implement a quality improvement 
                                intervention to address a 
                                practice weakness identified in 
                                the initial assessment under 
                                subclause (I) and then to 
                                remeasure to assess performance 
                                improvement after such 
                                intervention.
          (9) Continued application for purposes of mips and 
        for certain professionals volunteering to report.--The 
        Secretary shall, in accordance with subsection 
        (q)(1)(F), carry out the processes under this 
        subsection--
                  (A) for purposes of subsection (q); and
                  (B) for eligible professionals who are not 
                MIPS eligible professionals (as defined in 
                subsection (q)(1)(C)) for the year involved.
  (n) Physician Feedback Program.--
          (1) Establishment.--
                  (A) In general.--
                          (i) Establishment.--The Secretary 
                        shall establish a Physician Feedback 
                        Program (in this subsection referred to 
                        as the ``Program'').
                          (ii) Reports on resources.--The 
                        Secretary shall use claims data under 
                        this title (and may use other data) to 
                        provide confidential reports to 
                        physicians (and, as determined 
                        appropriate by the Secretary, to groups 
                        of physicians) that measure the 
                        resources involved in furnishing care 
                        to individuals under this title.
                          (iii) Inclusion of certain 
                        information.--If determined appropriate 
                        by the Secretary, the Secretary may 
                        include information on the quality of 
                        care furnished to individuals under 
                        this title by the physician (or group 
                        of physicians) in such reports.
                  (B) Resource use.--The resources described in 
                subparagraph (A)(ii) may be measured--
                          (i) on an episode basis;
                          (ii) on a per capita basis; or
                          (iii) on both an episode and a per 
                        capita basis.
          (2) Implementation.--The Secretary shall implement 
        the Program by not later than January 1, 2009.
          (3) Data for reports.--To the extent practicable, 
        reports under the Program shall be based on the most 
        recent data available.
          (4) Authority to focus initial application.--The 
        Secretary may focus the initial application of the 
        Program as appropriate, such as focusing the Program 
        on--
                  (A) physician specialties that account for a 
                certain percentage of all spending for 
                physicians' services under this title;
                  (B) physicians who treat conditions that have 
                a high cost or a high volume, or both, under 
                this title;
                  (C) physicians who use a high amount of 
                resources compared to other physicians;
                  (D) physicians practicing in certain 
                geographic areas; or
                  (E) physicians who treat a minimum number of 
                individuals under this title.
          (5) Authority to exclude certain information if 
        insufficient information.--The Secretary may exclude 
        certain information regarding a service from a report 
        under the Program with respect to a physician (or group 
        of physicians) if the Secretary determines that there 
        is insufficient information relating to that service to 
        provide a valid report on that service.
          (6) Adjustment of data.--To the extent practicable, 
        the Secretary shall make appropriate adjustments to the 
        data used in preparing reports under the Program, such 
        as adjustments to take into account variations in 
        health status and other patient characteristics. For 
        adjustments for reports on utilization under paragraph 
        (9), see subparagraph (D) of such paragraph.
          (7) Education and outreach.--The Secretary shall 
        provide for education and outreach activities to 
        physicians on the operation of, and methodologies 
        employed under, the Program.
          (8) Disclosure exemption.--Reports under the Program 
        shall be exempt from disclosure under section 552 of 
        title 5, United States Code.
          (9) Reports on utilization.--
                  (A) Development of episode grouper.--
                          (i) In general.--The Secretary shall 
                        develop an episode grouper that 
                        combines separate but clinically 
                        related items and services into an 
                        episode of care for an individual, as 
                        appropriate.
                          (ii) Timeline for development.--The 
                        episode grouper described in 
                        subparagraph (A) shall be developed by 
                        not later than January 1, 2012.
                          (iii) Public availability.--The 
                        Secretary shall make the details of the 
                        episode grouper described in 
                        subparagraph (A) available to the 
                        public.
                          (iv) Endorsement.--The Secretary 
                        shall seek endorsement of the episode 
                        grouper described in subparagraph (A) 
                        by the entity with a contract under 
                        section 1890(a).
                  (B) Reports on utilization.--Effective 
                beginning with 2012, the Secretary shall 
                provide reports to physicians that compare, as 
                determined appropriate by the Secretary, 
                patterns of resource use of the individual 
                physician to such patterns of other physicians.
                  (C) Analysis of data.--The Secretary shall, 
                for purposes of preparing reports under this 
                paragraph, establish methodologies as 
                appropriate, such as to--
                          (i) attribute episodes of care, in 
                        whole or in part, to physicians;
                          (ii) identify appropriate physicians 
                        for purposes of comparison under 
                        subparagraph (B); and
                          (iii) aggregate episodes of care 
                        attributed to a physician under clause 
                        (i) into a composite measure per 
                        individual.
                  (D) Data adjustment.--In preparing reports 
                under this paragraph, the Secretary shall make 
                appropriate adjustments, including 
                adjustments--
                          (i) to account for differences in 
                        socioeconomic and demographic 
                        characteristics, ethnicity, and health 
                        status of individuals (such as to 
                        recognize that less healthy individuals 
                        may require more intensive 
                        interventions); and
                          (ii) to eliminate the effect of 
                        geographic adjustments in payment rates 
                        (as described in subsection (e)).
                  (E) Public availability of methodology.--The 
                Secretary shall make available to the public--
                          (i) the methodologies established 
                        under subparagraph (C);
                          (ii) information regarding any 
                        adjustments made to data under 
                        subparagraph (D); and
                          (iii) aggregate reports with respect 
                        to physicians.
                  (F) Definition of physician.--In this 
                paragraph:
                          (i) In general.--The term 
                        ``physician'' has the meaning given 
                        that term in section 1861(r)(1).
                          (ii) Treatment of groups.--Such term 
                        includes, as the Secretary determines 
                        appropriate, a group of physicians.
                  (G) Limitations on review.--There shall be no 
                administrative or judicial review under section 
                1869, section 1878, or otherwise of the 
                establishment of the methodology under 
                subparagraph (C), including the determination 
                of an episode of care under such methodology.
          (10) Coordination with other value-based purchasing 
        reforms.--The Secretary shall coordinate the Program 
        with the value-based payment modifier established under 
        subsection (p) and, as the Secretary determines 
        appropriate, other similar provisions of this title.
          (11) Reports ending with 2017.--Reports under the 
        Program shall not be provided after December 31, 2017. 
        See subsection (q)(12) for reports under the eligible 
        professionals Merit-based Incentive Payment System.
  (o) Incentives for Adoption and Meaningful Use of Certified 
EHR Technology.--
          (1) Incentive payments.--
                  (A) In general.--
                          (i) In general.--Subject to the 
                        succeeding subparagraphs of this 
                        paragraph, with respect to covered 
                        professional services furnished by an 
                        eligible professional during a payment 
                        year (as defined in subparagraph (E)), 
                        if the eligible professional is a 
                        meaningful EHR user (as determined 
                        under paragraph (2)) for the EHR 
                        reporting period with respect to such 
                        year, in addition to the amount 
                        otherwise paid under this part, there 
                        also shall be paid to the eligible 
                        professional (or to an employer or 
                        facility in the cases described in 
                        clause (A) of section 1842(b)(6)), from 
                        the Federal Supplementary Medical 
                        Insurance Trust Fund established under 
                        section 1841 an amount equal to 75 
                        percent of the Secretary's estimate 
                        (based on claims submitted not later 
                        than 2 months after the end of the 
                        payment year) of the allowed charges 
                        under this part for all such covered 
                        professional services furnished by the 
                        eligible professional during such year.
                          (ii) No incentive payments with 
                        respect to years after 2016.--No 
                        incentive payments may be made under 
                        this subsection with respect to a year 
                        after 2016.
                  (B) Limitations on amounts of incentive 
                payments.--
                          (i) In general.--In no case shall the 
                        amount of the incentive payment 
                        provided under this paragraph for an 
                        eligible professional for a payment 
                        year exceed the applicable amount 
                        specified under this subparagraph with 
                        respect to such eligible professional 
                        and such year.
                          (ii) Amount.--Subject to clauses 
                        (iii) through (v), the applicable 
                        amount specified in this subparagraph 
                        for an eligible professional is as 
                        follows:
                                  (I) For the first payment 
                                year for such professional, 
                                $15,000 (or, if the first 
                                payment year for such eligible 
                                professional is 2011 or 2012, 
                                $18,000).
                                  (II) For the second payment 
                                year for such professional, 
                                $12,000.
                                  (III) For the third payment 
                                year for such professional, 
                                $8,000.
                                  (IV) For the fourth payment 
                                year for such professional, 
                                $4,000.
                                  (V) For the fifth payment 
                                year for such professional, 
                                $2,000.
                                  (VI) For any succeeding 
                                payment year for such 
                                professional, $0.
                          (iii) Phase down for eligible 
                        professionals first adopting ehr after 
                        2013.--If the first payment year for an 
                        eligible professional is after 2013, 
                        then the amount specified in this 
                        subparagraph for a payment year for 
                        such professional is the same as the 
                        amount specified in clause (ii) for 
                        such payment year for an eligible 
                        professional whose first payment year 
                        is 2013.
                          (iv) Increase for certain eligible 
                        professionals.--In the case of an 
                        eligible professional who predominantly 
                        furnishes services under this part in 
                        an area that is designated by the 
                        Secretary (under section 332(a)(1)(A) 
                        of the Public Health Service Act) as a 
                        health professional shortage area, the 
                        amount that would otherwise apply for a 
                        payment year for such professional 
                        under subclauses (I) through (V) of 
                        clause (ii) shall be increased by 10 
                        percent. In implementing the preceding 
                        sentence, the Secretary may, as 
                        determined appropriate, apply 
                        provisions of subsections (m) and (u) 
                        of section 1833 in a similar manner as 
                        such provisions apply under such 
                        subsection.
                          (v) No incentive payment if first 
                        adopting after 2014.--If the first 
                        payment year for an eligible 
                        professional is after 2014 then the 
                        applicable amount specified in this 
                        subparagraph for such professional for 
                        such year and any subsequent year shall 
                        be $0.
                  (C) Non-application to hospital-based 
                eligible professionals.--
                          (i) In general.--No incentive payment 
                        may be made under this paragraph in the 
                        case of a hospital-based eligible 
                        professional.
                          (ii) Hospital-based eligible 
                        professional.--For purposes of clause 
                        (i), the term ``hospital-based eligible 
                        professional'' means, with respect to 
                        covered professional services furnished 
                        by an eligible professional during the 
                        EHR reporting period for a payment 
                        year, an eligible professional, such as 
                        a pathologist, anesthesiologist, or 
                        emergency physician, who furnishes 
                        substantially all of such services in a 
                        hospital inpatient or emergency room 
                        setting and through the use of the 
                        facilities and equipment, including 
                        qualified electronic health records, of 
                        the hospital. The determination of 
                        whether an eligible professional is a 
                        hospital-based eligible professional 
                        shall be made on the basis of the site 
                        of service (as defined by the 
                        Secretary) and without regard to any 
                        employment or billing arrangement 
                        between the eligible professional and 
                        any other provider.
                  (D) Payment.--
                          (i) Form of payment.--The payment 
                        under this paragraph may be in the form 
                        of a single consolidated payment or in 
                        the form of such periodic installments 
                        as the Secretary may specify.
                          (ii) Coordination of application of 
                        limitation for professionals in 
                        different practices.--In the case of an 
                        eligible professional furnishing 
                        covered professional services in more 
                        than one practice (as specified by the 
                        Secretary), the Secretary shall 
                        establish rules to coordinate the 
                        incentive payments, including the 
                        application of the limitation on 
                        amounts of such incentive payments 
                        under this paragraph, among such 
                        practices.
                          (iii) Coordination with medicaid.--
                        The Secretary shall seek, to the 
                        maximum extent practicable, to avoid 
                        duplicative requirements from Federal 
                        and State governments to demonstrate 
                        meaningful use of certified EHR 
                        technology under this title and title 
                        XIX. The Secretary may also adjust the 
                        reporting periods under such title and 
                        such subsections in order to carry out 
                        this clause.
                  (E) Payment year defined.--
                          (i) In general.--For purposes of this 
                        subsection, the term ``payment year'' 
                        means a year beginning with 2011.
                          (ii) First, second, etc. payment 
                        year.--The term ``first payment year'' 
                        means, with respect to covered 
                        professional services furnished by an 
                        eligible professional, the first year 
                        for which an incentive payment is made 
                        for such services under this 
                        subsection. The terms ``second payment 
                        year'', ``third payment year'', 
                        ``fourth payment year'', and ``fifth 
                        payment year'' mean, with respect to 
                        covered professional services furnished 
                        by such eligible professional, each 
                        successive year immediately following 
                        the first payment year for such 
                        professional.
          (2) Meaningful ehr user.--
                  (A) In general.--An eligible professional 
                shall be treated as a meaningful EHR user for 
                an EHR reporting period for a payment year (or, 
                for purposes of subsection (a)(7), for an EHR 
                reporting period under such subsection for a 
                year, or pursuant to subparagraph (D) for 
                purposes of subsection (q), for a performance 
                period under such subsection for a year) if 
                each of the following requirements is met:
                          (i) Meaningful use of certified ehr 
                        technology.--The eligible professional 
                        demonstrates to the satisfaction of the 
                        Secretary, in accordance with 
                        subparagraph (C)(i), that during such 
                        period the professional is using 
                        certified EHR technology in a 
                        meaningful manner, which shall include 
                        the use of electronic prescribing as 
                        determined to be appropriate by the 
                        Secretary.
                          (ii) Information exchange.--The 
                        eligible professional demonstrates to 
                        the satisfaction of the Secretary, in 
                        accordance with subparagraph (C)(i), 
                        that during such period such certified 
                        EHR technology is connected in a manner 
                        that provides, in accordance with law 
                        and standards applicable to the 
                        exchange of information, for the 
                        electronic exchange of health 
                        information to improve the quality of 
                        health care, such as promoting care 
                        coordination, and the professional 
                        demonstrates (through a process 
                        specified by the Secretary, such as the 
                        use of an attestation) that the 
                        professional has not knowingly and 
                        willfully taken action (such as to 
                        disable functionality) to limit or 
                        restrict the compatibility or 
                        interoperability of the certified EHR 
                        technology.
                          (iii) Reporting on measures using 
                        ehr.--Subject to subparagraph (B)(ii) 
                        and subsection (q)(5)(B)(ii)(II) and 
                        using such certified EHR technology, 
                        the eligible professional submits 
                        information for such period, in a form 
                        and manner specified by the Secretary, 
                        on such clinical quality measures and 
                        such other measures as selected by the 
                        Secretary under subparagraph (B)(i).
                The Secretary may provide for the use of 
                alternative means for meeting the requirements 
                of clauses (i), (ii), and (iii) in the case of 
                an eligible professional furnishing covered 
                professional services in a group practice (as 
                defined by the Secretary). The Secretary shall 
                seek to improve the use of electronic health 
                records and health care quality over time by 
                requiring more stringent measures of meaningful 
                use selected under this paragraph.
                  (B) Reporting on measures.--
                          (i) Selection.--The Secretary shall 
                        select measures for purposes of 
                        subparagraph (A)(iii) but only 
                        consistent with the following:
                                  (I) The Secretary shall 
                                provide preference to clinical 
                                quality measures that have been 
                                endorsed by the entity with a 
                                contract with the Secretary 
                                under section 1890(a).
                                  (II) Prior to any measure 
                                being selected under this 
                                subparagraph, the Secretary 
                                shall publish in the Federal 
                                Register such measure and 
                                provide for a period of public 
                                comment on such measure.
                          (ii) Limitation.--The Secretary may 
                        not require the electronic reporting of 
                        information on clinical quality 
                        measures under subparagraph (A)(iii) 
                        unless the Secretary has the capacity 
                        to accept the information 
                        electronically, which may be on a pilot 
                        basis.
                          (iii) Coordination of reporting of 
                        information.--In selecting such 
                        measures, and in establishing the form 
                        and manner for reporting measures under 
                        subparagraph (A)(iii), the Secretary 
                        shall seek to avoid redundant or 
                        duplicative reporting otherwise 
                        required, including reporting under 
                        subsection (k)(2)(C).
                  (C) Demonstration of meaningful use of 
                certified ehr technology and information 
                exchange.--
                          (i) In general.--A professional may 
                        satisfy the demonstration requirement 
                        of clauses (i) and (ii) of subparagraph 
                        (A) through means specified by the 
                        Secretary, which may include--
                                  (I) an attestation;
                                  (II) the submission of claims 
                                with appropriate coding (such 
                                as a code indicating that a 
                                patient encounter was 
                                documented using certified EHR 
                                technology);
                                  (III) a survey response;
                                  (IV) reporting under 
                                subparagraph (A)(iii); and
                                  (V) other means specified by 
                                the Secretary.
                          (ii) Use of part d data.--
                        Notwithstanding sections 1860D-
                        15(d)(2)(B) and 1860D-15(f)(2), the 
                        Secretary may use data regarding drug 
                        claims submitted for purposes of 
                        section 1860D-15 that are necessary for 
                        purposes of subparagraph (A).
                  (D) Continued application for purposes of 
                mips.--With respect to 2019 and each subsequent 
                payment year, the Secretary shall, for purposes 
                of subsection (q) and in accordance with 
                paragraph (1)(F) of such subsection, determine 
                whether an eligible professional who is a MIPS 
                eligible professional (as defined in subsection 
                (q)(1)(C)) for such year is a meaningful EHR 
                user under this paragraph for the performance 
                period under subsection (q) for such year.
          (3) Application.--
                  (A) Physician reporting system rules.--
                Paragraphs (5), (6), and (8) of subsection (k) 
                shall apply for purposes of this subsection in 
                the same manner as they apply for purposes of 
                such subsection.
                  (B) Coordination with other payments.--The 
                provisions of this subsection shall not be 
                taken into account in applying the provisions 
                of subsection (m) of this section and of 
                section 1833(m) and any payment under such 
                provisions shall not be taken into account in 
                computing allowable charges under this 
                subsection.
                  (C) Limitations on review.--There shall be no 
                administrative or judicial review under section 
                1869, section 1878, or otherwise, of--
                          (i) the methodology and standards for 
                        determining payment amounts under this 
                        subsection and payment adjustments 
                        under subsection (a)(7)(A), including 
                        the limitation under paragraph (1)(B) 
                        and coordination under clauses (ii) and 
                        (iii) of paragraph (1)(D);
                          (ii) the methodology and standards 
                        for determining a meaningful EHR user 
                        under paragraph (2), including 
                        selection of measures under paragraph 
                        (2)(B), specification of the means of 
                        demonstrating meaningful EHR use under 
                        paragraph (2)(C), and the hardship 
                        exception under subsection (a)(7)(B);
                          (iii) the methodology and standards 
                        for determining a hospital-based 
                        eligible professional under paragraph 
                        (1)(C); and
                          (iv) the specification of reporting 
                        periods under paragraph (5) and the 
                        selection of the form of payment under 
                        paragraph (1)(D)(i).
                  (D) Posting on website.--The Secretary shall 
                post on the Internet website of the Centers for 
                Medicare & Medicaid Services, in an easily 
                understandable format, a list of the names, 
                business addresses, and business phone numbers 
                of the eligible professionals who are 
                meaningful EHR users and, as determined 
                appropriate by the Secretary, of group 
                practices receiving incentive payments under 
                paragraph (1).
          (4) Certified ehr technology defined.--For purposes 
        of this section, the term ``certified EHR technology'' 
        means a qualified electronic health record (as defined 
        in section 3000(13) of the Public Health Service Act) 
        that is certified pursuant to section 3001(c)(5) of 
        such Act as meeting standards adopted under section 
        3004 of such Act that are applicable to the type of 
        record involved (as determined by the Secretary, such 
        as an ambulatory electronic health record for office-
        based physicians or an inpatient hospital electronic 
        health record for hospitals).
          (5) Definitions.--For purposes of this subsection:
                  (A) Covered professional services.--The term 
                ``covered professional services'' has the 
                meaning given such term in subsection (k)(3).
                  (B) EHR reporting period.--The term ``EHR 
                reporting period'' means, with respect to a 
                payment year, any period (or periods) as 
                specified by the Secretary.
                  (C) Eligible professional.--The term 
                ``eligible professional'' means a physician, as 
                defined in section 1861(r).
  (p) Establishment of Value-based Payment Modifier.--
          (1) In general.--The Secretary shall establish a 
        payment modifier that provides for differential payment 
        to a physician or a group of physicians under the fee 
        schedule established under subsection (b) based upon 
        the quality of care furnished compared to cost (as 
        determined under paragraphs (2) and (3), respectively) 
        during a performance period. Such payment modifier 
        shall be separate from the geographic adjustment 
        factors established under subsection (e).
          (2) Quality.--
                  (A) In general.--For purposes of paragraph 
                (1), quality of care shall be evaluated, to the 
                extent practicable, based on a composite of 
                measures of the quality of care furnished (as 
                established by the Secretary under subparagraph 
                (B)).
                  (B) Measures.--
                          (i) The Secretary shall establish 
                        appropriate measures of the quality of 
                        care furnished by a physician or group 
                        of physicians to individuals enrolled 
                        under this part, such as measures that 
                        reflect health outcomes. Such measures 
                        shall be risk adjusted as determined 
                        appropriate by the Secretary.
                          (ii) The Secretary shall seek 
                        endorsement of the measures established 
                        under this subparagraph by the entity 
                        with a contract under section 1890(a).
                  (C) Continued application for purposes of 
                mips.--The Secretary shall, in accordance with 
                subsection (q)(1)(F), carry out subparagraph 
                (B) for purposes of subsection (q).
          (3) Costs.--For purposes of paragraph (1), costs 
        shall be evaluated, to the extent practicable, based on 
        a composite of appropriate measures of costs 
        established by the Secretary (such as the composite 
        measure under the methodology established under 
        subsection (n)(9)(C)(iii)) that eliminate the effect of 
        geographic adjustments in payment rates (as described 
        in subsection (e)), and take into account risk factors 
        (such as socioeconomic and demographic characteristics, 
        ethnicity, and health status of individuals (such as to 
        recognize that less healthy individuals may require 
        more intensive interventions) and other factors 
        determined appropriate by the Secretary. With respect 
        to 2019 and each subsequent year, the Secretary shall, 
        in accordance with subsection (q)(1)(F), carry out this 
        paragraph for purposes of subsection (q).
          (4) Implementation.--
                  (A) Publication of measures, dates of 
                implementation, performance period.--Not later 
                than January 1, 2012, the Secretary shall 
                publish the following:
                          (i) The measures of quality of care 
                        and costs established under paragraphs 
                        (2) and (3), respectively.
                          (ii) The dates for implementation of 
                        the payment modifier (as determined 
                        under subparagraph (B)).
                          (iii) The initial performance period 
                        (as specified under subparagraph 
                        (B)(ii)).
                  (B) Deadlines for implementation.--
                          (i) Initial implementation.--Subject 
                        to the preceding provisions of this 
                        subparagraph, the Secretary shall begin 
                        implementing the payment modifier 
                        established under this subsection 
                        through the rulemaking process during 
                        2013 for the physician fee schedule 
                        established under subsection (b).
                          (ii) Initial performance period.--
                                  (I) In general.--The 
                                Secretary shall specify an 
                                initial performance period for 
                                application of the payment 
                                modifier established under this 
                                subsection with respect to 
                                2015.
                                  (II) Provision of information 
                                during initial performance 
                                period.--During the initial 
                                performance period, the 
                                Secretary shall, to the extent 
                                practicable, provide 
                                information to physicians and 
                                groups of physicians about the 
                                quality of care furnished by 
                                the physician or group of 
                                physicians to individuals 
                                enrolled under this part 
                                compared to cost (as determined 
                                under paragraphs (2) and (3), 
                                respectively) with respect to 
                                the performance period.
                          (iii) Application.--The Secretary 
                        shall apply the payment modifier 
                        established under this subsection for 
                        items and services furnished on or 
                        after January 1, 2015, with respect to 
                        specific physicians and groups of 
                        physicians the Secretary determines 
                        appropriate, and for services furnished 
                        on or after January 1, 2017, with 
                        respect to all physicians and groups of 
                        physicians. Such payment modifier shall 
                        not be applied for items and services 
                        furnished on or after January 1, 2019.
