text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Hospital Readmissions Program 
  Accuracy and Accountability Act of 2014''.
  
  SEC. 2. FINDINGS.
  
      Congress makes the following findings:
              (1) Eliminating avoidable hospital readmissions should be a 
          core tenet of public and private efforts to improve quality of 
          care and reduce health care expenditures.
              (2) Measures adopted by the Centers for Medicare & Medicaid 
          Services should accurately reflect the quality of care provided 
          by specific hospitals and providers, and such measures should 
          never lower outcome or quality expectations for certain cohorts 
          of hospitals and providers.
              (3) There are numerous socioeconomic conditions that impact 
          health outcomes and the Medicare hospital readmission reduction 
          program is one of many Federal outcome performance programs 
          that fails to accurately adjust for these influences.
              (4) Holding all other factors constant, socioeconomic 
          conditions, such as poverty, low levels of literacy, limited 
          English proficiency, minimal social support, poor living 
          conditions, and limited community resources, likely have direct 
          and significant impacts on avoidable hospital readmissions.
              (5) The Medicare hospital readmission reduction program 
          includes risk adjustment for clinical variables, such as 
          comorbidity and severity of illness, because hospitals should 
          not be penalized for the effects of these uncontrollable 
          factors. Socioeconomic factors can influence readmissions to an 
          equal or greater degree than these clinical factors and the 
          Medicare hospital readmissions reduction program will more 
          accurately measure quality of care once risk adjustment for 
          socioeconomic status is implemented.
              (6) Research by the Medicare Payment Advisory Commission, 
          the National Quality Forum, and other independent experts has 
          provided compelling evidence that failing to adjust for 
          socioeconomic status in the Medicare hospital readmission 
          reduction program may provide an inaccurate picture of the 
          quality of care provided by hospitals, and has led to the 
          unfair penalization and stigmatization of hospitals serving 
          low-income populations that are, in fact, delivering high-
          quality health care.
              (7) Risk adjustment for socioeconomic status in the 
          Medicare hospital readmission reduction program will improve 
          quality of care, increase accountability for all inpatient 
          hospitals serving Medicare beneficiaries, and further reduce 
          preventable readmissions nationwide.
              (8) The Secretary of Health and Human Services should 
          consider the adoption of socioeconomic adjustment methodologies 
          in other quality reporting and pay-for-performance programs 