                  (C) Budget neutrality.--The payment modifier 
                established under this subsection shall be 
                implemented in a budget neutral manner.
          (5) Systems-based care.--The Secretary shall, as 
        appropriate, apply the payment modifier established 
        under this subsection in a manner that promotes 
        systems-based care.
          (6) Consideration of special circumstances of certain 
        providers.--In applying the payment modifier under this 
        subsection, the Secretary shall, as appropriate, take 
        into account the special circumstances of physicians or 
        groups of physicians in rural areas and other 
        underserved communities.
          (7) Application.--For purposes of the initial 
        application of the payment modifier established under 
        this subsection during the period beginning on January 
        1, 2015, and ending on December 31, 2016, the term 
        ``physician'' has the meaning given such term in 
        section 1861(r). On or after January 1, 2017, the 
        Secretary may apply this subsection to eligible 
        professionals (as defined in subsection (k)(3)(B)) as 
        the Secretary determines appropriate.
          (8) Definitions.--For purposes of this subsection:
                  (A) Costs.--The term ``costs'' means 
                expenditures per individual as determined 
                appropriate by the Secretary. In making the 
                determination under the preceding sentence, the 
                Secretary may take into account the amount of 
                growth in expenditures per individual for a 
                physician compared to the amount of such growth 
                for other physicians.
                  (B) Performance period.--The term 
                ``performance period'' means a period specified 
                by the Secretary.
          (9) Coordination with other value-based purchasing 
        reforms.--The Secretary shall coordinate the value-
        based payment modifier established under this 
        subsection with the Physician Feedback Program under 
        subsection (n) and, as the Secretary determines 
        appropriate, other similar provisions of this title.
          (10) Limitations on review.--There shall be no 
        administrative or judicial review under section 1869, 
        section 1878, or otherwise of--
                  (A) the establishment of the value-based 
                payment modifier under this subsection;
                  (B) the evaluation of quality of care under 
                paragraph (2), including the establishment of 
                appropriate measures of the quality of care 
                under paragraph (2)(B);
                  (C) the evaluation of costs under paragraph 
                (3), including the establishment of appropriate 
                measures of costs under such paragraph;
                  (D) the dates for implementation of the 
                value-based payment modifier;
                  (E) the specification of the initial 
                performance period and any other performance 
                period under paragraphs (4)(B)(ii) and (8)(B), 
                respectively;
                  (F) the application of the value-based 
                payment modifier under paragraph (7); and
                  (G) the determination of costs under 
                paragraph (8)(A).
  (q) Merit-Based Incentive Payment System.--
          (1) Establishment.--
                  (A) In general.--Subject to the succeeding 
                provisions of this subsection, the Secretary 
                shall establish an eligible professional Merit-
                based Incentive Payment System (in this 
                subsection referred to as the ``MIPS'') under 
                which the Secretary shall--
                          (i) develop a methodology for 
                        assessing the total performance of each 
                        MIPS eligible professional according to 
                        performance standards under paragraph 
                        (3) for a performance period (as 
                        established under paragraph (4)) for a 
                        year;
                          (ii) using such methodology, provide 
                        for a composite performance score in 
                        accordance with paragraph (5) for each 
                        such professional for each performance 
                        period; and
                          (iii) use such composite performance 
                        score of the MIPS eligible professional 
                        for a performance period for a year to 
                        determine and apply a MIPS adjustment 
                        factor (and, as applicable, an 
                        additional MIPS adjustment factor) 
                        under paragraph (6) to the professional 
                        for the year.
                Notwithstanding subparagraph (C)(ii), under the 
                MIPS, the Secretary shall permit any eligible 
                professional (as defined in subsection 
                (k)(3)(B)) to report on applicable measures and 
                activities described in paragraph (2)(B).
                  (B) Program implementation.--The MIPS shall 
                apply to payments for items and services 
                furnished on or after January 1, 2019.
                  (C) MIPS eligible professional defined.--
                          (i) In general.--For purposes of this 
                        subsection, subject to clauses (ii) and 
                        (iv), the term ``MIPS eligible 
                        professional'' means--
                                  (I) for the first and second 
                                years for which the MIPS 
                                applies to payments (and for 
                                the performance period for such 
                                first and second year), a 
                                physician (as defined in 
                                section 1861(r)), a physician 
                                assistant, nurse practitioner, 
                                and clinical nurse specialist 
                                (as such terms are defined in 
                                section 1861(aa)(5)), a 
                                certified registered nurse 
                                anesthetist (as defined in 
                                section 1861(bb)(2)), and a 
                                group that includes such 
                                professionals; and
                                  (II) for the third year for 
                                which the MIPS applies to 
                                payments (and for the 
                                performance period for such 
                                third year) and for each 
                                succeeding year (and for the 
                                performance period for each 
                                such year), the professionals 
                                described in subclause (I), 
                                such other eligible 
                                professionals (as defined in 
                                subsection (k)(3)(B)) as 
                                specified by the Secretary, and 
                                a group that includes such 
                                professionals.
                          (ii) Exclusions.--For purposes of 
                        clause (i), the term ``MIPS eligible 
                        professional'' does not include, with 
                        respect to a year, an eligible 
                        professional (as defined in subsection 
                        (k)(3)(B)) who--
                                  (I) is a qualifying APM 
                                participant (as defined in 
                                section 1833(z)(2));
                                  (II) subject to clause (vii), 
                                is a partial qualifying APM 
                                participant (as defined in 
                                clause (iii)) for the most 
                                recent period for which data 
                                are available and who, for the 
                                performance period with respect 
                                to such year, does not report 
                                on applicable measures and 
                                activities described in 
                                paragraph (2)(B) that are 
                                required to be reported by such 
                                a professional under the MIPS; 
                                or
                                  (III) for the performance 
                                period with respect to such 
                                year, does not exceed the low-
                                volume threshold measurement 
                                selected under clause (iv).
                          (iii) Partial qualifying apm 
                        participant.--For purposes of this 
                        subparagraph, the term ``partial 
                        qualifying APM participant'' means, 
                        with respect to a year, an eligible 
                        professional for whom the Secretary 
                        determines the minimum payment 
                        percentage (or percentages), as 
                        applicable, described in paragraph (2) 
                        of section 1833(z) for such year have 
                        not been satisfied, but who would be 
                        considered a qualifying APM participant 
                        (as defined in such paragraph) for such 
                        year if--
                                  (I) with respect to 2019 and 
                                2020, the reference in 
                                subparagraph (A) of such 
                                paragraph to 25 percent was 
                                instead a reference to 20 
                                percent;
                                  (II) with respect to 2021 and 
                                2022--
                                          (aa) the reference in 
                                        subparagraph (B)(i) of 
                                        such paragraph to 50 
                                        percent was instead a 
                                        reference to 40 
                                        percent; and
                                          (bb) the references 
                                        in subparagraph (B)(ii) 
                                        of such paragraph to 50 
                                        percent and 25 percent 
                                        of such paragraph were 
                                        instead references to 
                                        40 percent and 20 
                                        percent, respectively; 
                                        and
                                  (III) with respect to 2023 
                                and subsequent years--
                                          (aa) the reference in 
                                        subparagraph (C)(i) of 
                                        such paragraph to 75 
                                        percent was instead a 
                                        reference to 50 
                                        percent; and
                                          (bb) the references 
                                        in subparagraph (C)(ii) 
                                        of such paragraph to 75 
                                        percent and 25 percent 
                                        of such paragraph were 
                                        instead references to 
                                        50 percent and 20 
                                        percent, respectively.
                          (iv) Selection of low-volume 
                        threshold measurement.--The Secretary 
                        shall select a low-volume threshold to 
                        apply for purposes of clause (ii)(III), 
                        which may include one or more or a 
                        combination of the following:
                                  (I) The minimum number (as 
                                determined by the Secretary) of 
                                individuals enrolled under this 
                                part who are treated by the 
                                eligible professional for the 
                                performance period involved.
                                  (II) The minimum number (as 
                                determined by the Secretary) of 
                                items and services furnished to 
                                individuals enrolled under this 
                                part by such professional for 
                                such performance period.
                                  (III) The minimum amount (as 
                                determined by the Secretary) of 
                                allowed charges billed by such 
                                professional under this part 
                                for such performance period.
                          (v) Treatment of new medicare 
                        enrolled eligible professionals.--In 
                        the case of a professional who first 
                        becomes a Medicare enrolled eligible 
                        professional during the performance 
                        period for a year (and had not 
                        previously submitted claims under this 
                        title such as a person, an entity, or a 
                        part of a physician group or under a 
                        different billing number or tax 
                        identifier), such professional shall 
                        not be treated under this subsection as 
                        a MIPS eligible professional until the 
                        subsequent year and performance period 
                        for such subsequent year.
                          (vi) Clarification.--In the case of 
                        items and services furnished during a 
                        year by an individual who is not a MIPS 
                        eligible professional (including 
                        pursuant to clauses (ii) and (v)) with 
                        respect to a year, in no case shall a 
                        MIPS adjustment factor (or additional 
                        MIPS adjustment factor) under paragraph 
                        (6) apply to such individual for such 
                        year.
                          (vii) Partial qualifying apm 
                        participant clarifications.--
                                  (I) Treatment as mips 
                                eligible professional.--In the 
                                case of an eligible 
                                professional who is a partial 
                                qualifying APM participant, 
                                with respect to a year, and 
                                who, for the performance period 
                                for such year, reports on 
                                applicable measures and 
                                activities described in 
                                paragraph (2)(B) that are 
                                required to be reported by such 
                                a professional under the MIPS, 
                                such eligible professional is 
                                considered to be a MIPS 
                                eligible professional with 
                                respect to such year.
                                  (II) Not eligible for 
                                qualifying apm participant 
                                payments.--In no case shall an 
                                eligible professional who is a 
                                partial qualifying APM 
                                participant, with respect to a 
                                year, be considered a 
                                qualifying APM participant (as 
                                defined in paragraph (2) of 
                                section 1833(z)) for such year 
                                or be eligible for the 
                                additional payment under 
                                paragraph (1) of such section 
                                for such year.
                  (D) Application to group practices.--
                          (i) In general.--Under the MIPS:
                                  (I) Quality performance 
                                category.--The Secretary shall 
                                establish and apply a process 
                                that includes features of the 
                                provisions of subsection 
                                (m)(3)(C) for MIPS eligible 
                                professionals in a group 
                                practice with respect to 
                                assessing performance of such 
                                group with respect to the 
                                performance category described 
                                in clause (i) of paragraph 
                                (2)(A).
                                  (II) Other performance 
                                categories.--The Secretary may 
                                establish and apply a process 
                                that includes features of the 
                                provisions of subsection 
                                (m)(3)(C) for MIPS eligible 
                                professionals in a group 
                                practice with respect to 
                                assessing the performance of 
                                such group with respect to the 
                                performance categories 
                                described in clauses (ii) 
                                through (iv) of such paragraph.
                          (ii) Ensuring comprehensiveness of 
                        group practice assessment.--The process 
                        established under clause (i) shall to 
                        the extent practicable reflect the 
                        range of items and services furnished 
                        by the MIPS eligible professionals in 
                        the group practice involved.
                  (E) Use of registries.--Under the MIPS, the 
                Secretary shall encourage the use of qualified 
                clinical data registries pursuant to subsection 
                (m)(3)(E) in carrying out this subsection.
                  (F) Application of certain provisions.--In 
                applying a provision of subsection (k), (m), 
                (o), or (p) for purposes of this subsection, 
                the Secretary shall--
                          (i) adjust the application of such 
                        provision to ensure the provision is 
                        consistent with the provisions of this 
                        subsection; and
                          (ii) not apply such provision to the 
                        extent that the provision is 
                        duplicative with a provision of this 
                        subsection.
                  (G) Accounting for risk factors.--
                          (i) Risk factors.--Taking into 
                        account the relevant studies conducted 
                        and recommendations made in reports 
                        under section 2(d) of the Improving 
                        Medicare Post-Acute Care Transformation 
                        Act of 2014, and, as appropriate, other 
                        information, including information 
                        collected before completion of such 
                        studies and recommendations, the 
                        Secretary, on an ongoing basis, shall, 
                        as the Secretary determines appropriate 
                        and based on an individual's health 
                        status and other risk factors--
                                  (I) assess appropriate 
                                adjustments to quality 
                                measures, resource use 
                                measures, and other measures 
                                used under the MIPS; and
                                  (II) assess and implement 
                                appropriate adjustments to 
                                payment adjustments, composite 
                                performance scores, scores for 
                                performance categories, or 
                                scores for measures or 
                                activities under the MIPS.
          (2) Measures and activities under performance 
        categories.--
                  (A) Performance categories.--Under the MIPS, 
                the Secretary shall use the following 
                performance categories (each of which is 
                referred to in this subsection as a performance 
                category) in determining the composite 
                performance score under paragraph (5):
                          (i) Quality.
                          (ii) Resource use.
                          (iii) Clinical practice improvement 
                        activities.
                          (iv) Meaningful use of certified EHR 
                        technology.
                  (B) Measures and activities specified for 
                each category.--For purposes of paragraph 
                (3)(A) and subject to subparagraph (C), 
                measures and activities specified for a 
                performance period (as established under 
                paragraph (4)) for a year are as follows:
                          (i) Quality.--For the performance 
                        category described in subparagraph 
                        (A)(i), the quality measures included 
                        in the final measures list published 
                        under subparagraph (D)(i) for such year 
                        and the list of quality measures 
                        described in subparagraph (D)(vi) used 
                        by qualified clinical data registries 
                        under subsection (m)(3)(E).
                          (ii) Resource use.--For the 
                        performance category described in 
                        subparagraph (A)(ii), the measurement 
                        of resource use for such period under 
                        subsection (p)(3), using the 
                        methodology under subsection (r) as 
                        appropriate, and, as feasible and 
                        applicable, accounting for the cost of 
                        drugs under part D.
                          (iii) Clinical practice improvement 
                        activities.--For the performance 
                        category described in subparagraph 
                        (A)(iii), clinical practice improvement 
                        activities (as defined in subparagraph 
                        (C)(v)(III)) under subcategories 
                        specified by the Secretary for such 
                        period, which shall include at least 
                        the following:
                                  (I) The subcategory of 
                                expanded practice access, such 
                                as same day appointments for 
                                urgent needs and after hours 
                                access to clinician advice.
                                  (II) The subcategory of 
                                population management, such as 
                                monitoring health conditions of 
                                individuals to provide timely 
                                health care interventions or 
                                participation in a qualified 
                                clinical data registry.
                                  (III) The subcategory of care 
                                coordination, such as timely 
                                communication of test results, 
                                timely exchange of clinical 
                                information to patients and 
                                other providers, and use of 
                                remote monitoring or 
                                telehealth.
                                  (IV) The subcategory of 
                                beneficiary engagement, such as 
                                the establishment of care plans 
                                for individuals with complex 
                                care needs, beneficiary self-
                                management assessment and 
                                training, and using shared 
                                decision-making mechanisms.
                                  (V) The subcategory of 
                                patient safety and practice 
                                assessment, such as through use 
                                of clinical or surgical 
                                checklists and practice 
                                assessments related to 
                                maintaining certification.
                                  (VI) The subcategory of 
                                participation in an alternative 
                                payment model (as defined in 
                                section 1833(z)(3)(C)).
                        In establishing activities under this 
                        clause, the Secretary shall give 
                        consideration to the circumstances of 
                        small practices (consisting of 15 or 
                        fewer professionals) and practices 
                        located in rural areas and in health 
                        professional shortage areas (as 
                        designated under section 332(a)(1)(A) 
                        of the Public Health Service Act).
                          (iv) Meaningful ehr use.--For the 
                        performance category described in 
                        subparagraph (A)(iv), the requirements 
                        established for such period under 
                        subsection (o)(2) for determining 
                        whether an eligible professional is a 
                        meaningful EHR user.
                  (C) Additional provisions.--
                          (i) Emphasizing outcome measures 
                        under the quality performance 
                        category.--In applying subparagraph 
                        (B)(i), the Secretary shall, as 
                        feasible, emphasize the application of 
                        outcome measures.
                          (ii) Application of additional system 
                        measures.--The Secretary may use 
                        measures used for a payment system 
                        other than for physicians, such as 
                        measures for inpatient hospitals, for 
                        purposes of the performance categories 
                        described in clauses (i) and (ii) of 
                        subparagraph (A). For purposes of the 
                        previous sentence, the Secretary may 
                        not use measures for hospital 
                        outpatient departments, except in the 
                        case of items and services furnished by 
                        emergency physicians, radiologists, and 
                        anesthesiologists.
                          (iii) Global and population-based 
                        measures.--The Secretary may use global 
                        measures, such as global outcome 
                        measures, and population-based measures 
                        for purposes of the performance 
                        category described in subparagraph 
                        (A)(i).
                          (iv) Application of measures and 
                        activities to non-patient-facing 
                        professionals.--In carrying out this 
                        paragraph, with respect to measures and 
                        activities specified in subparagraph 
                        (B) for performance categories 
                        described in subparagraph (A), the 
                        Secretary--
                                  (I) shall give consideration 
                                to the circumstances of 
                                professional types (or 
                                subcategories of those types 
                                determined by practice 
                                characteristics) who typically 
                                furnish services that do not 
                                involve face-to-face 
                                interaction with a patient; and
                                  (II) may, to the extent 
                                feasible and appropriate, take 
                                into account such circumstances 
                                and apply under this subsection 
                                with respect to MIPS eligible 
                                professionals of such 
                                professional types or 
                                subcategories, alternative 
                                measures or activities that 
                                fulfill the goals of the 
                                applicable performance 
                                category.
                        In carrying out the previous sentence, 
                        the Secretary shall consult with 
                        professionals of such professional 
                        types or subcategories.
                          (v) Clinical practice improvement 
                        activities.--
                                  (I) Request for 
                                information.--In initially 
                                applying subparagraph (B)(iii), 
                                the Secretary shall use a 
                                request for information to 
                                solicit recommendations from 
                                stakeholders to identify 
                                activities described in such 
                                subparagraph and specifying 
                                criteria for such activities.
                                  (II) Contract authority for 
                                clinical practice improvement 
                                activities performance 
                                category.--In applying 
                                subparagraph (B)(iii), the 
                                Secretary may contract with 
                                entities to assist the 
                                Secretary in--
                                          (aa) identifying 
                                        activities described in 
                                        subparagraph (B)(iii);
                                          (bb) specifying 
                                        criteria for such 
                                        activities; and
                                          (cc) determining 
                                        whether a MIPS eligible 
                                        professional meets such 
                                        criteria.
                                  (III) Clinical practice 
                                improvement activities 
                                defined.--For purposes of this 
                                subsection, the term ``clinical 
                                practice improvement activity'' 
                                means an activity that relevant 
                                eligible professional 
                                organizations and other 
                                relevant stakeholders identify 
                                as improving clinical practice 
                                or care delivery and that the 
                                Secretary determines, when 
                                effectively executed, is likely 
                                to result in improved outcomes.
                  (D) Annual list of quality measures available 
                for mips assessment.--
                          (i) In general.--Under the MIPS, the 
                        Secretary, through notice and comment 
                        rulemaking and subject to the 
                        succeeding clauses of this 
                        subparagraph, shall, with respect to 
                        the performance period for a year, 
                        establish an annual final list of 
                        quality measures from which MIPS 
                        eligible professionals may choose for 
                        purposes of assessment under this 
                        subsection for such performance period. 
                        Pursuant to the previous sentence, the 
                        Secretary shall--
                                  (I) not later than November 1 
                                of the year prior to the first 
                                day of the first performance 
                                period under the MIPS, 
                                establish and publish in the 
                                Federal Register a final list 
                                of quality measures; and
                                  (II) not later than November 
                                1 of the year prior to the 
                                first day of each subsequent 
                                performance period, update the 
                                final list of quality measures 
                                from the previous year (and 
                                publish such updated final list 
                                in the Federal Register), by--
                                          (aa) removing from 
                                        such list, as 
                                        appropriate, quality 
                                        measures, which may 
                                        include the removal of 
                                        measures that are no 
                                        longer meaningful (such 
                                        as measures that are 
                                        topped out);
                                          (bb) adding to such 
                                        list, as appropriate, 
                                        new quality measures; 
                                        and
                                          (cc) determining 
                                        whether or not quality 
                                        measures on such list 
                                        that have undergone 
                                        substantive changes 
                                        should be included in 
                                        the updated list.
                          (ii) Call for quality measures.--
                                  (I) In general.--Eligible 
                                professional organizations and 
                                other relevant stakeholders 
                                shall be requested to identify 
                                and submit quality measures to 
                                be considered for selection 
                                under this subparagraph in the 
                                annual list of quality measures 
                                published under clause (i) and 
                                to identify and submit updates 
                                to the measures on such list. 
                                For purposes of the previous 
                                sentence, measures may be 
                                submitted regardless of whether 
                                such measures were previously 
                                published in a proposed rule or 
                                endorsed by an entity with a 
                                contract under section 1890(a).
                                  (II) Eligible professional 
                                organization defined.--In this 
                                subparagraph, the term 
                                ``eligible professional 
                                organization'' means a 
                                professional organization as 
                                defined by nationally 
                                recognized specialty boards of 
                                certification or equivalent 
                                certification boards.
                          (iii) Requirements.--In selecting 
                        quality measures for inclusion in the 
                        annual final list under clause (i), the 
                        Secretary shall--
                                  (I) provide that, to the 
                                extent practicable, all quality 
                                domains (as defined in 
                                subsection (s)(1)(B)) are 
                                addressed by such measures; and
                                  (II) ensure that such 
                                selection is consistent with 
                                the process for selection of 
                                measures under subsections (k), 
                                (m), and (p)(2).
                          (iv) Peer review.--Before including a 
                        new measure in the final list of 
                        measures published under clause (i) for 
                        a year, the Secretary shall submit for 
                        publication in applicable specialty-
                        appropriate, peer-reviewed journals 
                        such measure and the method for 
                        developing and selecting such measure, 
                        including clinical and other data 
                        supporting such measure.
                          (v) Measures for inclusion.--The 
                        final list of quality measures 
                        published under clause (i) shall 
                        include, as applicable, measures under 
                        subsections (k), (m), and (p)(2), 
                        including quality measures from among--
                                  (I) measures endorsed by a 
                                consensus-based entity;
                                  (II) measures developed under 
                                subsection (s); and
                                  (III) measures submitted 
                                under clause (ii)(I).
                        Any measure selected for inclusion in 
                        such list that is not endorsed by a 
                        consensus-based entity shall have a 
                        focus that is evidence-based.
                          (vi) Exception for qualified clinical 
                        data registry measures.--Measures used 
                        by a qualified clinical data registry 
                        under subsection (m)(3)(E) shall not be 
                        subject to the requirements under 
                        clauses (i), (iv), and (v). The 
                        Secretary shall publish the list of 
                        measures used by such qualified 
                        clinical data registries on the 
                        Internet website of the Centers for 
                        Medicare & Medicaid Services.
                          (vii) Exception for existing quality 
                        measures.--Any quality measure 
                        specified by the Secretary under 
                        subsection (k) or (m), including under 
                        subsection (m)(3)(E), and any measure 
                        of quality of care established under 
                        subsection (p)(2) for the reporting 
                        period or performance period under the 
                        respective subsection beginning before 
                        the first performance period under the 
                        MIPS--
                                  (I) shall not be subject to 
                                the requirements under clause 
                                (i) (except under items (aa) 
                                and (cc) of subclause (II) of 
                                such clause) or to the 
                                requirement under clause (iv); 
                                and
                                  (II) shall be included in the 
                                final list of quality measures 
                                published under clause (i) 
                                unless removed under clause 
                                (i)(II)(aa).
                          (viii) Consultation with relevant 
                        eligible professional organizations and 
                        other relevant stakeholders.--Relevant 
                        eligible professional organizations and 
                        other relevant stakeholders, including 
                        State and national medical societies, 
                        shall be consulted in carrying out this 
                        subparagraph.
                          (ix) Optional application.--The 
                        process under section 1890A is not 
                        required to apply to the selection of 
                        measures under this subparagraph.
          (3) Performance standards.--
                  (A) Establishment.--Under the MIPS, the 
                Secretary shall establish performance standards 
                with respect to measures and activities 
                specified under paragraph (2)(B) for a 
                performance period (as established under 
                paragraph (4)) for a year.
                  (B) Considerations in establishing 
                standards.--In establishing such performance 
                standards with respect to measures and 
                activities specified under paragraph (2)(B), 
                the Secretary shall consider the following:
                          (i) Historical performance standards.
                          (ii) Improvement.
                          (iii) The opportunity for continued 
                        improvement.
          (4) Performance period.--The Secretary shall 
        establish a performance period (or periods) for a year 
        (beginning with 2019). Such performance period (or 
        periods) shall begin and end prior to the beginning of 
        such year and be as close as possible to such year. In 
        this subsection, such performance period (or periods) 
        for a year shall be referred to as the performance 
        period for the year.
          (5) Composite performance score.--
                  (A) In general.--Subject to the succeeding 
                provisions of this paragraph and taking into 
                account, as available and applicable, paragraph 
                (1)(G), the Secretary shall develop a 
                methodology for assessing the total performance 
                of each MIPS eligible professional according to 
                performance standards under paragraph (3) with 
                respect to applicable measures and activities 
                specified in paragraph (2)(B) with respect to 
                each performance category applicable to such 
                professional for a performance period (as 
                established under paragraph (4)) for a year. 
                Using such methodology, the Secretary shall 
                provide for a composite assessment (using a 
                scoring scale of 0 to 100) for each such 
                professional for the performance period for 
                such year. In this subsection such a composite 
                assessment for such a professional with respect 
                to a performance period shall be referred to as 
                the ``composite performance score'' for such 
                professional for such performance period.
                  (B) Incentive to report; encouraging use of 
                certified ehr technology for reporting quality 
                measures.--
                          (i) Incentive to report.--Under the 
                        methodology established under 
                        subparagraph (A), the Secretary shall 
                        provide that in the case of a MIPS 
                        eligible professional who fails to 
                        report on an applicable measure or 
                        activity that is required to be 
                        reported by the professional, the 
                        professional shall be treated as 
                        achieving the lowest potential score 
                        applicable to such measure or activity.
                          (ii) Encouraging use of certified ehr 
                        technology and qualified clinical data 
                        registries for reporting quality 
                        measures.--Under the methodology 
                        established under subparagraph (A), the 
                        Secretary shall--
                                  (I) encourage MIPS eligible 
                                professionals to report on 
                                applicable measures with 
                                respect to the performance 
                                category described in paragraph 
                                (2)(A)(i) through the use of 
                                certified EHR technology and 
                                qualified clinical data 
                                registries; and
                                  (II) with respect to a 
                                performance period, with 
                                respect to a year, for which a 
                                MIPS eligible professional 
                                reports such measures through 
                                the use of such EHR technology, 
                                treat such professional as 
                                satisfying the clinical quality 
                                measures reporting requirement 
                                described in subsection 
                                (o)(2)(A)(iii) for such year.
                  (C) Clinical practice improvement activities 
                performance score.--
                          (i) Rule for certification.--A MIPS 
                        eligible professional who is in a 
                        practice that is certified as a 
                        patient-centered medical home or 
                        comparable specialty practice, as 
                        determined by the Secretary, with 
                        respect to a performance period shall 
                        be given the highest potential score 
                        for the performance category described 
                        in paragraph (2)(A)(iii) for such 
                        period.
                          (ii) APM participation.--
                        Participation by a MIPS eligible 
                        professional in an alternative payment 
                        model (as defined in section 
                        1833(z)(3)(C)) with respect to a 
                        performance period shall earn such 
                        eligible professional a minimum score 
                        of one-half of the highest potential 
                        score for the performance category 
                        described in paragraph (2)(A)(iii) for 
                        such performance period.
                          (iii) Subcategories.--A MIPS eligible 
                        professional shall not be required to 
                        perform activities in each subcategory 
                        under paragraph (2)(B)(iii) or 
                        participate in an alternative payment 
                        model in order to achieve the highest 
                        potential score for the performance 
                        category described in paragraph 
                        (2)(A)(iii).
                  (D) Achievement and improvement.--
                          (i) Taking into account 
                        improvement.--Beginning with the second 
                        year to which the MIPS applies, in 
                        addition to the achievement of a MIPS 
                        eligible professional, if data 
                        sufficient to measure improvement is 
                        available, the methodology developed 
                        under subparagraph (A)--
                                  (I) in the case of the 
                                performance score for the 
                                performance category described 
                                in clauses (i) and (ii) of 
                                paragraph (2)(A), shall take 
                                into account the improvement of 
                                the professional; and
                                  (II) in the case of 
                                performance scores for other 
                                performance categories, may 
                                take into account the 
                                improvement of the 
                                professional.
                          (ii) Assigning higher weight for 
                        achievement.--Subject to clause (i), 
                        under the methodology developed under 
                        subparagraph (A), the Secretary may 
                        assign a higher scoring weight under 
                        subparagraph (F) with respect to the 
                        achievement of a MIPS eligible 
                        professional than with respect to any 
                        improvement of such professional 
                        applied under clause (i) with respect 
                        to a measure, activity, or category 
                        described in paragraph (2).
                  (E) Weights for the performance categories.--
                          (i) In general.--Under the 
                        methodology developed under 
                        subparagraph (A), subject to 
                        subparagraph (F)(i) and clause (ii), 
                        the composite performance score shall 
                        be determined as follows:
                                  (I) Quality.--
                                          (aa) In general.--
                                        Subject to item (bb), 
                                        thirty percent of such 
                                        score shall be based on 
                                        performance with 
                                        respect to the category 
                                        described in clause (i) 
                                        of paragraph (2)(A). In 
                                        applying the previous 
                                        sentence, the Secretary 
                                        shall, as feasible, 
                                        encourage the 
                                        application of outcome 
                                        measures within such 
                                        category.
                                          (bb) First 2 years.--
                                        For the first and 
                                        second years for which 
                                        the MIPS applies to 
                                        payments, the 
                                        percentage applicable 
                                        under item (aa) shall 
                                        be increased in a 
                                        manner such that the 
                                        total percentage points 
                                        of the increase under 
                                        this item for the 
                                        respective year equals 
                                        the total number of 
                                        percentage points by 
                                        which the percentage 
                                        applied under subclause 
                                        (II)(bb) for the 
                                        respective year is less 
                                        than 30 percent.
                                  (II) Resource use.--
                                          (aa) In general.--
                                        Subject to item (bb), 
                                        thirty percent of such 
                                        score shall be based on 
                                        performance with 
                                        respect to the category 
                                        described in clause 
                                        (ii) of paragraph 
                                        (2)(A).
                                          (bb) First 2 years.--
                                        For the first year for 
                                        which the MIPS applies 
                                        to payments, not more 
                                        than 10 percent of such 
                                        score shall be based on 
                                        performance with 
                                        respect to the category 
                                        described in clause 
                                        (ii) of paragraph 
                                        (2)(A). For the second 
                                        year for which the MIPS 
                                        applies to payments, 
                                        not more than 15 
                                        percent of such score 
                                        shall be based on 
                                        performance with 
                                        respect to the category 
                                        described in clause 
                                        (ii) of paragraph 
                                        (2)(A).
                                  (III) Clinical practice 
                                improvement activities.--
                                Fifteen percent of such score 
                                shall be based on performance 
                                with respect to the category 
                                described in clause (iii) of 
                                paragraph (2)(A).
                                  (IV) Meaningful use of 
                                certified ehr technology.--
                                Twenty-five percent of such 
                                score shall be based on 
                                performance with respect to the 
                                category described in clause 
                                (iv) of paragraph (2)(A).
                          (ii) Authority to adjust percentages 
                        in case of high ehr meaningful use 
                        adoption.--In any year in which the 
                        Secretary estimates that the proportion 
                        of eligible professionals (as defined 
                        in subsection (o)(5)) who are 
                        meaningful EHR users (as determined 
                        under subsection (o)(2)) is 75 percent 
                        or greater, the Secretary may reduce 
                        the percent applicable under clause 
                        (i)(IV), but not below 15 percent. If 
                        the Secretary makes such reduction for 
                        a year, subject to subclauses (I)(bb) 
                        and (II)(bb) of clause (i), the 
                        percentages applicable under one or 
                        more of subclauses (I), (II), and (III) 
                        of clause (i) for such year shall be 
                        increased in a manner such that the 
                        total percentage points of the increase 
                        under this clause for such year equals 
                        the total number of percentage points 
                        reduced under the preceding sentence 
                        for such year.
                  (F) Certain flexibility for weighting 
                performance categories, measures, and 
                activities.--Under the methodology under 
                subparagraph (A), if there are not sufficient 
                measures and activities (described in paragraph 
                (2)(B)) applicable and available to each type 
                of eligible professional involved, the 
                Secretary shall assign different scoring 
                weights (including a weight of 0)--
                          (i) which may vary from the scoring 
                        weights specified in subparagraph (E), 
                        for each performance category based on 
                        the extent to which the category is 
                        applicable to the type of eligible 
                        professional involved; and
                          (ii) for each measure and activity 
                        specified under paragraph (2)(B) with 
                        respect to each such category based on 
                        the extent to which the measure or 
                        activity is applicable and available to 
                        the type of eligible professional 
                        involved.
                  (G) Resource use.--Analysis of the 
                performance category described in paragraph 
                (2)(A)(ii) shall include results from the 
                methodology described in subsection (r)(5), as 
                appropriate.
                  (H) Inclusion of quality measure data from 
                other payers.--In applying subsections (k), 
                (m), and (p) with respect to measures described 
                in paragraph (2)(B)(i), analysis of the 
                performance category described in paragraph 
                (2)(A)(i) may include data submitted by MIPS 
                eligible professionals with respect to items 
                and services furnished to individuals who are 
                not individuals entitled to benefits under part 
                A or enrolled under part B.
                  (I) Use of voluntary virtual groups for 
                certain assessment purposes.--
                          (i) In general.--In the case of MIPS 
                        eligible professionals electing to be a 
                        virtual group under clause (ii) with 
                        respect to a performance period for a 
                        year, for purposes of applying the 
                        methodology under subparagraph (A) with 
                        respect to the performance categories 
                        described in clauses (i) and (ii) of 
                        paragraph (2)(A)--
                                  (I) the assessment of 
                                performance provided under such 
                                methodology with respect to 
                                such performance categories 
                                that is to be applied to each 
                                such professional in such group 
                                for such performance period 
                                shall be with respect to the 
                                combined performance of all 
                                such professionals in such 
                                group for such period; and
                                  (II) with respect to the 
                                composite performance score 
                                provided under this paragraph 
                                for such performance period for 
                                each such MIPS eligible 
                                professional in such virtual 
                                group, the components of the 
                                composite performance score 
                                that assess performance with 
                                respect to such performance 
                                categories shall be based on 
                                the assessment of the combined 
                                performance under subclause (I) 
                                for such performance categories 
                                and performance period.
                          (ii) Election of practices to be a 
                        virtual group.--The Secretary shall, in 
                        accordance with the requirements under 
                        clause (iii), establish and have in 
                        place a process to allow an individual 
                        MIPS eligible professional or a group 
                        practice consisting of not more than 10 
                        MIPS eligible professionals to elect, 
                        with respect to a performance period 
                        for a year to be a virtual group under 
                        this subparagraph with at least one 
                        other such individual MIPS eligible 
                        professional or group practice. Such a 
                        virtual group may be based on 
                        appropriate classifications of 
                        providers, such as by geographic areas 
                        or by provider specialties defined by 
                        nationally recognized specialty boards 
                        of certification or equivalent 
                        certification boards.
                          (iii) Requirements.--The requirements 
                        for the process under clause (ii) 
                        shall--
                                  (I) provide that an election 
                                under such clause, with respect 
                                to a performance period, shall 
                                be made before the beginning of 
                                such performance period and may 
                                not be changed during such 
                                performance period;
                                  (II) provide that an 
                                individual MIPS eligible 
                                professional and a group 
                                practice described in clause 
                                (ii) may elect to be in no more 
                                than one virtual group for a 
                                performance period and that, in 
                                the case of such a group 
                                practice that elects to be in 
                                such virtual group for such 
                                performance period, such 
                                election applies to all MIPS 
                                eligible professionals in such 
                                group practice;
                                  (III) provide that a virtual 
                                group be a combination of tax 
                                identification numbers;
                                  (IV) provide for formal 
                                written agreements among MIPS 
                                eligible professionals electing 
                                to be a virtual group under 
                                this subparagraph; and
                                  (V) include such other 
                                requirements as the Secretary 
                                determines appropriate.
          (6) MIPS payments.--
                  (A) MIPS adjustment factor.--Taking into 
                account paragraph (1)(G), the Secretary shall 
                specify a MIPS adjustment factor for each MIPS 
                eligible professional for a year. Such MIPS 
                adjustment factor for a MIPS eligible 
                professional for a year shall be in the form of 
                a percent and shall be determined--
                          (i) by comparing the composite 
                        performance score of the eligible 
                        professional for such year to the 
                        performance threshold established under 
                        subparagraph (D)(i) for such year;
                          (ii) in a manner such that the 
                        adjustment factors specified under this 
                        subparagraph for a year result in 
                        differential payments under this 
                        paragraph reflecting that--
                                  (I) MIPS eligible 
                                professionals with composite 
                                performance scores for such 
                                year at or above such 
                                performance threshold for such 
                                year receive zero or positive 
                                payment adjustment factors for 
                                such year in accordance with 
                                clause (iii), with such 
                                professionals having higher 
                                composite performance scores 
                                receiving higher adjustment 
                                factors; and
                                  (II) MIPS eligible 
                                professionals with composite 
                                performance scores for such 
                                year below such performance 
                                threshold for such year receive 
                                negative payment adjustment 
                                factors for such year in 
                                accordance with clause (iv), 
                                with such professionals having 
                                lower composite performance 
                                scores receiving lower 
                                adjustment factors;
                          (iii) in a manner such that MIPS 
                        eligible professionals with composite 
                        scores described in clause (ii)(I) for 
                        such year, subject to clauses (i) and 
                        (ii) of subparagraph (F), receive a 
                        zero or positive adjustment factor on a 
                        linear sliding scale such that an 
                        adjustment factor of 0 percent is 
                        assigned for a score at the performance 
                        threshold and an adjustment factor of 
                        the applicable percent specified in 
                        subparagraph (B) is assigned for a 
                        score of 100; and
                          (iv) in a manner such that--
                                  (I) subject to subclause 
                                (II), MIPS eligible 
                                professionals with composite 
                                performance scores described in 
                                clause (ii)(II) for such year 
                                receive a negative payment 
                                adjustment factor on a linear 
                                sliding scale such that an 
                                adjustment factor of 0 percent 
                                is assigned for a score at the 
                                performance threshold and an 
                                adjustment factor of the 
                                negative of the applicable 
                                percent specified in 
                                subparagraph (B) is assigned 
                                for a score of 0; and
                                  (II) MIPS eligible 
                                professionals with composite 
                                performance scores that are 
                                equal to or greater than 0, but 
                                not greater than \1/4\ of the 
                                performance threshold specified 
                                under subparagraph (D)(i) for 
                                such year, receive a negative 
                                payment adjustment factor that 
                                is equal to the negative of the 
                                applicable percent specified in 
                                subparagraph (B) for such year.
                  (B) Applicable percent defined.--For purposes 
                of this paragraph, the term ``applicable 
                percent'' means--
                          (i) for 2019, 4 percent;
                          (ii) for 2020, 5 percent;
                          (iii) for 2021, 7 percent; and
                          (iv) for 2022 and subsequent years, 9 
                        percent.
                  (C) Additional mips adjustment factors for 
                exceptional performance.--For 2019 and each 
                subsequent year through 2024, in the case of a 
                MIPS eligible professional with a composite 
                performance score for a year at or above the 
                additional performance threshold under 
                subparagraph (D)(ii) for such year, in addition 
                to the MIPS adjustment factor under 
                subparagraph (A) for the eligible professional 
                for such year, subject to subparagraph (F)(iv), 
                the Secretary shall specify an additional 
                positive MIPS adjustment factor for such 
                professional and year. Such additional MIPS 
                adjustment factors shall be in the form of a 
                percent and determined by the Secretary in a 
                manner such that professionals having higher 
                composite performance scores above the 
                additional performance threshold receive higher 
                additional MIPS adjustment factors.
                  (D) Establishment of performance 
                thresholds.--
                          (i) Performance threshold.--For each 
                        year of the MIPS, the Secretary shall 
                        compute a performance threshold with 
                        respect to which the composite 
                        performance score of MIPS eligible 
                        professionals shall be compared for 
                        purposes of determining adjustment 
                        factors under subparagraph (A) that are 
                        positive, negative, and zero. Such 
                        performance threshold for a year shall 
                        be the mean or median (as selected by 
                        the Secretary) of the composite 
                        performance scores for all MIPS 
                        eligible professionals with respect to 
                        a prior period specified by the 
                        Secretary. The Secretary may reassess 
                        the selection of the mean or median 
                        under the previous sentence every 3 
                        years.
                          (ii) Additional performance threshold 
                        for exceptional performance.--In 
                        addition to the performance threshold 
                        under clause (i), for each year of the 
                        MIPS, the Secretary shall compute an 
                        additional performance threshold for 
                        purposes of determining the additional 
                        MIPS adjustment factors under 
                        subparagraph (C). For each such year, 
                        the Secretary shall apply either of the 
                        following methods for computing such 
                        additional performance threshold for 
                        such a year:
                                  (I) The threshold shall be 
                                the score that is equal to the 
                                25th percentile of the range of 
                                possible composite performance 
                                scores above the performance 
                                threshold determined under 
                                clause (i).
                                  (II) The threshold shall be 
                                the score that is equal to the 
                                25th percentile of the actual 
                                composite performance scores 
                                for MIPS eligible professionals 
                                with composite performance 
                                scores at or above the 
                                performance threshold with 
                                respect to the prior period 
                                described in clause (i).
                          (iii) Special rule for initial 2 
                        years.--With respect to each of the 
                        first two years to which the MIPS 
                        applies, the Secretary shall, prior to 
                        the performance period for such years, 
                        establish a performance threshold for 
                        purposes of determining MIPS adjustment 
                        factors under subparagraph (A) and a 
                        threshold for purposes of determining 
                        additional MIPS adjustment factors 
                        under subparagraph (C). Each such 
                        performance threshold shall--
                                  (I) be based on a period 
                                prior to such performance 
                                periods; and
                                  (II) take into account--
                                          (aa) data available 
                                        with respect to 
                                        performance on measures 
                                        and activities that may 
                                        be used under the 
                                        performance categories 
                                        under subparagraph 
                                        (2)(B); and
                                          (bb) other factors 
                                        determined appropriate 
                                        by the Secretary.
                  (E) Application of mips adjustment factors.--
                In the case of items and services furnished by 
                a MIPS eligible professional during a year 
                (beginning with 2019), the amount otherwise 
                paid under this part with respect to such items 
                and services and MIPS eligible professional for 
                such year, shall be multiplied by--
                          (i) 1, plus
                          (ii) the sum of--
                                  (I) the MIPS adjustment 
                                factor determined under 
                                subparagraph (A) divided by 
                                100, and
                                  (II) as applicable, the 
                                additional MIPS adjustment 
                                factor determined under 
                                subparagraph (C) divided by 
                                100.
                  (F) Aggregate application of mips adjustment 
                factors.--
                          (i) Application of scaling factor.--
                                  (I) In general.--With respect 
                                to positive MIPS adjustment 
                                factors under subparagraph 
                                (A)(ii)(I) for eligible 
                                professionals whose composite 
                                performance score is above the 
                                performance threshold under 
                                subparagraph (D)(i) for such 
                                year, subject to subclause 
                                (II), the Secretary shall 
                                increase or decrease such 
                                adjustment factors by a scaling 
                                factor in order to ensure that 
                                the budget neutrality 
                                requirement of clause (ii) is 
                                met.
                                  (II) Scaling factor limit.--
                                In no case may the scaling 
                                factor applied under this 
                                clause exceed 3.0.
                          (ii) Budget neutrality requirement.--
                                  (I) In general.--Subject to 
                                clause (iii), the Secretary 
                                shall ensure that the estimated 
                                amount described in subclause 
                                (II) for a year is equal to the 
                                estimated amount described in 
                                subclause (III) for such year.
                                  (II) Aggregate increases.--
                                The amount described in this 
                                subclause is the estimated 
                                increase in the aggregate 
                                allowed charges resulting from 
                                the application of positive 
                                MIPS adjustment factors under 
                                subparagraph (A) (after 
                                application of the scaling 
                                factor described in clause (i)) 
                                to MIPS eligible professionals 
                                whose composite performance 
                                score for a year is above the 
                                performance threshold under 
                                subparagraph (D)(i) for such 
                                year.
                                  (III) Aggregate decreases.--
                                The amount described in this 
                                subclause is the estimated 
                                decrease in the aggregate 
                                allowed charges resulting from 
                                the application of negative 
                                MIPS adjustment factors under 
                                subparagraph (A) to MIPS 
                                eligible professionals whose 
                                composite performance score for 
                                a year is below the performance 
                                threshold under subparagraph 
                                (D)(i) for such year.
                          (iii) Exceptions.--
                                  (I) In the case that all MIPS 
                                eligible professionals receive 
                                composite performance scores 
                                for a year that are below the 
                                performance threshold under 
                                subparagraph (D)(i) for such 
                                year, the negative MIPS 
                                adjustment factors under 
                                subparagraph (A) shall apply 
                                with respect to such MIPS 
                                eligible professionals and the 
                                budget neutrality requirement 
                                of clause (ii) and the 
                                additional adjustment factors 
                                under clause (iv) shall not 
                                apply for such year.
                                  (II) In the case that, with 
                                respect to a year, the 
                                application of clause (i) 
                                results in a scaling factor 
                                equal to the maximum scaling 
                                factor specified in clause 
                                (i)(II), such scaling factor 
                                shall apply and the budget 
                                neutrality requirement of 
                                clause (ii) shall not apply for 
                                such year.
                          (iv) Additional incentive payment 
                        adjustments.--
                                  (I) In general.--Subject to 
                                subclause (II), in specifying 
                                the MIPS additional adjustment 
                                factors under subparagraph (C) 
                                for each applicable MIPS 
                                eligible professional for a 
                                year, the Secretary shall 
                                ensure that the estimated 
                                aggregate increase in payments 
                                under this part resulting from 
                                the application of such 
                                additional adjustment factors 
                                for MIPS eligible professionals 
                                in a year shall be equal (as 
                                estimated by the Secretary) to 
                                $500,000,000 for each year 
                                beginning with 2019 and ending 
                                with 2024.
                                  (II) Limitation on additional 
                                incentive payment 
                                adjustments.--The MIPS 
                                additional adjustment factor 
                                under subparagraph (C) for a 
                                year for an applicable MIPS 
                                eligible professional whose 
                                composite performance score is 
                                above the additional 
                                performance threshold under 
                                subparagraph (D)(ii) for such 
                                year shall not exceed 10 
                                percent. The application of the 
                                previous sentence may result in 
                                an aggregate amount of 
                                additional incentive payments 
                                that are less than the amount 
                                specified in subclause (I).
          (7) Announcement of result of adjustments.--Under the 
        MIPS, the Secretary shall, not later than 30 days prior 
        to January 1 of the year involved, make available to 
        MIPS eligible professionals the MIPS adjustment factor 
        (and, as applicable, the additional MIPS adjustment 
        factor) under paragraph (6) applicable to the eligible 
        professional for items and services furnished by the 
        professional for such year. The Secretary may include 
        such information in the confidential feedback under 
        paragraph (12).
          (8) No effect in subsequent years.--The MIPS 
        adjustment factors and additional MIPS adjustment 
        factors under paragraph (6) shall apply only with 
        respect to the year involved, and the Secretary shall 
        not take into account such adjustment factors in making 
        payments to a MIPS eligible professional under this 
        part in a subsequent year.
          (9) Public reporting.--
                  (A) In general.--The Secretary shall, in an 
                easily understandable format, make available on 
                the Physician Compare Internet website of the 
                Centers for Medicare & Medicaid Services the 
                following:
                          (i) Information regarding the 
                        performance of MIPS eligible 
                        professionals under the MIPS, which--
                                  (I) shall include the 
                                composite score for each such 
                                MIPS eligible professional and 
                                the performance of each such 
                                MIPS eligible professional with 
                                respect to each performance 
                                category; and
                                  (II) may include the 
                                performance of each such MIPS 
                                eligible professional with 
                                respect to each measure or 
                                activity specified in paragraph 
                                (2)(B).
                          (ii) The names of eligible 
                        professionals in eligible alternative 
                        payment models (as defined in section 
                        1833(z)(3)(D)) and, to the extent 
                        feasible, the names of such eligible 
                        alternative payment models and 
                        performance of such models.
                  (B) Disclosure.--The information made 
                available under this paragraph shall indicate, 
                where appropriate, that publicized information 
                may not be representative of the eligible 
                professional's entire patient population, the 
                variety of services furnished by the eligible 
                professional, or the health conditions of 
                individuals treated.
                  (C) Opportunity to review and submit 
                corrections.--The Secretary shall provide for 
                an opportunity for a professional described in 
                subparagraph (A) to review, and submit 
                corrections for, the information to be made 
                public with respect to the professional under 
                such subparagraph prior to such information 
                being made public.
                  (D) Aggregate information.--The Secretary 
                shall periodically post on the Physician 
                Compare Internet website aggregate information 
                on the MIPS, including the range of composite 
                scores for all MIPS eligible professionals and 
                the range of the performance of all MIPS 
                eligible professionals with respect to each 
                performance category.
          (10) Consultation.--The Secretary shall consult with 
        stakeholders in carrying out the MIPS, including for 
        the identification of measures and activities under 
        paragraph (2)(B) and the methodologies developed under 
        paragraphs (5)(A) and (6) and regarding the use of 
        qualified clinical data registries. Such consultation 
        shall include the use of a request for information or 
        other mechanisms determined appropriate.
          (11) Technical assistance to small practices and 
        practices in health professional shortage areas.--
                  (A) In general.--The Secretary shall enter 
                into contracts or agreements with appropriate 
                entities (such as quality improvement 
                organizations, regional extension centers (as 
                described in section 3012(c) of the Public 
                Health Service Act), or regional health 
                collaboratives) to offer guidance and 
                assistance to MIPS eligible professionals in 
                practices of 15 or fewer professionals (with 
                priority given to such practices located in 
                rural areas, health professional shortage areas 
                (as designated under in section 332(a)(1)(A) of 
                such Act), and medically underserved areas, and 
                practices with low composite scores) with 
                respect to--
                          (i) the performance categories 
                        described in clauses (i) through (iv) 
                        of paragraph (2)(A); or
                          (ii) how to transition to the 
                        implementation of and participation in 
                        an alternative payment model as 
                        described in section 1833(z)(3)(C).
                  (B) Funding for technical assistance.--For 
                purposes of implementing subparagraph (A), the 
                Secretary shall provide for the transfer from 
                the Federal Supplementary Medical Insurance 
                Trust Fund established under section 1841 to 
                the Centers for Medicare & Medicaid Services 
                Program Management Account of $20,000,000 for 
                each of fiscal years 2016 through 2020. Amounts 
                transferred under this subparagraph for a 
                fiscal year shall be available until expended.
          (12) Feedback and information to improve 
        performance.--
                  (A) Performance feedback.--
                          (i) In general.--Beginning July 1, 
                        2017, the Secretary--
                                  (I) shall make available 
                                timely (such as quarterly) 
                                confidential feedback to MIPS 
                                eligible professionals on the 
                                performance of such 
                                professionals with respect to 
                                the performance categories 
                                under clauses (i) and (ii) of 
                                paragraph (2)(A); and
                                  (II) may make available 
                                confidential feedback to such 
                                professionals on the 
                                performance of such 
                                professionals with respect to 
                                the performance categories 
                                under clauses (iii) and (iv) of 
                                such paragraph.
                          (ii) Mechanisms.--The Secretary may 
                        use one or more mechanisms to make 
                        feedback available under clause (i), 
                        which may include use of a web-based 
                        portal or other mechanisms determined 
                        appropriate by the Secretary. With 
                        respect to the performance category 
                        described in paragraph (2)(A)(i), 
                        feedback under this subparagraph shall, 
                        to the extent an eligible professional 
                        chooses to participate in a data 
                        registry for purposes of this 
                        subsection (including registries under 
                        subsections (k) and (m)), be provided 
                        based on performance on quality 
                        measures reported through the use of 
                        such registries. With respect to any 
                        other performance category described in 
                        paragraph (2)(A), the Secretary shall 
                        encourage provision of feedback through 
                        qualified clinical data registries as 
                        described in subsection (m)(3)(E)).
                          (iii) Use of data.--For purposes of 
                        clause (i), the Secretary may use data, 
                        with respect to a MIPS eligible 
                        professional, from periods prior to the 
                        current performance period and may use 
                        rolling periods in order to make 
                        illustrative calculations about the 
                        performance of such professional.
                          (iv) Disclosure exemption.--Feedback 
                        made available under this subparagraph 
                        shall be exempt from disclosure under 
                        section 552 of title 5, United States 
                        Code.
                          (v) Receipt of information.--The 
                        Secretary may use the mechanisms 
                        established under clause (ii) to 
                        receive information from professionals, 
                        such as information with respect to 
                        this subsection.
                  (B) Additional information.--
                          (i) In general.--Beginning July 1, 
                        2018, the Secretary shall make 
                        available to MIPS eligible 
                        professionals information, with respect 
                        to individuals who are patients of such 
                        MIPS eligible professionals, about 
                        items and services for which payment is 
                        made under this title that are 
                        furnished to such individuals by other 
                        suppliers and providers of services, 
                        which may include information described 
                        in clause (ii). Such information may be 
                        made available under the previous 
                        sentence to such MIPS eligible 
                        professionals by mechanisms determined 
                        appropriate by the Secretary, which may 
                        include use of a web-based portal. Such 
                        information may be made available in 
                        accordance with the same or similar 
                        terms as data are made available to 
                        accountable care organizations 
                        participating in the shared savings 
                        program under section 1899.
                          (ii) Type of information.--For 
                        purposes of clause (i), the information 
                        described in this clause, is the 
                        following:
                                  (I) With respect to selected 
                                items and services (as 
                                determined appropriate by the 
                                Secretary) for which payment is 
                                made under this title and that 
                                are furnished to individuals, 
                                who are patients of a MIPS 
                                eligible professional, by 
                                another supplier or provider of 
                                services during the most recent 
                                period for which data are 
                                available (such as the most 
                                recent three-month period), 
                                such as the name of such 
                                providers furnishing such items 
                                and services to such patients 
                                during such period, the types 
                                of such items and services so 
                                furnished, and the dates such 
                                items and services were so 
                                furnished.
                                  (II) Historical data, such as 
                                averages and other measures of 
                                the distribution if 
                                appropriate, of the total, and 
                                components of, allowed charges 
                                (and other figures as 
                                determined appropriate by the 
                                Secretary).
          (13) Review.--
                  (A) Targeted review.--The Secretary shall 
                establish a process under which a MIPS eligible 
                professional may seek an informal review of the 
                calculation of the MIPS adjustment factor (or 
                factors) applicable to such eligible 
                professional under this subsection for a year. 
                The results of a review conducted pursuant to 
                the previous sentence shall not be taken into 
                account for purposes of paragraph (6) with 
                respect to a year (other than with respect to 
                the calculation of such eligible professional's 
                MIPS adjustment factor for such year or 
                additional MIPS adjustment factor for such 
                year) after the factors determined in 
                subparagraph (A) and subparagraph (C) of such 
                paragraph have been determined for such year.
                  (B) Limitation.--Except as provided for in 
                subparagraph (A), there shall be no 
                administrative or judicial review under section 
                1869, section 1878, or otherwise of the 
                following:
                          (i) The methodology used to determine 
                        the amount of the MIPS adjustment 
                        factor under paragraph (6)(A) and the 
                        amount of the additional MIPS 
                        adjustment factor under paragraph 
                        (6)(C) and the determination of such 
                        amounts.
                          (ii) The establishment of the 
                        performance standards under paragraph 
                        (3) and the performance period under 
                        paragraph (4).
                          (iii) The identification of measures 
                        and activities specified under 
                        paragraph (2)(B) and information made 
                        public or posted on the Physician 
                        Compare Internet website of the Centers 
                        for Medicare & Medicaid Services under 
                        paragraph (9).
                          (iv) The methodology developed under 
                        paragraph (5) that is used to calculate 
                        performance scores and the calculation 
                        of such scores, including the weighting 
                        of measures and activities under such 
                        methodology.
  (r) Collaborating With the Physician, Practitioner, and Other 
Stakeholder Communities To Improve Resource Use Measurement.--
          (1) In general.--In order to involve the physician, 
        practitioner, and other stakeholder communities in 
        enhancing the infrastructure for resource use 
        measurement, including for purposes of the Merit-based 
        Incentive Payment System under subsection (q) and 
        alternative payment models under section 1833(z), the 
        Secretary shall undertake the steps described in the 
        succeeding provisions of this subsection.
          (2) Development of care episode and patient condition 
        groups and classification codes.--
                  (A) In general.--In order to classify similar 
                patients into care episode groups and patient 
                condition groups, the Secretary shall undertake 
                the steps described in the succeeding 
                provisions of this paragraph.
                  (B) Public availability of existing efforts 
                to design an episode grouper.--Not later than 
                180 days after the date of the enactment of 
                this subsection, the Secretary shall post on 
                the Internet website of the Centers for 
                Medicare & Medicaid Services a list of the 
                episode groups developed pursuant to subsection 
                (n)(9)(A) and related descriptive information.
                  (C) Stakeholder input.--The Secretary shall 
                accept, through the date that is 120 days after 
                the day the Secretary posts the list pursuant 
                to subparagraph (B), suggestions from physician 
                specialty societies, applicable practitioner 
                organizations, and other stakeholders for 
                episode groups in addition to those posted 
                pursuant to such subparagraph, and specific 
                clinical criteria and patient characteristics 
                to classify patients into--
                          (i) care episode groups; and
                          (ii) patient condition groups.
                  (D) Development of proposed classification 
                codes.--
                          (i) In general.--Taking into account 
                        the information described in 
                        subparagraph (B) and the information 
                        received under subparagraph (C), the 
                        Secretary shall--
                                  (I) establish care episode 
                                groups and patient condition 
                                groups, which account for a 
                                target of an estimated \1/2\ of 
                                expenditures under parts A and 
                                B (with such target increasing 
                                over time as appropriate); and
                                  (II) assign codes to such 
                                groups.
                          (ii) Care episode groups.--In 
                        establishing the care episode groups 
                        under clause (i), the Secretary shall 
                        take into account--
                                  (I) the patient's clinical 
                                problems at the time items and 
                                services are furnished during 
                                an episode of care, such as the 
                                clinical conditions or 
                                diagnoses, whether or not 
                                inpatient hospitalization 
                                occurs, and the principal 
                                procedures or services 
                                furnished; and
                                  (II) other factors determined 
                                appropriate by the Secretary.
                          (iii) Patient condition groups.--In 
                        establishing the patient condition 
                        groups under clause (i), the Secretary 
                        shall take into account--
                                  (I) the patient's clinical 
                                history at the time of a 
                                medical visit, such as the 
                                patient's combination of 
                                chronic conditions, current 
                                health status, and recent 
                                significant history (such as 
                                hospitalization and major 
                                surgery during a previous 
                                period, such as 3 months); and
                                  (II) other factors determined 
                                appropriate by the Secretary, 
                                such as eligibility status 
                                under this title (including 
                                eligibility under section 
                                226(a), 226(b), or 226A, and 
                                dual eligibility under this 
                                title and title XIX).
                  (E) Draft care episode and patient condition 
                groups and classification codes.--Not later 
                than 270 days after the end of the comment 
                period described in subparagraph (C), the 
                Secretary shall post on the Internet website of 
                the Centers for Medicare & Medicaid Services a 
                draft list of the care episode and patient 
                condition codes established under subparagraph 
                (D) (and the criteria and characteristics 
                assigned to such code).
                  (F) Solicitation of input.--The Secretary 
                shall seek, through the date that is 120 days 
                after the Secretary posts the list pursuant to 
                subparagraph (E), comments from physician 
                specialty societies, applicable practitioner 
                organizations, and other stakeholders, 
                including representatives of individuals 
                entitled to benefits under part A or enrolled 
                under this part, regarding the care episode and 
                patient condition groups (and codes) posted 
                under subparagraph (E). In seeking such 
                comments, the Secretary shall use one or more 
                mechanisms (other than notice and comment 
                rulemaking) that may include use of open door 
                forums, town hall meetings, or other 
                appropriate mechanisms.
                  (G) Operational list of care episode and 
                patient condition groups and codes.--Not later 
                than 270 days after the end of the comment 
                period described in subparagraph (F), taking 
                into account the comments received under such 
                subparagraph, the Secretary shall post on the 
                Internet website of the Centers for Medicare & 
                Medicaid Services an operational list of care 
                episode and patient condition codes (and the 
                criteria and characteristics assigned to such 
                code).
                  (H) Subsequent revisions.--Not later than 
                November 1 of each year (beginning with 2018), 
                the Secretary shall, through rulemaking, make 
                revisions to the operational lists of care 
                episode and patient condition codes as the 
                Secretary determines may be appropriate. Such 
                revisions may be based on experience, new 
                information developed pursuant to subsection 
                (n)(9)(A), and input from the physician 
                specialty societies, applicable practitioner 
                organizations, and other stakeholders, 
                including representatives of individuals 
                entitled to benefits under part A or enrolled 
                under this part.
          (3) Attribution of patients to physicians or 
        practitioners.--
                  (A) In general.--In order to facilitate the 
                attribution of patients and episodes (in whole 
                or in part) to one or more physicians or 
                applicable practitioners furnishing items and 
                services, the Secretary shall undertake the 
                steps described in the succeeding provisions of 
                this paragraph.
                  (B) Development of patient relationship 
                categories and codes.--The Secretary shall 
                develop patient relationship categories and 
                codes that define and distinguish the 
                relationship and responsibility of a physician 
                or applicable practitioner with a patient at 
                the time of furnishing an item or service. Such 
                patient relationship categories shall include 
                different relationships of the physician or 
                applicable practitioner to the patient (and the 
                codes may reflect combinations of such 
                categories), such as a physician or applicable 
                practitioner who--
                          (i) considers themself to have the 
                        primary responsibility for the general 
                        and ongoing care for the patient over 
                        extended periods of time;
                          (ii) considers themself to be the 
                        lead physician or practitioner and who 
                        furnishes items and services and 
                        coordinates care furnished by other 
                        physicians or practitioners for the 
                        patient during an acute episode;
                          (iii) furnishes items and services to 
                        the patient on a continuing basis 
                        during an acute episode of care, but in 
                        a supportive rather than a lead role;
                          (iv) furnishes items and services to 
                        the patient on an occasional basis, 
                        usually at the request of another 
                        physician or practitioner; or
                          (v) furnishes items and services only 
                        as ordered by another physician or 
                        practitioner.
                  (C) Draft list of patient relationship 
                categories and codes.--Not later than one year 
                after the date of the enactment of this 
                subsection, the Secretary shall post on the 
                Internet website of the Centers for Medicare & 
                Medicaid Services a draft list of the patient 
                relationship categories and codes developed 
                under subparagraph (B).
                  (D) Stakeholder input.--The Secretary shall 
                seek, through the date that is 120 days after 
                the Secretary posts the list pursuant to 
                subparagraph (C), comments from physician 
                specialty societies, applicable practitioner 
                organizations, and other stakeholders, 
                including representatives of individuals 
                entitled to benefits under part A or enrolled 
                under this part, regarding the patient 
                relationship categories and codes posted under 
                subparagraph (C). In seeking such comments, the 
                Secretary shall use one or more mechanisms 
                (other than notice and comment rulemaking) that 
                may include open door forums, town hall 
                meetings, web-based forums, or other 
                appropriate mechanisms.
                  (E) Operational list of patient relationship 
                categories and codes.--Not later than 240 days 
                after the end of the comment period described 
                in subparagraph (D), taking into account the 
                comments received under such subparagraph, the 
                Secretary shall post on the Internet website of 
                the Centers for Medicare & Medicaid Services an 
                operational list of patient relationship 
                categories and codes.
                  (F) Subsequent revisions.--Not later than 
                November 1 of each year (beginning with 2018), 
                the Secretary shall, through rulemaking, make 
                revisions to the operational list of patient 
                relationship categories and codes as the 
                Secretary determines appropriate. Such 
                revisions may be based on experience, new 
                information developed pursuant to subsection 
                (n)(9)(A), and input from the physician 
                specialty societies, applicable practitioner 
                organizations, and other stakeholders, 
                including representatives of individuals 
                entitled to benefits under part A or enrolled 
                under this part.
          (4) Reporting of information for resource use 
        measurement.--Claims submitted for items and services 
        furnished by a physician or applicable practitioner on 
        or after January 1, 2018, shall, as determined 
        appropriate by the Secretary, include--
                  (A) applicable codes established under 
                paragraphs (2) and (3); and
                  (B) the national provider identifier of the 
                ordering physician or applicable practitioner 
                (if different from the billing physician or 
                applicable practitioner).
          (5) Methodology for resource use analysis.--
                  (A) In general.--In order to evaluate the 
                resources used to treat patients (with respect 
                to care episode and patient condition groups), 
                the Secretary shall, as the Secretary 
                determines appropriate--
                          (i) use the patient relationship 
                        codes reported on claims pursuant to 
                        paragraph (4) to attribute patients (in 
                        whole or in part) to one or more 
                        physicians and applicable 
                        practitioners;
                          (ii) use the care episode and patient 
                        condition codes reported on claims 
                        pursuant to paragraph (4) as a basis to 
                        compare similar patients and care 
                        episodes and patient condition groups; 
                        and
                          (iii) conduct an analysis of resource 
                        use (with respect to care episodes and 
                        patient condition groups of such 
                        patients).
                  (B) Analysis of patients of physicians and 
                practitioners.--In conducting the analysis 
                described in subparagraph (A)(iii) with respect 
                to patients attributed to physicians and 
                applicable practitioners, the Secretary shall, 
                as feasible--
                          (i) use the claims data experience of 
                        such patients by patient condition 
                        codes during a common period, such as 
                        12 months; and
                          (ii) use the claims data experience 
                        of such patients by care episode 
                        codes--
                                  (I) in the case of episodes 
                                without a hospitalization, 
                                during periods of time (such as 
                                the number of days) determined 
                                appropriate by the Secretary; 
                                and
                                  (II) in the case of episodes 
                                with a hospitalization, during 
                                periods of time (such as the 
                                number of days) before, during, 
                                and after the hospitalization.
                  (C) Measurement of resource use.--In 
                measuring such resource use, the Secretary--
                          (i) shall use per patient total 
                        allowed charges for all services under 
                        part A and this part (and, if the 
                        Secretary determines appropriate, part 
                        D) for the analysis of patient resource 
                        use, by care episode codes and by 
                        patient condition codes; and
                          (ii) may, as determined appropriate, 
                        use other measures of allowed charges 
                        (such as subtotals for categories of 
                        items and services) and measures of 
                        utilization of items and services (such 
                        as frequency of specific items and 
                        services and the ratio of specific 
                        items and services among attributed 
                        patients or episodes).
                  (D) Stakeholder input.--The Secretary shall 
                seek comments from the physician specialty 
                societies, applicable practitioner 
                organizations, and other stakeholders, 
                including representatives of individuals 
                entitled to benefits under part A or enrolled 
                under this part, regarding the resource use 
                methodology established pursuant to this 
                paragraph. In seeking comments the Secretary 
                shall use one or more mechanisms (other than 
                notice and comment rulemaking) that may include 
                open door forums, town hall meetings, web-based 
                forums, or other appropriate mechanisms.
          (6) Implementation.--To the extent that the Secretary 
        contracts with an entity to carry out any part of the 
        provisions of this subsection, the Secretary may not 
        contract with an entity or an entity with a subcontract 
        if the entity or subcontracting entity currently makes 
        recommendations to the Secretary on relative values for 
        services under the fee schedule for physicians' 
        services under this section.
          (7) Limitation.--There shall be no administrative or 
        judicial review under section 1869, section 1878, or 
        otherwise of--
                  (A) care episode and patient condition groups 
                and codes established under paragraph (2);
                  (B) patient relationship categories and codes 
                established under paragraph (3); and
                  (C) measurement of, and analyses of resource 
                use with respect to, care episode and patient 
                condition codes and patient relationship codes 
                pursuant to paragraph (5).
          (8) Administration.--Chapter 35 of title 44, United 
        States Code, shall not apply to this section.
          (9) Definitions.--In this subsection:
                  (A) Physician.--The term ``physician'' has 
                the meaning given such term in section 
                1861(r)(1).
                  (B) Applicable practitioner.--The term 
                ``applicable practitioner'' means--
                          (i) a physician assistant, nurse 
                        practitioner, and clinical nurse 
                        specialist (as such terms are defined 
                        in section 1861(aa)(5)), and a 
                        certified registered nurse anesthetist 
                        (as defined in section 1861(bb)(2)); 
                        and
                          (ii) beginning January 1, 2019, such 
                        other eligible professionals (as 
                        defined in subsection (k)(3)(B)) as 
                        specified by the Secretary.
          (10) Clarification.--The provisions of sections 
        1890(b)(7) and 1890A shall not apply to this 
        subsection.
  (s) Priorities and Funding for Measure Development.--
          (1) Plan identifying measure development priorities 
        and timelines.--
                  (A) Draft measure development plan.--Not 
                later than January 1, 2016, the Secretary shall 
                develop, and post on the Internet website of 
                the Centers for Medicare & Medicaid Services, a 
                draft plan for the development of quality 
                measures for application under the applicable 
                provisions (as defined in paragraph (5)). Under 
                such plan the Secretary shall--
                          (i) address how measures used by 
                        private payers and integrated delivery 
                        systems could be incorporated under 
                        title XVIII;
                          (ii) describe how coordination, to 
                        the extent possible, will occur across 
                        organizations developing such measures; 
                        and
                          (iii) take into account how clinical 
                        best practices and clinical practice 
                        guidelines should be used in the 
                        development of quality measures.
                  (B) Quality domains.--For purposes of this 
                subsection, the term ``quality domains'' means 
                at least the following domains:
                          (i) Clinical care.
                          (ii) Safety.
                          (iii) Care coordination.
                          (iv) Patient and caregiver 
                        experience.
                          (v) Population health and prevention.
                  (C) Consideration.--In developing the draft 
                plan under this paragraph, the Secretary shall 
                consider--
                          (i) gap analyses conducted by the 
                        entity with a contract under section 
                        1890(a) or other contractors or 
                        entities;
                          (ii) whether measures are applicable 
                        across health care settings;
                          (iii) clinical practice improvement 
                        activities submitted under subsection 
                        (q)(2)(C)(iv) for identifying possible 
                        areas for future measure development 
                        and identifying existing gaps with 
                        respect to such measures; and
                          (iv) the quality domains applied 
                        under this subsection.
                  (D) Priorities.--In developing the draft plan 
                under this paragraph, the Secretary shall give 
                priority to the following types of measures:
                          (i) Outcome measures, including 
                        patient reported outcome and functional 
                        status measures.
                          (ii) Patient experience measures.
                          (iii) Care coordination measures.
                          (iv) Measures of appropriate use of 
                        services, including measures of over 
                        use.
                  (E) Stakeholder input.--The Secretary shall 
                accept through March 1, 2016, comments on the 
                draft plan posted under paragraph (1)(A) from 
                the public, including health care providers, 
                payers, consumers, and other stakeholders.
                  (F) Final measure development plan.--Not 
                later than May 1, 2016, taking into account the 
                comments received under this subparagraph, the 
                Secretary shall finalize the plan and post on 
                the Internet website of the Centers for 
                Medicare & Medicaid Services an operational 
                plan for the development of quality measures 
                for use under the applicable provisions. Such 
                plan shall be updated as appropriate.
          (2) Contracts and other arrangements for quality 
        measure development.--
                  (A) In general.--The Secretary shall enter 
                into contracts or other arrangements with 
                entities for the purpose of developing, 
                improving, updating, or expanding in accordance 
                with the plan under paragraph (1) quality 
                measures for application under the applicable 
                provisions. Such entities shall include 
                organizations with quality measure development 
                expertise.
                  (B) Prioritization.--
                          (i) In general.--In entering into 
                        contracts or other arrangements under 
                        subparagraph (A), the Secretary shall 
                        give priority to the development of the 
                        types of measures described in 
                        paragraph (1)(D).
                          (ii) Consideration.--In selecting 
                        measures for development under this 
                        subsection, the Secretary shall 
                        consider--
                                  (I) whether such measures 
                                would be electronically 
                                specified; and
                                  (II) clinical practice 
                                guidelines to the extent that 
                                such guidelines exist.
          (3) Annual report by the secretary.--
                  (A) In general.--Not later than May 1, 2017, 
                and annually thereafter, the Secretary shall 
                post on the Internet website of the Centers for 
                Medicare & Medicaid Services a report on the 
                progress made in developing quality measures 
                for application under the applicable 
                provisions.
                  (B) Requirements.--Each report submitted 
                pursuant to subparagraph (A) shall include the 
                following:
                          (i) A description of the Secretary's 
                        efforts to implement this paragraph.
                          (ii) With respect to the measures 
                        developed during the previous year--
                                  (I) a description of the 
                                total number of quality 
                                measures developed and the 
                                types of such measures, such as 
                                an outcome or patient 
                                experience measure;
                                  (II) the name of each measure 
                                developed;
                                  (III) the name of the 
                                developer and steward of each 
                                measure;
                                  (IV) with respect to each 
                                type of measure, an estimate of 
                                the total amount expended under 
                                this title to develop all 
                                measures of such type; and
                                  (V) whether the measure would 
                                be electronically specified.
                          (iii) With respect to measures in 
                        development at the time of the report--
                                  (I) the information described 
                                in clause (ii), if available; 
                                and
                                  (II) a timeline for 
                                completion of the development 
                                of such measures.
                          (iv) A description of any updates to 
                        the plan under paragraph (1) (including 
                        newly identified gaps and the status of 
                        previously identified gaps) and the 
                        inventory of measures applicable under 
                        the applicable provisions.
                          (v) Other information the Secretary 
                        determines to be appropriate.
          (4) Stakeholder input.--With respect to paragraph 
        (1), the Secretary shall seek stakeholder input with 
        respect to--
                  (A) the identification of gaps where no 
                quality measures exist, particularly with 
                respect to the types of measures described in 
                paragraph (1)(D);
                  (B) prioritizing quality measure development 
                to address such gaps; and
                  (C) other areas related to quality measure 
                development determined appropriate by the 
                Secretary.
          (5) Definition of applicable provisions.--In this 
        subsection, the term ``applicable provisions'' means 
        the following provisions:
                  (A) Subsection (q)(2)(B)(i).
                  (B) Section 1833(z)(2)(C).
          (6) Funding.--For purposes of carrying out this 
        subsection, the Secretary shall provide for the 
        transfer, from the Federal Supplementary Medical 
        Insurance Trust Fund under section 1841, of $15,000,000 
        to the Centers for Medicare & Medicaid Services Program 
        Management Account for each of fiscal years 2015 
        through 2019. Amounts transferred under this paragraph 
        shall remain available through the end of fiscal year 
        2022.
          (7) Administration.--Chapter 35 of title 44, United 
        States Code, shall not apply to the collection of 
        information for the development of quality measures.

Part C--Medicare+Choice Program

           *       *       *       *       *       *       *



              contracts with medicare+choice organizations

  Sec. 1857. (a) In General.--The Secretary shall not permit 
the election under section 1851 of a Medicare+Choice plan 
offered by a Medicare+Choice organization under this part, and 
no payment shall be made under section 1853 to an organization, 
unless the Secretary has entered into a contract under this 
section with the organization with respect to the offering of 
such plan. Such a contract with an organization may cover more 
than 1 Medicare+Choice plan. Such contract shall provide that 
the organization agrees to comply with the applicable 
requirements and standards of this part and the terms and 
conditions of payment as provided for in this part.
  (b) Minimum Enrollment Requirements.--
          (1) In general.--Subject to paragraph (2), the 
        Secretary may not enter into a contract under this 
        section with a Medicare+Choice organization unless the 
        organization has--
                  (A) at least 5,000 individuals (or 1,500 
                individuals in the case of an organization that 
                is a provider-sponsored organization) who are 
                receiving health benefits through the 
                organization, or
                  (B) at least 1,500 individuals (or 500 
                individuals in the case of an organization that 
                is a provider-sponsored organization) who are 
                receiving health benefits through the 
                organization if the organization primarily 
                serves individuals residing outside of 
                urbanized areas.
          (2) Application to msa plans.--In applying paragraph 
        (1) in the case of a Medicare+Choice organization that 
        is offering an MSA plan, paragraph (1) shall be applied 
        by substituting covered lives for individuals.
          (3) Allowing transition.--The Secretary may waive the 
        requirement of paragraph (1) during the first 3 
        contract years with respect to an organization.
  (c) Contract Period and Effectiveness.--
          (1) Period.--Each contract under this section shall 
        be for a term of at least 1 year, as determined by the 
        Secretary, and may be made automatically renewable from 
        term to term in the absence of notice by either party 
        of intention to terminate at the end of the current 
        term.
          (2) Termination authority.--In accordance with 
        procedures established under subsection (h), the 
        Secretary may at any time terminate any such contract 
        if the Secretary determines that the organization--
                  (A) has failed substantially to carry out the 
                contract;
                  (B) is carrying out the contract in a manner 
                inconsistent with the efficient and effective 
                administration of this part; or
                  (C) no longer substantially meets the 
                applicable conditions of this part.
          (3) Effective date of contracts.--The effective date 
        of any contract executed pursuant to this section shall 
        be specified in the contract, except that in no case 
        shall a contract under this section which provides for 
        coverage under an MSA plan be effective before January 
        1999 with respect to such coverage.
          (4) Previous terminations.--
                  (A) In general.--The Secretary may not enter 
                into a contract with a Medicare+Choice 
                organization if a previous contract with that 
                organization under this section was terminated 
                at the request of the organization within the 
                preceding 2-year period, except as provided in 
                subparagraph (B) and except in such other 
                circumstances which warrant special 
                consideration, as determined by the Secretary.
                  (B) Earlier re-entry permitted where change 
                in payment policy.--Subparagraph (A) shall not 
                apply with respect to the offering by a 
                Medicare+Choice organization of a 
                Medicare+Choice plan in a Medicare+Choice 
                payment area if during the 6-month period 
                beginning on the date the organization notified 
                the Secretary of the intention to terminate the 
                most recent previous contract, there was a 
                legislative change enacted (or a regulatory 
                change adopted) that has the effect of 
                increasing payment amounts under section 1853 
                for that Medicare+Choice payment area.
          (5) Contracting authority.--The authority vested in 
        the Secretary by this part may be performed without 
        regard to such provisions of law or regulations 
        relating to the making, performance, amendment, or 
        modification of contracts of the United States as the 
        Secretary may determine to be inconsistent with the 
        furtherance of the purpose of this title.
  (d) Protections Against Fraud and Beneficiary Protections.--
          (1) Periodic auditing.--The Secretary shall provide 
        for the annual auditing of the financial records 
        (including data relating to medicare utilization and 
        costs, including allowable costs under section 1858(c)) 
        of at least one-third of the Medicare+Choice 
        organizations offering Medicare+Choice plans under this 
        part. The Comptroller General shall monitor auditing 
        activities conducted under this subsection.
          (2) Inspection and audit.--Each contract under this 
        section shall provide that the Secretary, or any person 
        or organization designated by the Secretary--
                  (A) shall have the right to timely inspect or 
                otherwise evaluate (i) the quality, 
                appropriateness, and timeliness of services 
                performed under the contract, and (ii) the 
                facilities of the organization when there is 
                reasonable evidence of some need for such 
                inspection, and
                  (B) shall have the right to timely audit and 
                inspect any books and records of the 
                Medicare+Choice organization that pertain (i) 
                to the ability of the organization to bear the 
                risk of potential financial losses, or (ii) to 
                services performed or determinations of amounts 
                payable under the contract.
          (3) Enrollee notice at time of termination.--Each 
        contract under this section shall require the 
        organization to provide (and pay for) written notice in 
        advance of the contract's termination, as well as a 
        description of alternatives for obtaining benefits 
        under this title, to each individual enrolled with the 
        organization under this part.
          (4) Disclosure.--
                  (A) In general.--Each Medicare+Choice 
                organization shall, in accordance with 
                regulations of the Secretary, report to the 
                Secretary financial information which shall 
                include the following:
                          (i) Such information as the Secretary 
                        may require demonstrating that the 
                        organization has a fiscally sound 
                        operation.
                          (ii) A copy of the report, if any, 
                        filed with the Secretary containing the 
                        information required to be reported 
                        under section 1124 by disclosing 
                        entities.
                          (iii) A description of transactions, 
                        as specified by the Secretary, between 
                        the organization and a party in 
                        interest. Such transactions shall 
                        include--
                                  (I) any sale or exchange, or 
                                leasing of any property between 
                                the organization and a party in 
                                interest;
                                  (II) any furnishing for 
                                consideration of goods, 
                                services (including management 
                                services), or facilities 
                                between the organization and a 
                                party in interest, but not 
                                including salaries paid to 
                                employees for services provided 
                                in the normal course of their 
                                employment and health services 
                                provided to members by 
                                hospitals and other providers 
                                and by staff, medical group (or 
                                groups), individual practice 
                                association (or associations), 
                                or any combination thereof; and
                                  (III) any lending of money or 
                                other extension of credit 
                                between an organization and a 
                                party in interest.
                The Secretary may require that information 
                reported respecting an organization which 
                controls, is controlled by, or is under common 
                control with, another entity be in the form of 
                a consolidated financial statement for the 
                organization and such entity.
                  (B) Party in interest defined.--For the 
                purposes of this paragraph, the term ``party in 
                interest'' means--
                          (i) any director, officer, partner, 
                        or employee responsible for management 
                        or administration of a Medicare+Choice 
                        organization, any person who is 
                        directly or indirectly the beneficial 
                        owner of more than 5 percent of the 
                        equity of the organization, any person 
                        who is the beneficial owner of a 
                        mortgage, deed of trust, note, or other 
                        interest secured by, and valuing more 
                        than 5 percent of the organization, 
                        and, in the case of a Medicare+Choice 
                        organization organized as a nonprofit 
                        corporation, an incorporator or member 
                        of such corporation under applicable 
                        State corporation law;
                          (ii) any entity in which a person 
                        described in clause (i)--
                                  (I) is an officer or 
                                director;
                                  (II) is a partner (if such 
                                entity is organized as a 
                                partnership);
                                  (III) has directly or 
                                indirectly a beneficial 
                                interest of more than 5 percent 
                                of the equity; or
                                  (IV) has a mortgage, deed of 
                                trust, note, or other interest 
                                valuing more than 5 percent of 
                                the assets of such entity;
                          (iii) any person directly or 
                        indirectly controlling, controlled by, 
                        or under common control with an 
                        organization; and
                          (iv) any spouse, child, or parent of 
                        an individual described in clause (i).
                  (C) Access to information.--Each 
                Medicare+Choice organization shall make the 
                information reported pursuant to subparagraph 
                (A) available to its enrollees upon reasonable 
                request.
          (5) Loan information.--The contract shall require the 
        organization to notify the Secretary of loans and other 
        special financial arrangements which are made between 
        the organization and subcontractors, affiliates, and 
        related parties.
          (6) Review to ensure compliance with care management 
        requirements for specialized medicare advantage plans 
        for special needs individuals.--In conjunction with the 
        periodic audit of a specialized Medicare Advantage plan 
        for special needs individuals under paragraph (1), the 
        Secretary shall conduct a review to ensure that such 
        organization offering the plan meets the requirements 
        described in section 1859(f)(5).
  (e) Additional Contract Terms.--
          (1) In general.--The contract shall contain such 
        other terms and conditions not inconsistent with this 
        part (including requiring the organization to provide 
        the Secretary with such information) as the Secretary 
        may find necessary and appropriate.
          (2) Cost-sharing in enrollment-related costs.--
                  (A) In general.--A Medicare+Choice 
                organization and a PDP sponsor under part D 
                shall pay the fee established by the Secretary 
                under subparagraph (B).
                  (B) Authorization.--The Secretary is 
                authorized to charge a fee to each 
                Medicare+Choice organization with a contract 
                under this part and each PDP sponsor with a 
                contract under part D that is equal to the 
                organization' or sponsor's pro rata share (as 
                determined by the Secretary) of the aggregate 
                amount of fees which the Secretary is directed 
                to collect in a fiscal year. Any amounts 
                collected shall be available without further 
                appropriation to the Secretary for the purpose 
                of carrying out section 1851 (relating to 
                enrollment and dissemination of information), 
                section 1860D-1(c), and section 4360 of the 
                Omnibus Budget Reconciliation Act of 1990 
                (relating to the health insurance counseling 
                and assistance program).
                  (C) Authorization of appropriations.--There 
                are authorized to be appropriated for the 
                purposes described in subparagraph (B) for each 
                fiscal year beginning with fiscal year 2001 and 
                ending with fiscal year 2005 an amount equal to 
                $100,000,000, and for each fiscal year 
                beginning with fiscal year 2006 an amount equal 
                to $200,000,000, reduced by the amount of fees 
                authorized to be collected under this paragraph 
                and section 1860D-12(b)(3)(D) for the fiscal 
                year.
                  (D) Limitation.--In any fiscal year the fees 
                collected by the Secretary under subparagraph 
                (B) shall not exceed the lesser of--
                          (i) the estimated costs to be 
                        incurred by the Secretary in the fiscal 
                        year in carrying out the activities 
                        described in section 1851 and section 
                        1860D-1(c) and section 4360 of the 
                        Omnibus Budget Reconciliation Act of 
                        1990; or
                          (ii)(I) $200,000,000 in fiscal year 
                        1998;
                          (II) $150,000,000 in fiscal year 
                        1999;
                          (III) $100,000,000 in fiscal year 
                        2000;
                          (IV) the Medicare+Choice portion (as 
                        defined in subparagraph (E)) of 
                        $100,000,000 in fiscal year 2001 and 
                        each succeeding fiscal year before 
                        fiscal year 2006; and
                          (V) the applicable portion (as 
                        defined in subparagraph (F)) of 
                        $200,000,000 in fiscal year 2006 and 
                        each succeeding fiscal year.
                  (E) Medicare+choice portion defined.--In this 
                paragraph, the term ``Medicare+Choice portion'' 
                means, for a fiscal year, the ratio, as 
                estimated by the Secretary, of--
                          (i) the average number of individuals 
                        enrolled in Medicare+Choice plans 
                        during the fiscal year, to
                          (ii) the average number of 
                        individuals entitled to benefits under 
                        part A, and enrolled under part B, 
                        during the fiscal year.
                  (F) Applicable portion defined.--In this 
                paragraph, the term ``applicable portion'' 
                means, for a fiscal year--
                          (i) with respect to MA organizations, 
                        the Secretary's estimate of the total 
                        proportion of expenditures under this 
                        title that are attributable to 
                        expenditures made under this part 
                        (including payments under part D that 
                        are made to such organizations); or
                          (ii) with respect to PDP sponsors, 
                        the Secretary's estimate of the total 
                        proportion of expenditures under this 
                        title that are attributable to 
                        expenditures made to such sponsors 
                        under part D.
          (3) Agreements with federally qualified health 
        centers.--
                  (A) Payment levels and amounts.--A contract 
                under this section with an MA organization 
                shall require the organization to provide, in 
                any written agreement described in section 
                1853(a)(4) between the organization and a 
                federally qualified health center, for a level 
                and amount of payment to the federally 
                qualified health center for services provided 
                by such health center that is not less than the 
                level and amount of payment that the plan would 
                make for such services if the services had been 
                furnished by a entity providing similar 
                services that was not a federally qualified 
                health center.
                  (B) Cost-sharing.--Under the written 
                agreement referred to in subparagraph (A), a 
                federally qualified health center must accept 
                the payment amount referred to in such 
                subparagraph plus the Federal payment provided 
                for in section 1833(a)(3)(B) as payment in full 
                for services covered by the agreement, except 
                that such a health center may collect any 
                amount of cost-sharing permitted under the 
                contract under this section, so long as the 
                amounts of any deductible, coinsurance, or 
                copayment comply with the requirements under 
                section 1854(e).
          (4) Requirement for minimum medical loss ratio.--If 
        the Secretary determines for a contract year (beginning 
        with 2014) that an MA plan has failed to have a medical 
        loss ratio of at least .85--
                  (A) the MA plan shall remit to the Secretary 
                an amount equal to the product of--
                          (i) the total revenue of the MA plan 
                        under this part for the contract year; 
                        and
                          (ii) the difference between .85 and 
                        the medical loss ratio;
                  (B) for 3 consecutive contract years, the 
                Secretary shall not permit the enrollment of 
                new enrollees under the plan for coverage 
                during the second succeeding contract year; and
                  (C) the Secretary shall terminate the plan 
                contract if the plan fails to have such a 
                medical loss ratio for 5 consecutive contract 
                years.
  (f) Prompt Payment by Medicare+Choice Organization.--
          (1) Requirement.--A contract under this part shall 
        require a Medicare+Choice organization to provide 
        prompt payment (consistent with the provisions of 
        sections 1816(c)(2) and 1842(c)(2)) of claims submitted 
        for services and supplies furnished to enrollees 
        pursuant to the contract, if the services or supplies 
        are not furnished under a contract between the 
        organization and the provider or supplier (or in the 
        case of a Medicare+Choice private fee-for-service plan, 
        if a claim is submitted to such organization by an 
        enrollee).
          (2) Secretary's option to bypass noncomplying 
        organization.--In the case of a Medicare+Choice 
        eligible organization which the Secretary determines, 
        after notice and opportunity for a hearing, has failed 
        to make payments of amounts in compliance with 
        paragraph (1), the Secretary may provide for direct 
        payment of the amounts owed to providers and suppliers 
        (or, in the case of a Medicare+Choice private fee-for-
        service plan, amounts owed to the enrollees) for 
        covered services and supplies furnished to individuals 
        enrolled under this part under the contract. If the 
        Secretary provides for the direct payments, the 
        Secretary shall provide for an appropriate reduction in 
        the amount of payments otherwise made to the 
        organization under this part to reflect the amount of 
        the Secretary's payments (and the Secretary's costs in 
        making the payments).
          (3) Incorporation of certain prescription drug plan 
        contract requirements.--The following provisions shall 
        apply to contracts with a Medicare Advantage 
        organization offering an MA-PD plan in the same manner 
        as they apply to contracts with a PDP sponsor offering 
        a prescription drug plan under part D:
                  (A) Prompt payment.--Section 1860D-12(b)(4).
                  (B) Submission of claims by pharmacies 
                located in or contracting with long-term care 
                facilities.--Section 1860D-12(b)(5).
                  (C) Regular update of prescription drug 
                pricing standard.--Section 1860D-12(b)(6).
  (g) Intermediate Sanctions.--
          (1) In general.--If the Secretary determines that a 
        Medicare+Choice organization with a contract under this 
        section--
                  (A) fails substantially to provide medically 
                necessary items and services that are required 
                (under law or under the contract) to be 
                provided to an individual covered under the 
                contract, if the failure has adversely affected 
                (or has substantial likelihood of adversely 
                affecting) the individual;
                  (B) imposes premiums on individuals enrolled 
                under this part in excess of the amount of the 
                Medicare+Choice monthly basic and supplemental 
                beneficiary premiums permitted under section 
                1854;
                  (C) acts to expel or to refuse to re-enroll 
                an individual in violation of the provisions of 
                this part;
                  (D) engages in any practice that would 
                reasonably be expected to have the effect of 
                denying or discouraging enrollment (except as 
                permitted by this part) by eligible individuals 
                with the organization whose medical condition 
                or history indicates a need for substantial 
                future medical services;
                  (E) misrepresents or falsifies information 
                that is furnished--
                          (i) to the Secretary under this part, 
                        or
                          (ii) to an individual or to any other 
                        entity under this part;
                  (F) fails to comply with the applicable 
                requirements of section 1852(j)(3) or 
                1852(k)(2)(A)(ii);
                  (G) employs or contracts with any individual 
                or entity that is excluded from participation 
                under this title under section 1128 or 1128A 
                for the provision of health care, utilization 
                review, medical social work, or administrative 
                services or employs or contracts with any 
                entity for the provision (directly or 
                indirectly) through such an excluded individual 
                or entity of such services;
                  (H) except as provided under subparagraph (C) 
                or (D) of section 1860D-1(b)(1), enrolls an 
                individual in any plan under this part without 
                the prior consent of the individual or the 
                designee of the individual;
                  (I) transfers an individual enrolled under 
                this part from one plan to another without the 
                prior consent of the individual or the designee 
                of the individual or solely for the purpose of 
                earning a commission;
                  (J) fails to comply with marketing 
                restrictions described in subsections (h) and 
                (j) of section 1851 or applicable implementing 
                regulations or guidance; or
                  (K) employs or contracts with any individual 
                or entity who engages in the conduct described 
                in subparagraphs (A) through (J) of this 
                paragraph;
        the Secretary may provide, in addition to any other 
        remedies authorized by law, for any of the remedies 
        described in paragraph (2). The Secretary may provide, 
        in addition to any other remedies authorized by law, 
        for any of the remedies described in paragraph (2), if 
        the Secretary determines that any employee or agent of 
        such organization, or any provider or supplier who 
        contracts with such organization, has engaged in any 
        conduct described in subparagraphs (A) through (K) of 
        this paragraph.
          (2) Remedies.--The remedies described in this 
        paragraph are--
                  (A) civil money penalties of not more than 
                $25,000 for each determination under paragraph 
                (1) or, with respect to a determination under 
                subparagraph (D) or (E)(i) of such paragraph, 
                of not more than $100,000 for each such 
                determination, except with respect to a 
                determination under subparagraph (E), an 
                assessment of not more than the amount claimed 
                by such plan or plan sponsor based upon the 
                misrepresentation or falsified information 
                involved, plus, with respect to a determination 
                under paragraph (1)(B), double the excess 
                amount charged in violation of such paragraph 
                (and the excess amount charged shall be 
                deducted from the penalty and returned to the 
                individual concerned), and plus, with respect 
                to a determination under paragraph (1)(D), 
                $15,000 for each individual not enrolled as a 
                result of the practice involved,
                  (B) suspension of enrollment of individuals 
                under this part after the date the Secretary 
                notifies the organization of a determination 
                under paragraph (1) and until the Secretary is 
                satisfied that the basis for such determination 
                has been corrected and is not likely to recur, 
                or
                  (C) suspension of payment to the organization 
                under this part for individuals enrolled after 
                the date the Secretary notifies the 
                organization of a determination under paragraph 
                (1) and until the Secretary is satisfied that 
                the basis for such determination has been 
                corrected and is not likely to recur.
          (3) Other intermediate sanctions.--In the case of a 
        Medicare+Choice organization for which the Secretary 
        makes a determination under subsection (c)(2) the basis 
        of which is not described in paragraph (1), the 
        Secretary may apply the following intermediate 
        sanctions:
                  (A) Civil money penalties of not more than 
                $25,000 for each determination under subsection 
                (c)(2) if the deficiency that is the basis of 
                the determination has directly adversely 
                affected (or has the substantial likelihood of 
                adversely affecting) an individual covered 
                under the organization's contract.
                  (B) Civil money penalties of not more than 
                $10,000 for each week beginning after the 
                initiation of civil money penalty procedures by 
                the Secretary during which the deficiency that 
                is the basis of a determination under 
                subsection (c)(2) exists.
                  (C) Suspension of enrollment of individuals 
                under this part after the date the Secretary 
                notifies the organization of a determination 
                under subsection (c)(2) and until the Secretary 
                is satisfied that the deficiency that is the 
                basis for the determination has been corrected 
                and is not likely to recur.
                  (D) Civil monetary penalties of not more than 
                $100,000, or such higher amount as the 
                Secretary may establish by regulation, where 
                the finding under subsection (c)(2)(A) is based 
                on the organization's termination of its 
                contract under this section other than at a 
                time and in a manner provided for under 
                subsection (a).
          (4) Civil money penalties.--The provisions of section 
        1128A (other than subsections (a) and (b)) shall apply 
        to a civil money penalty under paragraph (2) or (3) in 
        the same manner as they apply to a civil money penalty 
        or proceeding under section 1128A(a).
  (h) Procedures for Termination.--
          (1) In general.--The Secretary may terminate a 
        contract with a Medicare+Choice organization under this 
        section in accordance with formal investigation and 
        compliance procedures established by the Secretary 
        under which--
                  (A) the Secretary provides the organization 
                with the reasonable opportunity to develop and 
                implement a corrective action plan to correct 
                the deficiencies that were the basis of the 
                Secretary's determination under subsection 
                (c)(2); and
                  (B) the Secretary provides the organization 
                with reasonable notice and opportunity for 
                hearing (including the right to appeal an 
                initial decision) before terminating the 
                contract.
          (2) Exception for imminent and serious risk to 
        health.--Paragraph (1) shall not apply if the Secretary 
        determines that a delay in termination, resulting from 
        compliance with the procedures specified in such 
        paragraph prior to termination, would pose an imminent 
        and serious risk to the health of individuals enrolled 
        under this part with the organization.
  (i) Medicare+Choice Program Compatibility With Employer or 
Union Group Health Plans.--
          (1) Contracts with ma organizations.--To facilitate 
        the offering of Medicare+Choice plans under contracts 
        between Medicare+Choice organizations and employers, 
        labor organizations, or the trustees of a fund 
        established by one or more employers or labor 
        organizations (or combination thereof) to furnish 
        benefits to the entity's employees, former employees 
        (or combination thereof) or members or former members 
        (or combination thereof) of the labor organizations, 
        the Secretary may waive or modify requirements that 
        hinder the design of, the offering of, or the 
        enrollment in such Medicare+Choice plans.
          (2) Employer sponsored ma plans.--To facilitate the 
        offering of MA plans by employers, labor organizations, 
        or the trustees of a fund established by one or more 
        employers or labor organizations (or combination 
        thereof) to furnish benefits to the entity's employees, 
        former employees (or combination thereof) or members or 
        former members (or combination thereof) of the labor 
        organizations, the Secretary may waive or modify 
        requirements that hinder the design of, the offering 
        of, or the enrollment in such MA plans. Notwithstanding 
        section 1851(g), an MA plan described in the previous 
        sentence may restrict the enrollment of individuals 
        under this part to individuals who are beneficiaries 
        and participants in such plan.

           *       *       *       *       *       *       *


Part E--Miscellaneous Provisions

           *       *       *       *       *       *       *



                             administration

  Sec. 1874. (a) Except as otherwise provided in this title and 
in the Railroad Retirement Act of 1974, the insurance programs 
established by this title shall be administered by the 
Secretary. The Secretary may perform any of his functions under 
this title directly, or by contract providing for payment in 
advance or by way of reimbursement, and in such installments, 
as the Secretary may deem necessary.
  (b) The Secretary may contract with any person, agency, or 
institution to secure on a reimbursable basis such special 
data, actuarial information, and other information as may be 
necessary in the carrying out of his functions under this 
title.
  (c) In the course of any hearing, investigation, or other 
proceeding that he is authorized to conduct under this title, 
the Secretary may administer oaths and affirmations.
  (d) Inclusion of Medicare Provider and Supplier Payments in 
Federal Payment Levy Program.--
          (1) In general.--The Centers for Medicare & Medicaid 
        Services shall take all necessary steps to participate 
        in the Federal Payment Levy Program under section 
        6331(h) of the Internal Revenue Code of 1986 as soon as 
        possible and shall ensure that--
                  (A) at least 50 percent of all payments under 
                parts A and B are processed through such 
                program beginning within 1 year after the date 
                of the enactment of this section;
                  (B) at least 75 percent of all payments under 
                parts A and B are processed through such 
                program beginning within 2 years after such 
                date; and
                  (C) all payments under parts A and B are 
                processed through such program beginning not 
                later than September 30, 2011.
          (2) Assistance.--The Financial Management Service and 
        the Internal Revenue Service shall provide assistance 
        to the Centers for Medicare & Medicaid Services to 
        ensure that all payments described in paragraph (1) are 
        included in the Federal Payment Levy Program by the 
        deadlines specified in that subsection.
  (e) Availability of Data.--
          (1) In general.--Subject to paragraph (4), the 
        Secretary shall make available to qualified entities 
        (as defined in paragraph (2)) data described in 
        paragraph (3) for the evaluation of the performance of 
        providers of services and suppliers.
          (2) Qualified entities.--For purposes of this 
        subsection, the term ``qualified entity'' means a 
        public or private entity that--
                  (A) is qualified (as determined by the 
                Secretary) to use claims data to evaluate the 
                performance of providers of services and 
                suppliers on measures of quality, efficiency, 
                effectiveness, and resource use; and
                  (B) agrees to meet the requirements described 
                in paragraph (4) and meets such other 
                requirements as the Secretary may specify, such 
                as ensuring security of data.
          (3) Data described.--The data described in this 
        paragraph are standardized extracts (as determined by 
        the Secretary) of claims data under parts A, B, and D 
        for items and services furnished under such parts for 
        one or more specified geographic areas and time periods 
        requested by a qualified entity. Beginning July 1, 
        2016, if the Secretary determines appropriate, the data 
        described in this paragraph may also include 
        standardized extracts (as determined by the Secretary) 
        of claims data under titles XIX and XXI for assistance 
        provided under such titles for one or more specified 
        geographic areas and time periods requested by a 
        qualified entity. The Secretary shall take such actions 
        as the Secretary deems necessary to protect the 
        identity of individuals entitled to or enrolled for 
        benefits under such parts or under titles XIX or XXI.
          (4) Requirements.--
                  (A) Fee.--Data described in paragraph (3) 
                shall be made available to a qualified entity 
                under this subsection at a fee equal to the 
                cost of making such data available. Any fee 
                collected pursuant to the preceding sentence 
                shall be deposited, for periods prior to July 
                1, 2016, into the Federal Supplementary Medical 
                Insurance Trust Fund under section 1841, and, 
                beginning July 1, 2016, into the Centers for 
                Medicare & Medicaid Services Program Management 
                Account.
                  (B) Specification of uses and 
                methodologies.--A qualified entity requesting 
                data under this subsection shall--
                          (i) submit to the Secretary a 
                        description of the methodologies that 
                        such qualified entity will use to 
                        evaluate the performance of providers 
                        of services and suppliers using such 
                        data;
                          (ii)(I) except as provided in 
                        subclause (II), if available, use 
                        standard measures, such as measures 
                        endorsed by the entity with a contract 
                        under section 1890(a) and measures 
                        developed pursuant to section 931 of 
                        the Public Health Service Act; or
                          (II) use alternative measures if the 
                        Secretary, in consultation with 
                        appropriate stakeholders, determines 
                        that use of such alternative measures 
                        would be more valid, reliable, 
                        responsive to consumer preferences, 
                        cost-effective, or relevant to 
                        dimensions of quality and resource use 
                        not addressed by such standard 
                        measures;
                          (iii) include data made available 
                        under this subsection with claims data 
                        from sources other than claims data 
                        under this title in the evaluation of 
                        performance of providers of services 
                        and suppliers;
                          (iv) only include information on the 
                        evaluation of performance of providers 
                        and suppliers in reports described in 
                        subparagraph (C);
                          (v) make available to providers of 
                        services and suppliers, upon their 
                        request, data made available under this 
                        subsection; and
                          (vi) prior to their release, submit 
                        to the Secretary the format of reports 
                        under subparagraph (C).
                  (C) Reports.--Any report by a qualified 
                entity evaluating the performance of providers 
                of services and suppliers using data made 
                available under this subsection shall--
                          (i) include an understandable 
                        description of the measures, which 
                        shall include quality measures and the 
                        rationale for use of other measures 
                        described in subparagraph (B)(ii)(II), 
                        risk adjustment methods, physician 
                        attribution methods, other applicable 
                        methods, data specifications and 
                        limitations, and the sponsors, so that 
                        consumers, providers of services and 
                        suppliers, health plans, researchers, 
                        and other stakeholders can assess such 
                        reports;
                          (ii) be made available 
                        confidentially, to any provider of 
                        services or supplier to be identified 
                        in such report, prior to the public 
                        release of such report, and provide an 
                        opportunity to appeal and correct 
                        errors;
                          (iii) only include information on a 
                        provider of services or supplier in an 
                        aggregate form as determined 
                        appropriate by the Secretary; and
                          (iv) except as described in clause 
                        (ii), be made available to the public.
                  (D) Approval and limitation of uses.--The 
                Secretary shall not make data described in 
                paragraph (3) available to a qualified entity 
                unless the qualified entity agrees to release 
                the information on the evaluation of 
                performance of providers of services and 
                suppliers. Such entity shall only use such 
                data, and information derived from such 
                evaluation, for the reports under subparagraph 
                (C). Data released to a qualified entity under 
                this subsection shall not be subject to 
                discovery or admission as evidence in judicial 
                or administrative proceedings without consent 
                of the applicable provider of services or 
                supplier.
  (f) Requirement for the Secretary To Establish Policies and 
Claims Edits Relating to Incarcerated Individuals, Individuals 
Not Lawfully Present, and Deceased Individuals.--The Secretary 
shall establish and maintain procedures, including procedures 
for using claims processing edits, updating eligibility 
information to improve provider accessibility, and conducting 
recoupment activities such as through recovery audit 
contractors, in order to ensure that payment is not made under 
this title for items and services furnished to an individual 
who is one of the following:
          (1) An individual who is incarcerated.
          (2) An individual who is not lawfully present in the 
        United States and who is not eligible for coverage 
        under this title.
          (3) A deceased individual.

           *       *       *       *       *       *       *


          payment to hospitals for inpatient hospital services

  Sec. 1886. (a)(1)(A)(i) The Secretary, in determining the 
amount of the payments that may be made under this title with 
respect to operating costs of inpatient hospital services (as 
defined in paragraph (4)) shall not recognize as reasonable (in 
the efficient delivery of health services) costs for the 
provision of such services by a hospital for a cost reporting 
period to the extent such costs exceed the applicable 
percentage (as determined under clause (ii)) of the average of 
such costs for all hospitals in the same grouping as such 
hospital for comparable time periods.
  (ii) For purposes of clause (i), the applicable percentage 
for hospital cost reporting periods beginning--
          (I) on or after October 1, 1982, and before October 
        1, 1983, is 120 percent;
          (II) on or after October 1, 1983, and before October 
        1, 1984, is 115 percent; and
          (III) on or after October 1, 1984, is 110 percent.
  (B)(i) For purposes of subparagraph (A) the Secretary shall 
establish case mix indexes for all short- term hospitals, and 
shall set limits for each hospital based upon the general mix 
of types of medical cases with respect to which such hospital 
provides services for which payment may be made under this 
title.
  (ii) The Secretary shall set such limits for a cost reporting 
period of a hospital--
          (I) by updating available data for a previous period 
        to the immediate preceding cost reporting period by the 
        estimated average rate of change of hospital costs 
        industry-wide, and
          (II) by projecting for the cost reporting period by 
        the applicable percentage increase (as defined in 
        subsection (b)(3)(B)).
  (C) The limitation established under subparagraph (A) for any 
hospital shall in no event be lower than the allowable 
operating costs of inpatient hospital services (as defined in 
paragraph (4)) recognized under this title for such hospital 
for such hospital's last cost reporting period prior to the 
hospital's first cost reporting period for which this section 
is in effect.
  (D) Subparagraph (A) shall not apply to cost reporting 
periods beginning on or after October 1, 1983.
  (2) The Secretary shall provide for such exemptions from, and 
exceptions and adjustments to, the limitation established under 
paragraph (1)(A) as he deems appropriate, including those which 
he deems necessary to take into account--
          (A) the special needs of sole community hospitals, of 
        new hospitals, of risk based health maintenance 
        organizations, and of hospitals which provide atypical 
        services or essential community services, and to take 
        into account extraordinary circumstances beyond the 
        hospital's control, medical and paramedical education 
        costs, significantly fluctuating population in the 
        service area of the hospital, and unusual labor costs,
          (B) the special needs of psychiatric hospitals and of 
        public or other hospitals that serve a significantly 
        disproportionate number of patients who have low income 
        or are entitled to benefits under part A of this title, 
        and
          (C) a decrease in the inpatient hospital services 
        that a hospital provides and that are customarily 
        provided directly by similar hospitals which results in 
        a significant distortion in the operating costs of 
        inpatient hospital services.
  (3) The limitation established under paragraph (1)(A) shall 
not apply with respect to any hospital which--
          (A) is located outside of a standard metropolitan 
        statistical area, and
          (B)(i) has less than 50 beds, and
          (ii) was in operation and had less than 50 beds on 
        the date of the enactment of this section.
  (4) For purposes of this section, the term ``operating costs 
of inpatient hospital services'' includes all routine operating 
costs, ancillary service operating costs, and special care unit 
operating costs with respect to inpatient hospital services as 
such costs are determined on an average per admission or per 
discharge basis (as determined by the Secretary), and includes 
the costs of all services for which payment may be made under 
this title that are provided by the hospital (or by an entity 
wholly owned or operated by the hospital) to the patient during 
the 3 days (or, in the case of a hospital that is not a 
subsection (d) hospital, during the 1 day) immediately 
preceding the date of the patient's admission if such services 
are diagnostic services (including clinical diagnostic 
laboratory tests) or are other services related to the 
admission (as defined by the Secretary). Such term does not 
include costs of approved educational activities, a return on 
equity capital, or, other capital-related costs (as defined by 
the Secretary for periods before October 1, 1987). In applying 
the first sentence of this paragraph, the term ``other services 
related to the admission'' includes all services that are not 
diagnostic services (other than ambulance and maintenance renal 
dialysis services) for which payment may be made under this 
title that are provided by a hospital (or an entity wholly 
owned or operated by the hospital) to a patient--
          (A) on the date of the patient's inpatient admission; 
        or
          (B) during the 3 days (or, in the case of a hospital 
        that is not a subsection (d) hospital, during the 1 
        day) immediately preceding the date of such admission 
        unless the hospital demonstrates (in a form and manner, 
        and at a time, specified by the Secretary) that such 
        services are not related (as determined by the 
        Secretary) to such admission.
  (b)(1) Notwithstanding section 1814(b) but subject to the 
provisions of section 1813, if the operating costs of inpatient 
hospital services (as defined in subsection (a)(4)) of a 
hospital (other than a subsection (d) hospital, as defined in 
subsection (d)(1)(B) and other than a rehabilitation facility 
described in subsection (j)(1)) for a cost reporting period 
subject to this paragraph--
          (A) are less than or equal to the target amount (as 
        defined in paragraph (3)) for that hospital for that 
        period, the amount of the payment with respect to such 
        operating costs payable under part A on a per discharge 
        or per admission basis (as the case may be) shall be 
        equal to the amount of such operating costs, plus--
                  (i) 15 percent of the amount by which the 
                target amount exceeds the amount of the 
                operating costs, or
                  (ii) 2 percent of the target amount,
        whichever is less;
          (B) are greater than the target amount but do not 
        exceed 110 percent of the target amount, the amount of 
        the payment with respect to those operating costs 
        payable under part A on a per discharge basis shall 
        equal the target amount; or
          (C) are greater than 110 percent of the target 
        amount, the amount of the payment with respect to such 
        operating costs payable under part A on a per discharge 
        or per admission basis (as the case may be) shall be 
        equal to (i) the target amount, plus (ii) in the case 
        of cost reporting periods beginning on or after October 
        1, 1991, an additional amount equal to 50 percent of 
        the amount by which the operating costs exceed 110 
        percent of the target amount (except that such 
        additional amount may not exceed 10 percent of the 
        target amount) after any exceptions or adjustments are 
        made to such target amount for the cost reporting 
        period;
plus the amount, if any, provided under paragraph (2), except 
that in no case may the amount payable under this title (other 
than on the basis of a DRG prospective payment rate determined 
under subsection (d)) with respect to operating costs of 
inpatient hospital services exceed the maximum amount payable 
with respect to such costs pursuant to subsection (a).
  (2)(A) Except as provided in subparagraph (E), in addition to 
the payment computed under paragraph (1), in the case of an 
eligible hospital (described in subparagraph (B)) for a cost 
reporting period beginning on or after October 1, 1997, the 
amount of payment on a per discharge basis under paragraph (1) 
shall be increased by the lesser of--
          (i) 50 percent of the amount by which the operating 
        costs are less than the expected costs (as defined in 
        subparagraph (D)) for the period; or
          (ii) 1 percent of the target amount for the period.
  (B) For purposes of this paragraph, an ``eligible hospital'' 
means with respect to a cost reporting period, a hospital--
          (i) that has received payments under this subsection 
        for at least 3 full cost reporting periods before that 
        cost reporting period, and
          (ii) whose operating costs for the period are less 
        than the least of its target amount, its trended costs 
        (as defined in subparagraph (C)), or its expected costs 
        (as defined in subparagraph (D)) for the period.
  (C) For purposes of subparagraph (B)(ii), the term ``trended 
costs'' means for a hospital cost reporting period ending in a 
fiscal year--
          (i) in the case of a hospital for which its cost 
        reporting period ending in fiscal year 1996 was its 
        third or subsequent full cost reporting period for 
        which it receives payments under this subsection, the 
        lesser of the operating costs or target amount for that 
        hospital for its cost reporting period ending in fiscal 
        year 1996, or
          (ii) in the case of any other hospital, the operating 
        costs for that hospital for its third full cost 
        reporting period for which it receives payments under 
        this subsection,
increased (in a compounded manner) for each succeeding fiscal 
year (through the fiscal year involved) by the market basket 
percentage increase for the fiscal year.
  (D) For purposes of this paragraph, the term ``expected 
costs'', with respect to the cost reporting period ending in a 
fiscal year, means the lesser of the operating costs of 
inpatient hospital services or target amount per discharge for 
the previous cost reporting period updated by the market basket 
percentage increase (as defined in paragraph (3)(B)(iii)) for 
the fiscal year.
  (E)(i) In the case of an eligible hospital that is a hospital 
or unit that is within a class of hospital described in clause 
(ii) with a 12-month cost reporting period beginning before the 
enactment of this subparagraph, in determining the amount of 
the increase under subparagraph (A), the Secretary shall 
substitute for the percentage of the target amount applicable 
under subparagraph (A)(ii)--
          (I) for a cost reporting period beginning on or after 
        October 1, 2000, and before September 30, 2001, 1.5 
        percent; and
          (II) for a cost reporting period beginning on or 
        after October 1, 2001, and before September 30, 2002, 2 
        percent.
  (ii) For purposes of clause (i), each of the following shall 
be treated as a separate class of hospital:
          (I) Hospitals described in clause (i) of subsection 
        (d)(1)(B) and psychiatric units described in the matter 
        following clause (v) of such subsection.
          (II) Hospitals described in clause (iv) of such 
        subsection.
  (3)(A) Except as provided in subparagraph (C) and succeeding 
subparagraphs and in paragraph (7)(A)(ii), for purposes of this 
subsection, the term ``target amount'' means, with respect to a 
hospital for a particular 12-month cost reporting period--
          (i) in the case of the first such reporting period 
        for which this subsection is in effect, the allowable 
        operating costs of inpatient hospital services (as 
        defined in subsection (a)(4)) recognized under this 
        title for such hospital for the preceding 12-month cost 
        reporting period, and
          (ii) in the case of a later reporting period, the 
        target amount for the preceding 12-month cost reporting 
        period,
increased by the applicable percentage increase under 
subparagraph (B) for that particular cost reporting period.
  (B)(i) For purposes of subsection (d) and subsection (j) for 
discharges occurring during a fiscal year, the ``applicable 
percentage increase'' shall be--
          (I) for fiscal year 1986, \1/2\ percent,
          (II) for fiscal year 1987, 1.15 percent,
          (III) for fiscal year 1988, 3.0 percent for hospitals 
        located in a rural area, 1.5 percent for hospitals 
        located in a large urban area (as defined in subsection 
        (d)(2)(D)), and 1.0 percent for hospitals located in 
        other urban areas,
          (IV) for fiscal year 1989, the market basket 
        percentage increase minus 1.5 percentage points for 
        hospitals located in a rural area, the market basket 
        percentage increase minus 2.0 percentage points for 
        hospitals located in a large urban area, and the market 
        basket percentage increase minus 2.5 percentage points 
        for hospitals located in other urban areas,
          (V) for fiscal year 1990, the market basket 
        percentage increase plus 4.22 percentage points for 
        hospitals located in a rural area, the market basket 
        percentage increase plus 0.12 percentage points for 
        hospitals located in a large urban area, and the market 
        basket percentage increase minus 0.53 percentage points 
        for hospitals located in other urban areas,
          (VI) for fiscal year 1991, the market basket 
        percentage increase minus 2.0 percentage points for 
        hospitals in a large urban or other urban area, and the 
        market basket percentage increase minus 0.7 percentage 
        point for hospitals located in a rural area,
          (VII) for fiscal year 1992, the market basket 
        percentage increase minus 1.6 percentage points for 
        hospitals in a large urban or other urban area, and the 
        market basket percentage increase minus 0.6 percentage 
        point for hospitals located in a rural area,
          (VIII) for fiscal year 1993, the market basket 
        percentage increase minus 1.55 percentage point for 
        hospitals in a large urban or other urban area, and the 
        market basket percentage increase minus 0.55 for 
        hospitals located in a rural area,
          (IX) for fiscal year 1994, the market basket 
        percentage increase minus 2.5 percentage points for 
        hospitals located in a large urban or other urban area, 
        and the market basket percentage increase minus 1.0 
        percentage point for hospitals located in a rural area,
          (X) for fiscal year 1995, the market basket 
        percentage increase minus 2.5 percentage points for 
        hospitals located in a large urban or other urban area, 
        and such percentage increase for hospitals located in a 
        rural area as will provide for the average standardized 
        amount determined under subsection (d)(3)(A) for 
        hospitals located in a rural area being equal to such 
        average standardized amount for hospitals located in an 
        urban area (other than a large urban area),
          (XI) for fiscal year 1996, the market basket 
        percentage increase minus 2.0 percentage points for 
        hospitals in all areas,
          (XII) for fiscal year 1997, the market basket 
        percentage increase minus 0.5 percentage point for 
        hospitals in all areas,
          (XIII) for fiscal year 1998, 0 percent,
          (XIV) for fiscal year 1999, the market basket 
        percentage increase minus 1.9 percentage points for 
        hospitals in all areas,
          (XV) for fiscal year 2000, the market basket 
        percentage increase minus 1.8 percentage points for 
        hospitals in all areas,
          (XVI) for fiscal year 2001, the market basket 
        percentage increase for hospitals in all areas,
          (XVII) for fiscal year 2002, the market basket 
        percentage increase minus 0.55 percentage points for 
        hospitals in all areas,
          (XVIII) for fiscal year 2003, the market basket 
        percentage increase minus 0.55 percentage points for 
        hospitals in all areas,
          (XIX) for each of fiscal years 2004 through 2006, 
        subject to clause (vii), the market basket percentage 
        increase for hospitals in all areas; and
          (XX) for each subsequent fiscal year, subject to 
        clauses (viii), (ix), (xi), and (xii), the market 
        basket percentage increase for hospitals in all areas.
  (ii) For purposes of subparagraphs (A) and (E), the 
``applicable percentage increase'' for 12-month cost reporting 
periods beginning during--
          (I) fiscal year 1986, is 0.5 percent,
          (II) fiscal year 1987, is 1.15 percent,
          (III) fiscal year 1988, is the market basket 
        percentage increase minus 2.0 percentage points,
          (IV) a subsequent fiscal year ending on or before 
        September 30, 1993, is the market basket percentage 
        increase,
          (V) fiscal years 1994 through 1997, is the market 
        basket percentage increase minus the applicable 
        reduction (as defined in clause (v)(II)), or in the 
        case of a hospital for a fiscal year for which the 
        hospital's update adjustment percentage (as defined in 
        clause (v)(I)) is at least 10 percent, the market 
        basket percentage increase,
          (VI) for fiscal year 1998, is 0 percent,
          (VII) for fiscal years 1999 through 2002, is the 
        applicable update factor specified under clause (vi) 
        for the fiscal year, and
          (VIII) subsequent fiscal years is the market basket 
        percentage increase.
  (iii) For purposes of this subparagraph, the term ``market 
basket percentage increase'' means, with respect to cost 
reporting periods and discharges occurring in a fiscal year, 
the percentage, estimated by the Secretary before the beginning 
of the period or fiscal year, by which the cost of the mix of 
goods and services (including personnel costs but excluding 
nonoperating costs) comprising routine, ancillary, and special 
care unit inpatient hospital services, based on an index of 
appropriately weighted indicators of changes in wages and 
prices which are representative of the mix of goods and 
services included in such inpatient hospital services, for the 
period or fiscal year will exceed the cost of such mix of goods 
and services for the preceding 12-month cost reporting period 
or fiscal year.
  (iv) For purposes of subparagraphs (C) and (D), the 
``applicable percentage increase'' is--
          (I) for 12-month cost reporting periods beginning 
        during fiscal years 1986 through 1993, the applicable 
        percentage increase specified in clause (ii),
          (II) for fiscal year 1994, the market basket 
        percentage increase minus 2.3 percentage points 
        (adjusted to exclude any portion of a cost reporting 
        period beginning during fiscal year 1993 for which the 
        applicable percentage increase is determined under 
        subparagraph (I)),
          (III) for fiscal year 1995, the market basket 
        percentage increase minus 2.2 percentage points, and
          (IV) for fiscal year 1996 and each subsequent fiscal 
        year, the applicable percentage increase under clause 
        (i).
  (v) For purposes of clause (ii)(V)--
          (I) a hospital's ``update adjustment percentage'' for 
        a fiscal year is the percentage by which the hospital's 
        allowable operating costs of inpatient hospital 
        services recognized under this title for the cost 
        reporting period beginning in fiscal year 1990 exceeds 
        the hospital's target amount (as determined under 
        subparagraph (A)) for such cost reporting period, 
        increased for each fiscal year (beginning with fiscal 
        year 1994) by the sum of any of the hospital's 
        applicable reductions under subclause (V) for previous 
        fiscal years; and
          (II) the ``applicable reduction'' with respect to a 
        hospital for a fiscal year is the lesser of 1 
        percentage point or the percentage point difference 
        between 10 percent and the hospital's update adjustment 
        percentage for the fiscal year.
  (vi) For purposes of clause (ii)(VII) for a fiscal year, if a 
hospital's allowable operating costs of inpatient hospital 
services recognized under this title for the most recent cost 
reporting period for which information is available--
          (I) is equal to, or exceeds, 110 percent of the 
        hospital's target amount (as determined under 
        subparagraph (A)) for such cost reporting period, the 
        applicable update factor specified under this clause is 
        the market basket percentage;
          (II) exceeds 100 percent, but is less than 110 
        percent, of such target amount for the hospital, the 
        applicable update factor specified under this clause is 
        0 percent or, if greater, the market basket percentage 
        minus 0.25 percentage points for each percentage point 
        by which such allowable operating costs (expressed as a 
        percentage of such target amount) is less than 110 
        percent of such target amount;
          (III) is equal to, or less than 100 percent, but 
        exceeds \2/3\ of such target amount for the hospital, 
        the applicable update factor specified under this 
        clause is 0 percent or, if greater, the market basket 
        percentage minus 2.5 percentage points; or
          (IV) does not exceed \2/3\ of such target amount for 
        the hospital, the applicable update factor specified 
        under this clause is 0 percent.
  (vii)(I) For purposes of clause (i)(XIX) for fiscal years 
2005 and 2006, in a case of a subsection (d) hospital that does 
not submit data to the Secretary in accordance with subclause 
(II) with respect to such a fiscal year, the applicable 
percentage increase under such clause for such fiscal year 
shall be reduced by 0.4 percentage points. Such reduction shall 
apply only with respect to the fiscal year involved, and the 
Secretary shall not take into account such reduction in 
computing the applicable percentage increase under clause 
(i)(XIX) for a subsequent fiscal year.
  (II) For fiscal years 2005 and 2006, each subsection (d) 
hospital shall submit to the Secretary quality data (for a set 
of 10 indicators established by the Secretary as of November 1, 
2003) that relate to the quality of care furnished by the 
hospital in inpatient settings in a form and manner, and at a 
time, specified by the Secretary for purposes of this clause, 
but with respect to fiscal year 2005, the Secretary shall 
provide for a 30-day grace period for the submission of data by 
a hospital.
  (viii)(I) For purposes of clause (i) for fiscal year 2007 and 
each subsequent fiscal year, in the case of a subsection (d) 
hospital that does not submit, to the Secretary in accordance 
with this clause, data required to be submitted on measures 
selected under this clause with respect to such a fiscal year, 
the applicable percentage increase under clause (i) for such 
fiscal year shall be reduced by 2.0 percentage points (or, 
beginning with fiscal year 2015, by one-quarter of such 
applicable percentage increase (determined without regard to 
clause (ix), (xi), or (xii))). Such reduction shall apply only 
with respect to the fiscal year involved and the Secretary 
shall not take into account such reduction in computing the 
applicable percentage increase under clause (i) for a 
subsequent fiscal year, and the Secretary and the Medicare 
Payment Advisory Commission shall carry out the requirements 
under section 5001(b) of the Deficit Reduction Act of 2005.
  (II) Each subsection (d) hospital shall submit data on 
measures selected under this clause to the Secretary in a form 
and manner, and at a time, specified by the Secretary for 
purposes of this clause. The Secretary may require hospitals to 
submit data on measures that are not used for the determination 
of value-based incentive payments under subsection (o).
  (III) The Secretary shall expand, beyond the measures 
specified under clause (vii)(II) and consistent with the 
succeeding subclauses, the set of measures that the Secretary 
determines to be appropriate for the measurement of the quality 
of care (including medication errors) furnished by hospitals in 
inpatient settings.
  (IV) Effective for payments beginning with fiscal year 2007, 
in expanding the number of measures under subclause (III), the 
Secretary shall begin to adopt the baseline set of performance 
measures as set forth in the November 2005 report by the 
Institute of Medicine of the National Academy of Sciences under 
section 238(b) of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003.
  (V) Effective for payments for fiscal years 2008 through 
2012, the Secretary shall add other measures that reflect 
consensus among affected parties and, to the extent feasible 
and practicable, shall include measures set forth by one or 
more national consensus building entities.
  (VI) For purposes of this clause and clause (vii), the 
Secretary may replace any measures or indicators in appropriate 
cases, such as where all hospitals are effectively in 
compliance or the measures or indicators have been subsequently 
shown not to represent the best clinical practice.
  (VII) The Secretary shall establish procedures for making 
information regarding measures submitted under this clause 
available to the public. Such procedures shall ensure that a 
hospital has the opportunity to review the data that are to be 
made public with respect to the hospital prior to such data 
being made public. The Secretary shall report quality measures 
of process, structure, outcome, patients' perspectives on care, 
efficiency, and costs of care that relate to services furnished 
in inpatient settings in hospitals on the Internet website of 
the Centers for Medicare & Medicaid Services.
  (VIII) Effective for payments beginning with fiscal year 
2013, with respect to quality measures for outcomes of care, 
the Secretary shall provide for such risk adjustment as the 
Secretary determines to be appropriate to maintain incentives 
for hospitals to treat patients with severe illnesses or 
conditions.
  (IX)(aa) Subject to item (bb), effective for payments 
beginning with fiscal year 2013, each measure specified by the 
Secretary under this clause shall be endorsed by the entity 
with a contract under section 1890(a).
  (bb) In the case of a specified area or medical topic 
determined appropriate by the Secretary for which a feasible 
and practical measure has not been endorsed by the entity with 
a contract under section 1890(a), the Secretary may specify a 
measure that is not so endorsed as long as due consideration is 
given to measures that have been endorsed or adopted by a 
consensus organization identified by the Secretary.
  (X) To the extent practicable, the Secretary shall, with 
input from consensus organizations and other stakeholders, take 
steps to ensure that the measures specified by the Secretary 
under this clause are coordinated and aligned with quality 
measures applicable to--
          (aa) physicians under section 1848(k); and
          (bb) other providers of services and suppliers under 
        this title.
  (XI) The Secretary shall establish a process to validate 
measures specified under this clause as appropriate. Such 
process shall include the auditing of a number of randomly 
selected hospitals sufficient to ensure validity of the 
reporting program under this clause as a whole and shall 
provide a hospital with an opportunity to appeal the validation 
of measures reported by such hospital.
  (ix)(I) For purposes of clause (i) for fiscal year 2015 and 
each subsequent fiscal year, in the case of an eligible 
hospital (as defined in subsection (n)(6)(B)) that is not a 
meaningful EHR user (as defined in subsection (n)(3)) for an 
EHR reporting period for such fiscal year, three-quarters of 
the applicable percentage increase otherwise applicable under 
clause (i) (determined without regard to clause (viii), (xi), 
or (xii)) for such fiscal year shall be reduced by 33\1/3\ 
percent for fiscal year 2015, 66\2/3\ percent for fiscal year 
2016, and 100 percent for fiscal year 2017 and each subsequent 
fiscal year. Such reduction shall apply only with respect to 
the fiscal year involved and the Secretary shall not take into 
account such reduction in computing the applicable percentage 
increase under clause (i) for a subsequent fiscal year.
  (II) The Secretary may, on a case-by-case basis (and, with 
respect to the application of subclause (I) for fiscal year 
2017, for categories of subsection (d) hospitals, as 
established by the Secretary and posted on the Internet website 
of the Centers for Medicare & Medicaid Services prior to 
December 15, 2015, an application for which must be submitted 
to the Secretary by not later than April 1, 2016), exempt an 
eligible hospital from the application of subclause (I) with 
respect to a fiscal year if the Secretary determines, subject 
to annual renewal, that requiring such hospital to be a 
meaningful EHR user during such fiscal year would result in a 
significant hardship, such as in the case of a hospital in a 
rural area without sufficient Internet access. In no case may a 
hospital be granted an exemption under this subclause for more 
than 5 years.
  (III) For fiscal year 2015 and each subsequent fiscal year, a 
State in which hospitals are paid for services under section 
1814(b)(3) shall adjust the payments to each subsection (d) 
hospital in the State that is not a meaningful EHR user (as 
defined in subsection (n)(3)) in a manner that is designed to 
result in an aggregate reduction in payments to hospitals in 
the State that is equivalent to the aggregate reduction that 
would have occurred if payments had been reduced to each 
subsection (d) hospital in the State in a manner comparable to 
the reduction under the previous provisions of this clause. The 
State shall report to the Secretary the methodology it will use 
to make the payment adjustment under the previous sentence.
  (IV) For purposes of this clause, the term ``EHR reporting 
period'' means, with respect to a fiscal year, any period (or 
periods) as specified by the Secretary.
  (x)(I) The Secretary shall develop standard Internet website 
reports tailored to meet the needs of various stakeholders such 
as hospitals, patients, researchers, and policymakers. The 
Secretary shall seek input from such stakeholders in 
determining the type of information that is useful and the 
formats that best facilitate the use of the information.
  (II) The Secretary shall modify the Hospital Compare Internet 
website to make the use and navigation of that website readily 
available to individuals accessing it.
  (xi)(I) For 2012 and each subsequent fiscal year, after 
determining the applicable percentage increase described in 
clause (i) and after application of clauses (viii) and (ix), 
such percentage increase shall be reduced by the productivity 
adjustment described in subclause (II).
  (II) The productivity adjustment described in this subclause, 
with respect to a percentage, factor, or update for a fiscal 
year, year, cost reporting period, or other annual period, is a 
productivity adjustment equal to the 10-year moving average of 
changes in annual economy-wide private nonfarm business multi-
factor productivity (as projected by the Secretary for the 10-
year period ending with the applicable fiscal year, year, cost 
reporting period, or other annual period).
  (III) The application of subclause (I) may result in the 
applicable percentage increase described in clause (i) being 
less than 0.0 for a fiscal year, and may result in payment 
rates under this section for a fiscal year being less than such 
payment rates for the preceding fiscal year.
  (xii) After determining the applicable percentage increase 
described in clause (i), and after application of clauses 
(viii), (ix), and (xi), the Secretary shall reduce such 
applicable percentage increase--
          (I) for each of fiscal years 2010 and 2011, by 0.25 
        percentage point;
          (II) for each of fiscal years 2012 and 2013, by 0.1 
        percentage point;
          (III) for fiscal year 2014, by 0.3 percentage point;
          (IV) for each of fiscal years 2015 and 2016, by 0.2 
        percentage point; and
          (V) for each of fiscal years 2017, 2018, and 2019, by 
        0.75 percentage point.
The application of this clause may result in the applicable 
percentage increase described in clause (i) being less than 0.0 
for a fiscal year, and may result in payment rates under this 
section for a fiscal year being less than such payment rates 
for the preceding fiscal year.
  (C) In the case of a hospital that is a sole community 
hospital (as defined in subsection (d)(5)(D)(iii)), subject to 
subparagraphs (I) and (L), the term ``target amount'' means--
          (i) with respect to the first 12-month cost reporting 
        period in which this subparagraph is applied to the 
        hospital--
                  (I) the allowable operating costs of 
                inpatient hospital services (as defined in 
                subsection (a)(4)) recognized under this title 
                for the hospital for the 12-month cost 
                reporting period (in this subparagraph referred 
                to as the ``base cost reporting period'') 
                preceding the first cost reporting period for 
                which this subsection was in effect with 
                respect to such hospital, increased (in a 
                compounded manner) by--
                  (II) the applicable percentage increases 
                applied to such hospital under this paragraph 
                for cost reporting periods after the base cost 
                reporting period and up to and including such 
                first 12-month cost reporting period,
          (ii) with respect to a later cost reporting period 
        beginning before fiscal year 1994, the target amount 
        for the preceding 12-month cost reporting period, 
        increased by the applicable percentage increase under 
        subparagraph (B)(iv) for discharges occurring in the 
        fiscal year in which that later cost reporting period 
        begins,
          (iii) with respect to discharges occurring in fiscal 
        year 1994, the target amount for the cost reporting 
        period beginning in fiscal year 1993 increased by the 
        applicable percentage increase under subparagraph 
        (B)(iv), or
          (iv) with respect to discharges occurring in fiscal 
        year 1995 and each subsequent fiscal year, the target 
        amount for the preceding year increased by the 
        applicable percentage increase under subparagraph 
        (B)(iv).
There shall be substituted for the base cost reporting period 
described in clause (i) a hospital's cost reporting period (if 
any) beginning during fiscal year 1987 if such substitution 
results in an increase in the target amount for the hospital.
  (D) For cost reporting periods ending on or before September 
30, 1994, and for cost reporting periods occurring on or after 
October 1, 1997, and before October 1, 2017, in the case of a 
hospital that is a medicare-dependent, small rural hospital (as 
defined in subsection (d)(5)(G)), subject to subparagraph (K), 
the term ``target amount'' means--
          (i) with respect to the first 12-month cost reporting 
        period in which this subparagraph is applied to the 
        hospital--
                  (I) the allowable operating costs of 
                inpatient hospital services (as defined in 
                subsection (a)(4)) recognized under this title 
                for the hospital for the 12-month cost 
                reporting period (in this subparagraph referred 
                to as the ``base cost reporting period'') 
                preceding the first cost reporting period for 
                which this subsection was in effect with 
                respect to such hospital, increased (in a 
                compounded manner) by--
                  (II) the applicable percentage increases 
                applied to such hospital under this paragraph 
                for cost reporting periods after the base cost 
                reporting period and up to and including such 
                first 12-month cost reporting period, or
          (ii) with respect to a later cost reporting period 
        beginning before fiscal year 1994, the target amount 
        for the preceding 12-month cost reporting period, 
        increased by the applicable percentage increase under 
        subparagraph (B)(iv) for discharges occurring in the 
        fiscal year in which that later cost reporting period 
        begins,
          (iii) with respect to discharges occurring in fiscal 
        year 1994, the target amount for the cost reporting 
        period beginning in fiscal year 1993 increased by the 
        applicable percentage increase under subparagraph 
        (B)(iv), and
          (iv) with respect to discharges occurring during 
        fiscal year 1998 through fiscal year 2017, the target 
        amount for the preceding year increased by the 
        applicable percentage increase under subparagraph 
        (B)(iv).
There shall be substituted for the base cost reporting period 
described in clause (i) a hospital's cost reporting period (if 
any) beginning during fiscal year 1987 if such substitution 
results in an increase in the target amount for the hospital.
  (E) In the case of a hospital described in clause (v) of 
subsection (d)(1)(B), the term ``target amount'' means--
          (i) with respect to the first 12-month cost reporting 
        period in which this subparagraph is applied to the 
        hospital--
                  (I) the allowable operating costs of 
                inpatient hospital services (as defined in 
                subsection (a)(4)) recognized under this title 
                for the hospital for the 12-month cost 
                reporting period (in this subparagraph referred 
                to as the ``base cost reporting period'') 
                preceding the first cost reporting period for 
                which this subsection was in effect with 
                respect to such hospital, increased (in a 
                compounded manner) by--
                  (II) the sum of the applicable percentage 
                increases applied to such hospital under this 
                paragraph for cost reporting periods after the 
                base cost reporting period and up to and 
                including such first 12-month cost reporting 
                period, or
          (ii) with respect to a later cost reporting period, 
        the target amount for the preceding 12-month cost 
        reporting period, increased by the applicable 
        percentage increase under subparagraph (B)(ii) for that 
        later cost reporting period.
There shall be substituted for the base cost reporting period 
described in clause (i) a hospital's cost reporting period (if 
any) beginning during fiscal year 1987 if such substitution 
results in an increase in the target amount for the hospital.
  (F)(i) In the case of a hospital (or unit described in the 
matter following clause (v) of subsection (d)(1)(B)) that 
received payment under this subsection for inpatient hospital 
services furnished during cost reporting periods beginning 
before October 1, 1990, that is within a class of hospital 
described in clause (iii), and that elects (in a form and 
manner determined by the Secretary) this subparagraph to apply 
to the hospital, the target amount for the hospital's 12-month 
cost reporting period beginning during fiscal year 1998 is 
equal to the average described in clause (ii).
  (ii) The average described in this clause for a hospital or 
unit shall be determined by the Secretary as follows:
          (I) The Secretary shall determine the allowable 
        operating costs for inpatient hospital services for the 
        hospital or unit for each of the 5 cost reporting 
        periods for which the Secretary has the most recent 
        settled cost reports as of the date of the enactment of 
        this subparagraph.
          (II) The Secretary shall increase the amount 
        determined under subclause (I) for each cost reporting 
        period by the applicable percentage increase under 
        subparagraph (B)(ii) for each subsequent cost reporting 
        period up to the cost reporting period described in 
        clause (i).
          (III) The Secretary shall identify among such 5 cost 
        reporting periods the cost reporting periods for which 
        the amount determined under subclause (II) is the 
        highest, and the lowest.
          (IV) The Secretary shall compute the averages of the 
        amounts determined under subclause (II) for the 3 cost 
        reporting periods not identified under subclause (III).
  (iii) For purposes of this subparagraph, each of the 
following shall be treated as a separate class of hospital:
          (I) Hospitals described in clause (i) of subsection 
        (d)(1)(B) and psychiatric units described in the matter 
        following clause (v) of such subsection.
          (II) Hospitals described in clause (ii) of such 
        subsection and rehabilitation units described in the 
        matter following clause (v) of such subsection.
          (III) Hospitals described in clause (iii) of such 
        subsection.
          (IV) Hospitals described in clause (iv) of such 
        subsection.
          (V) Hospitals described in clause (v) of such 
        subsection.
  (G)(i) In the case of a qualified long-term care hospital (as 
defined in clause (ii)) that elects (in a form and manner 
determined by the Secretary) this subparagraph to apply to the 
hospital, the target amount for the hospital's 12-month cost 
reporting period beginning during fiscal year 1998 is equal to 
the allowable operating costs of inpatient hospital services 
(as defined in subsection (a)(4)) recognized under this title 
for the hospital for the 12-month cost reporting period 
beginning during fiscal year 1996, increased by the applicable 
percentage increase for the cost reporting period beginning 
during fiscal year 1997.
  (ii) In clause (i), a ``qualified long-term care hospital'' 
means, with respect to a cost reporting period, a hospital 
described in clause (iv) of subsection (d)(1)(B) during each of 
the 2 cost reporting periods for which the Secretary has the 
most recent settled cost reports as of the date of the 
enactment of this subparagraph for each of which--
          (I) the hospital's allowable operating costs of 
        inpatient hospital services recognized under this title 
        exceeded 115 percent of the hospital's target amount, 
        and
          (II) the hospital would have a disproportionate 
        patient percentage of at least 70 percent (as 
        determined by the Secretary under subsection 
        (d)(5)(F)(vi)) if the hospital were a subsection (d) 
        hospital.
  (H)(i) In the case of a hospital or unit that is within a 
class of hospital described in clause (iv), for a cost 
reporting period beginning during fiscal years 1998 through 
2002, the target amount for such a hospital or unit may not 
exceed the amount as updated up to or for such cost reporting 
period under clause (ii).
  (ii)(I) In the case of a hospital or unit that is within a 
class of hospital described in clause (iv), the Secretary shall 
estimate the 75th percentile of the target amounts for such 
hospitals within such class for cost reporting periods ending 
during fiscal year 1996, as adjusted under clause (iii).
  (II) The Secretary shall update the amount determined under 
subclause (I), for each cost reporting period after the cost 
reporting period described in such subclause and up to the 
first cost reporting period beginning on or after October 1, 
1997, by a factor equal to the market basket percentage 
increase.
  (III) For cost reporting periods beginning during each of 
fiscal years 1999 through 2002, subject to subparagraph (J), 
the Secretary shall update such amount by a factor equal to the 
market basket percentage increase.
  (iii) In applying clause (ii)(I) in the case of a hospital or 
unit, the Secretary shall provide for an appropriate adjustment 
to the labor-related portion of the amount determined under 
such subparagraph to take into account differences between 
average wage-related costs in the area of the hospital and the 
national average of such costs within the same class of 
hospital.
  (iv) For purposes of this subparagraph, each of the following 
shall be treated as a separate class of hospital:
          (I) Hospitals described in clause (i) of subsection 
        (d)(1)(B) and psychiatric units described in the matter 
        following clause (v) of such subsection.
          (II) Hospitals described in clause (ii) of such 
        subsection and rehabilitation units described in the 
        matter following clause (v) of such subsection.
          (III) Hospitals described in clause (iv) of such 
        subsection.
  (I)(i) Subject to subparagraph (L), for cost reporting 
periods beginning on or after October 1, 2000, in the case of a 
sole community hospital there shall be substituted for the 
amount otherwise determined under subsection (d)(5)(D)(i), if 
such substitution results in a greater amount of payment under 
this section for the hospital--
          (I) with respect to discharges occurring in fiscal 
        year 2001, 75 percent of the amount otherwise 
        applicable to the hospital under subsection 
        (d)(5)(D)(i) (referred to in this clause as the 
        ``subsection (d)(5)(D)(i) amount'') and 25 percent of 
        the rebased target amount (as defined in clause (ii));
          (II) with respect to discharges occurring in fiscal 
        year 2002, 50 percent of the subsection (d)(5)(D)(i) 
        amount and 50 percent of the rebased target amount;
          (III) with respect to discharges occurring in fiscal 
        year 2003, 25 percent of the subsection (d)(5)(D)(i) 
        amount and 75 percent of the rebased target amount; and
          (IV) with respect to discharges occurring after 
        fiscal year 2003, 100 percent of the rebased target 
        amount.
  (ii) For purposes of this subparagraph, the ``rebased target 
amount'' has the meaning given the term ``target amount'' in 
subparagraph (C) except that--
          (I) there shall be substituted for the base cost 
        reporting period the 12-month cost reporting period 
        beginning during fiscal year 1996;
          (II) any reference in subparagraph (C)(i) to the 
        ``first cost reporting period'' described in such 
        subparagraph is deemed a reference to the first cost 
        reporting period beginning on or after October 1, 2000; 
        and
          (III) applicable increase percentage shall only be 
        applied under subparagraph (C)(iv) for discharges 
        occurring in fiscal years beginning with fiscal year 
        2002.
  (iii) In no case shall a hospital be denied treatment as a 
sole community hospital or payment (on the basis of a target 
rate as such as a hospital) because data are unavailable for 
any cost reporting period due to changes in ownership, changes 
in fiscal intermediaries, or other extraordinary circumstances, 
so long as data for at least one applicable base cost reporting 
period is available.
  (J) For cost reporting periods beginning during fiscal year 
2001, for a hospital described in subsection (d)(1)(B)(iv)--
          (i) the limiting or cap amount otherwise determined 
        under subparagraph (H) shall be increased by 2 percent; 
        and
          (ii) the target amount otherwise determined under 
        subparagraph (A) shall be increased by 25 percent 
        (subject to the limiting or cap amount determined under 
        subparagraph (H), as increased by clause (i)).
  (K)(i) With respect to discharges occurring on or after 
October 1, 2006, in the case of a medicare-dependent, small 
rural hospital, for purposes of applying subparagraph (D)--
          (I) there shall be substituted for the base cost 
        reporting period described in subparagraph (D)(i) the 
        12-month cost reporting period beginning during fiscal 
        year 2002; and
          (II) any reference in such subparagraph to the 
        ``first cost reporting period'' described in such 
        subparagraph is deemed a reference to the first cost 
        reporting period beginning on or after October 1, 2006.
  (ii) This subparagraph shall only apply to a hospital if the 
substitution described in clause (i)(I) results in an increase 
in the target amount under subparagraph (D) for the hospital.
  (L)(i) For cost reporting periods beginning on or after 
January 1, 2009, in the case of a sole community hospital there 
shall be substituted for the amount otherwise determined under 
subsection (d)(5)(D)(i) of this section, if such substitution 
results in a greater amount of payment under this section for 
the hospital, the subparagraph (L) rebased target amount.
  (ii) For purposes of this subparagraph, the term 
``subparagraph (L) rebased target amount'' has the meaning 
given the term ``target amount'' in subparagraph (C), except 
that--
          (I) there shall be substituted for the base cost 
        reporting period the 12-month cost reporting period 
        beginning during fiscal year 2006;
          (II) any reference in subparagraph (C)(i) to the 
        ``first cost reporting period'' described in such 
        subparagraph is deemed a reference to the first cost 
        reporting period beginning on or after January 1, 2009; 
        and
          (III) the applicable percentage increase shall only 
        be applied under subparagraph (C)(iv) for discharges 
        occurring on or after January 1, 2009.
  (4)(A)(i) The Secretary shall provide for an exception and 
adjustment to (and in the case of a hospital described in 
subsection (d)(1)(B)(iii), may provide an exemption from) the 
method under this subsection for determining the amount of 
payment to a hospital where events beyond the hospital's 
control or extraordinary circumstances, including changes in 
the case mix of such hospital, create a distortion in the 
increase in costs for a cost reporting period (including any 
distortion in the costs for the base period against which such 
increase is measured). The Secretary may provide for such other 
exemptions from, and exceptions and adjustments to, such method 
as the Secretary deems appropriate, including the assignment of 
a new base period which is more representative, as determined 
by the Secretary, of the reasonable and necessary cost of 
inpatient services and including those which he deems necessary 
to take into account a decrease in the inpatient hospital 
services that a hospital provides and that are customarily 
provided directly by similar hospitals which results in a 
significant distortion in the operating costs of inpatient 
hospital services. The Secretary shall announce a decision on 
any request for an exemption, exception, or adjustment under 
this paragraph not later than 180 days after receiving a 
completed application from the intermediary for such exemption, 
exception, or adjustment, and shall include in such decision a 
detailed explanation of the grounds on which such request was 
approved or denied.
  (ii) The payment reductions under paragraph (3)(B)(ii)(V) 
shall not be considered by the Secretary in making adjustments 
pursuant to clause (i). In making such reductions, the 
Secretary shall treat the applicable update factor described in 
paragraph (3)(B)(vi) for a fiscal year as being equal to the 
market basket percentage for that year.
  (B) In determining under subparagraph (A) whether to assign a 
new base period which is more representative of the reasonable 
and necessary cost to a hospital of providing inpatient 
services, the Secretary shall take into consideration--
          (i) changes in applicable technologies and medical 
        practices, or differences in the severity of illness 
        among patients, that increase the hospital's costs;
          (ii) whether increases in wages and wage-related 
        costs for hospitals located in the geographic area in 
        which the hospital is located exceed the average of the 
        increases in such costs paid by hospitals in the United 
        States; and
          (iii) such other factors as the Secretary considers 
        appropriate in determining increases in the hospital's 
        costs of providing inpatient services.
  (C) Paragraph (1) shall not apply to payment of hospitals 
which is otherwise determined under paragraph (3) of section 
1814(b).
  (5) In the case of any hospital having any cost reporting 
period of other than a 12-month period, the Secretary shall 
determine the 12-month period which shall be used for purposes 
of this section.
  (6) In the case of any hospital which becomes subject to the 
taxes under section 3111 of the Internal Revenue Code of 1954, 
with respect to any or all of its employees, for part or all of 
a cost reporting period, and was not subject to such taxes with 
respect to any or all of its employees for all or part of the 
12-month base cost reporting period referred to in subsection 
(b)(3)(A)(i), the Secretary shall provide for an adjustment by 
increasing the base period amount described in such subsection 
for such hospital by an amount equal to the amount of such 
taxes which would have been paid or accrued by such hospital 
for such base period if such hospital had been subject to such 
taxes for all of such base period with respect to all its 
employees, minus the amount of any such taxes actually paid or 
accrued for such base period.
  (7)(A) Notwithstanding paragraph (1), in the case of a 
hospital or unit that is within a class of hospital described 
in subparagraph (B) which first receives payments under this 
section on or after October 1, 1997--
          (i) for each of the first 2 cost reporting periods 
        for which the hospital has a settled cost report, the 
        amount of the payment with respect to operating costs 
        described in paragraph (1) under part A on a per 
        discharge or per admission basis (as the case may be) 
        is equal to the lesser of--
                  (I) the amount of operating costs for such 
                respective period, or
                  (II) 110 percent of the national median (as 
                estimated by the Secretary) of the target 
                amount for hospitals in the same class as the 
                hospital for cost reporting periods ending 
                during fiscal year 1996, updated by the 
                hospital market basket increase percentage to 
                the fiscal year in which the hospital first 
                received payments under this section, as 
                adjusted under subparagraph (C); and
          (ii) for purposes of computing the target amount for 
        the subsequent cost reporting period, the target amount 
        for the preceding cost reporting period is equal to the 
        amount determined under clause (i) for such preceding 
        period.
  (B) For purposes of this paragraph, each of the following 
shall be treated as a separate class of hospital:
          (i) Hospitals described in clause (i) of subsection 
        (d)(1)(B) and psychiatric units described in the matter 
        following clause (v) of such subsection.
          (ii) Hospitals described in clause (ii) of such 
        subsection and rehabilitation units described in the 
        matter following clause (v) of such subsection.
          (iii) Hospitals described in clause (iv) of such 
        subsection.
  (C) In applying subparagraph (A)(i)(II) in the case of a 
hospital or unit, the Secretary shall provide for an 
appropriate adjustment to the labor-related portion of the 
amount determined under such subparagraph to take into account 
differences between average wage-related costs in the area of 
the hospital and the national average of such costs within the 
same class of hospital.
  (c)(1) The Secretary may provide, in his discretion, that 
payment with respect to services provided by a hospital in a 
State may be made in accordance with a hospital reimbursement 
control system in a State, rather than in accordance with the 
other provisions of this title, if the chief executive officer 
of the State requests such treatment and if--
          (A) the Secretary determines that the system, if 
        approved under this subsection, will apply (i) to 
        substantially all non- Federal acute care hospitals (as 
        defined by the Secretary) in the State and (ii) to the 
        review of at least 75 percent of all revenues or 
        expenses in the State for inpatient hospital services 
        and of revenues or expenses for inpatient hospital 
        services provided under the State's plan approved under 
        title XIX;
          (B) the Secretary has been provided satisfactory 
        assurances as to the equitable treatment under the 
        system of all entities (including Federal and State 
        programs) that pay hospitals for inpatient hospital 
        services, of hospital employees, and of hospital 
        patients;
          (C) the Secretary has been provided satisfactory 
        assurances that under the system, over 36-month periods 
        (the first such period beginning with the first month 
        in which this subsection applies to that system in the 
        State), the amount of payments made under this title 
        under such system will not exceed the amount of 
        payments which would otherwise have been made under 
        this title not using such system;
          (D) the Secretary determines that the system will not 
        preclude an eligible organization (as defined in 
        section 1876(b)) from negotiating directly with 
        hospitals with respect to the organization's rate of 
        payment for inpatient hospital services; and
          (E) the Secretary determines that the system requires 
        hospitals to meet the requirement of section 
        1866(a)(1)(G) and the system provides for the exclusion 
        of certain costs in accordance with section 1862(a)(14) 
        (except for such waivers thereof as the Secretary 
        provides by regulation).
The Secretary cannot deny the application of a State under this 
subsection on the ground that the State's hospital 
reimbursement control system is based on a payment methodology 
other than on the basis of a diagnosis-related group or on the 
ground that the amount of payments made under this title under 
such system must be less than the amount of payments which 
would otherwise have been made under this title not using such 
system. If the Secretary determines that the conditions 
described in subparagraph (C) are based on maintaining payment 
amounts at no more than a specified percentage increase above 
the payment amounts in a base period, the State has the option 
of applying such test (for inpatient hospital services under 
part A) on an aggregate payment basis or on the basis of the 
amount of payment per inpatient discharge or admission. If the 
Secretary determines that the conditions described in 
subparagraph (C) are based on maintaining aggregate payment 
amounts below a national average percentage increase in total 
payments under part A for inpatient hospital services, the 
Secretary cannot deny the application of a State under this 
subsection on the ground that the State's rate of increase in 
such payments for such services must be less than such national 
average rate of increase.
  (2) In determining under paragraph (1)(C) the amount of 
payment which would otherwise have been made under this title 
for a State, the Secretary may provide for appropriate 
adjustment of such amount to take into account previous 
reductions effected in the amount of payments made under this 
title in the State due to the operation of the hospital 
reimbursement control system in the State if the system has 
resulted in an aggregate rate of increase in operating costs of 
inpatient hospital services (as defined in subsection (a)(4)) 
under this title for hospitals in the State which is less than 
the aggregate rate of increase in such costs under this title 
for hospitals in the United States.
  (3) The Secretary shall discontinue payments under a system 
described in paragraph (1) if the Secretary--
          (A) determines that the system no longer meets the 
        requirements of subparagraphs (A), (D), and (E) of 
        paragraph (1) and, if applicable, the requirements of 
        paragraph (5), or
          (B) has reason to believe that the assurances 
        described in subparagraph (B) or (C) of paragraph (1) 
        (or, if applicable, in paragraph (5)) are not being (or 
        will not be) met.
  (4) The Secretary shall approve the request of a State under 
paragraph (1) with respect to a hospital reimbursement control 
system if--
          (A) the requirements of subparagraphs (A), (B), (C), 
        (D), and (E) of paragraph (1) have been met with 
        respect to the system, and
          (B) with respect to that system a waiver of certain 
        requirements of title XVIII of the Social Security Act 
        has been approved on or before (and which is in effect 
        as of) the date of the enactment of the Social Security 
        Amendments of 1983, pursuant to section 402(a) of the 
        Social Security Amendments of 1967 or section 222(a) of 
        the Social Security Amendments of 1972.
With respect to a State system described in this paragraph, the 
Secretary shall judge the effectiveness of such system on the 
basis of its rate of increase or inflation in inpatient 
hospital payments for individuals under this title, as compared 
to the national rate of increase or inflation for such 
payments, with the State retaining the option to have the test 
applied on the basis of the aggregate payments under the State 
system as compared to aggregate payments which would have been 
made under the national system since October 1, 1984, to the 
most recent date for which annual data are available.
  (5) The Secretary shall approve the request of a State under 
paragraph (1) with respect to a hospital reimbursement control 
system if--
          (A) the requirements of subparagraphs (A), (B), (C), 
        (D), and (E) of paragraph (1) have been met with 
        respect to the system;
          (B) the Secretary determines that the system--
                  (i) is operated directly by the State or by 
                an entity designated pursuant to State law,
                  (ii) provides for payment of hospitals 
                covered under the system under a methodology 
                (which sets forth exceptions and adjustments, 
                as well as any method for changes in the 
                methodology) by which rates or amounts to be 
                paid for hospital services during a specified 
                period are established under the system prior 
                to the defined rate period, and
                  (iii) hospitals covered under the system will 
                make such reports (in lieu of cost and other 
                reports, identified by the Secretary, otherwise 
                required under this title) as the Secretary may 
                require in order to properly monitor assurances 
                provided under this subsection;
          (C) the State has provided the Secretary with 
        satisfactory assurances that operation of the system 
        will not result in any change in hospital admission 
        practices which result in--
                  (i) a significant reduction in the proportion 
                of patients (receiving hospital services 
                covered under the system) who have no third-
                party coverage and who are unable to pay for 
                hospital services,
                  (ii) a significant reduction in the 
                proportion of individuals admitted to hospitals 
                for inpatient hospital services for which 
                payment is (or is likely to be) less than the 
                anticipated charges for or costs of such 
                services,
                  (iii) the refusal to admit patients who would 
                be expected to require unusually costly or 
                prolonged treatment for reasons other than 
                those related to the appropriateness of the 
                care available at the hospital, or
                  (iv) the refusal to provide emergency 
                services to any person who is in need of 
                emergency services if the hospital provides 
                such services;
          (D) any change by the State in the system which has 
        the effect of materially reducing payments to hospitals 
        can only take effect upon 60 days notice to the 
        Secretary and to the hospitals the payment to which is 
        likely to be materially affected by the change; and
          (E) the State has provided the Secretary with 
        satisfactory assurances that in the development of the 
        system the State has consulted with local governmental 
        officials concerning the impact of the system on public 
        hospitals.
The Secretary shall respond to requests of States under this 
paragraph within 60 days of the date the request is submitted 
to the Secretary.
  (6) If the Secretary determines that the assurances described 
in paragraph (1)(C) have not been met with respect to any 36-
month period, the Secretary may reduce payments under this 
title to hospitals under the system in an amount equal to the 
amount by which the payment under this title under such system 
for such period exceeded the amount of payments which would 
otherwise have been made under this title not using such 
system.
  (7) In the case of a State which made a request under 
paragraph (5) before December 31, 1984, for the approval of a 
State hospital reimbursement control system and which request 
was approved--
          (A) in applying paragraphs (1)(C) and (6), a 
        reference to a ``36-month period'' is deemed a 
        reference to a ``48-month period'', and
          (B) in order to allow the State the opportunity to 
        provide the assurances described in paragraph (1)(C) 
        for a 48-month period, the Secretary may not 
        discontinue payments under the system, under the 
        authority of paragraph (3)(A) because the Secretary has 
        reason to believe that such assurances are not being 
        (or will not be) met, before July 1, 1986.
  (d)(1)(A) Notwithstanding section 1814(b) but subject to the 
provisions of section 1813, the amount of the payment with 
respect to the operating costs of inpatient hospital services 
(as defined in subsection (a)(4)) of a subsection (d) hospital 
(as defined in subparagraph (B)) for inpatient hospital 
discharges in a cost reporting period or in a fiscal year--
          (i) beginning on or after October 1, 1983, and before 
        October 1, 1984, is equal to the sum of--
                  (I) the target percentage (as defined in 
                subparagraph (C)) of the hospital's target 
                amount for the cost reporting period (as 
                defined in subsection (b)(3)(A), but determined 
                without the application of subsection (a)), and
                  (II) the DRG percentage (as defined in 
                subparagraph (C)) of the regional adjusted DRG 
                prospective payment rate determined under 
                paragraph (2) for such discharges;
          (ii) beginning on or after October 1, 1984, and 
        before October 1, 1987, is equal to the sum of--
                  (I) the target percentage (as defined in 
                subparagraph (C)) of the hospital's target 
                amount for the cost reporting period (as 
                defined in subsection (b)(3)(A), but determined 
                without the application of subsection (a)), and
                  (II) the DRG percentage (as defined in 
                subparagraph (C)) of the applicable combined 
                adjusted DRG prospective payment rate 
                determined under subparagraph (D) for such 
                discharges; or
          (iii) beginning on or after April 1, 1988, is equal 
        to
                  (I) the national adjusted DRG prospective 
                payment rate determined under paragraph (3) for 
                such discharges, or
                  (II) for discharges occurring during a fiscal 
                year ending on or before September 30, 1996, 
                the sum of 85 percent of the national adjusted 
                DRG prospective payment rate determined under 
                paragraph (3) for such discharges and 15 
                percent of the regional adjusted DRG 
                prospective payment rate determined under such 
                paragraph, but only if the average standardized 
                amount (described in clause (i)(I) or clause 
                (ii)(I) of paragraph (3)(D)) for hospitals 
                within the region of, and in the same large 
                urban or other area (or, for discharges 
                occurring during a fiscal year ending on or 
                before September 30, 1994, the same rural, 
                large urban, or other urban area) as, the 
                hospital is greater than the average 
                standardized amount (described in the 
                respective clause) for hospitals within the 
                United States in that type of area for 
                discharges occurring during such fiscal year.
  (B) As used in this section, the term ``subsection (d) 
hospital'' means a hospital located in one of the fifty States 
or the District of Columbia other than--
          (i) a psychiatric hospital (as defined in section 
        1861(f)),
          (ii) a rehabilitation hospital (as defined by the 
        Secretary),
          (iii) a hospital whose inpatients are predominantly 
        individuals under 18 years of age,
          (iv)(I) a hospital which has an average inpatient 
        length of stay (as determined by the Secretary) of 
        greater than 25 days, or
          (II) a hospital that first received payment under 
        this subsection in 1986 which has an average inpatient 
        length of stay (as determined by the Secretary) of 
        greater than 20 days and that has 80 percent or more of 
        its annual medicare inpatient discharges with a 
        principal diagnosis that reflects a finding of 
        neoplastic disease in the 12-month cost reporting 
        period ending in fiscal year 1997, or
          (v)(I) a hospital that the Secretary has classified, 
        at any time on or before December 31, 1990, (or, in the 
        case of a hospital that, as of the date of the 
        enactment of this clause, is located in a State 
        operating a demonstration project under section 
        1814(b), on or before December 31, 1991) for purposes 
        of applying exceptions and adjustments to payment 
        amounts under this subsection, as a hospital involved 
        extensively in treatment for or research on cancer,
          (II) a hospital that was recognized as a 
        comprehensive cancer center or clinical cancer research 
        center by the National Cancer Institute of the National 
        Institutes of Health as of April 20, 1983, that is 
        located in a State which, as of December 19, 1989, was 
        not operating a demonstration project under section 
        1814(b), that applied and was denied, on or before 
        December 31, 1990, for classification as a hospital 
        involved extensively in treatment for or research on 
        cancer under this clause (as in effect on the day 
        before the date of the enactment of this subclause), 
        that as of the date of the enactment of this subclause, 
        is licensed for less than 50 acute care beds, and that 
        demonstrates for the 4-year period ending on December 
        31, 1996, that at least 50 percent of its total 
        discharges have a principal finding of neoplastic 
        disease, as defined in subparagraph (E), or
          (III) a hospital that was recognized as a clinical 
        cancer research center by the National Cancer Institute 
        of the National Institutes of Health as of February 18, 
        1998, that has never been reimbursed for inpatient 
        hospital services pursuant to a reimbursement system 
        under a demonstration project under section 1814(b), 
        that is a freestanding facility organized primarily for 
        treatment of and research on cancer and is not a unit 
        of another hospital, that as of the date of the 
        enactment of this subclause, is licensed for 162 acute 
        care beds, and that demonstrates for the 4-year period 
        ending on June 30, 1999, that at least 50 percent of 
        its total discharges have a principal finding of 
        neoplastic disease, as defined in subparagraph (E);
and, in accordance with regulations of the Secretary, does not 
include a psychiatric or rehabilitation unit of the hospital 
which is a distinct part of the hospital (as defined by the 
Secretary). A hospital that was classified by the Secretary on 
or before September 30, 1995, as a hospital described in clause 
(iv) shall continue to be so classified notwithstanding that it 
is located in the same building as, or on the same campus as, 
another hospital.
  (C) For purposes of this subsection, for cost reporting 
periods beginning--
          (i) on or after October 1, 1983, and before October 
        1, 1984, the ``target percentage'' is 75 percent and 
        the ``DRG percentage'' is 25 percent;
          (ii) on or after October 1, 1984, and before October 
        1, 1985, the ``target percentage'' is 50 percent and 
        the ``DRG percentage'' is 50 percent;
          (iii) on or after October 1, 1985, and before October 
        1, 1986, the ``target percentage'' is 45 percent and 
        the ``DRG percentage'' is 55 percent; and
          (iv) on or after October 1, 1986, and before October 
        1, 1987, the ``target percentage'' is 25 percent and 
        the ``DRG percentage'' is 75 percent.
  (D) For purposes of subparagraph (A)(ii)(II), the 
``applicable combined adjusted DRG prospective payment rate'' 
for discharges occurring--
          (i) on or after October 1, 1984, and before October 
        1, 1986, is a combined rate consisting of 25 percent of 
        the national adjusted DRG prospective payment rate, and 
        75 percent of the regional adjusted DRG prospective 
        payment rate, determined under paragraph (3) for such 
        discharges; and
          (ii) on or after October 1, 1986, and before October 
        1, 1987, is a combined rate consisting of 50 percent of 
        the national adjusted DRG prospective payment rate, and 
        50 percent of the regional adjusted DRG prospective 
        payment rate, determined under paragraph (3) for such 
        discharges.
  (E) For purposes of subclauses (II) and (III) of subparagraph 
(B)(v) only, the term ``principal finding of neoplastic 
disease'' means the condition established after study to be 
chiefly responsible for occasioning the admission of a patient 
to a hospital, except that only discharges with ICD-9-CM 
principal diagnosis codes of 140 through 239, V58.0, V58.1, 
V66.1, V66.2, or 990 will be considered to reflect such a 
principal diagnosis.
  (2) The Secretary shall determine a national adjusted DRG 
prospective payment rate, for each inpatient hospital discharge 
in fiscal year 1984 involving inpatient hospital services of a 
subsection (d) hospital in the United States, and shall 
determine a regional adjusted DRG prospective payment rate for 
such discharges in each region, for which payment may be made 
under part A of this title. Each such rate shall be determined 
for hospitals located in urban or rural areas within the United 
States or within each such region, respectively, as follows:
          (A) Determining allowable individual hospital costs 
        for base period.--The Secretary shall determine the 
        allowable operating costs per discharge of inpatient 
        hospital services for the hospital for the most recent 
        cost reporting period for which data are available.
          (B) Updating for fiscal year 1984.--The Secretary 
        shall update each amount determined under subparagraph 
        (A) for fiscal year 1984 by--
                  (i) updating for fiscal year 1983 by the 
                estimated average rate of change of hospital 
                costs industry-wide between the cost reporting 
                period used under such subparagraph and fiscal 
                year 1983 and the most recent case-mix data 
                available, and
                  (ii) projecting for fiscal year 1984 by the 
                applicable percentage increase (as defined in 
                subsection (b)(3)(B)) f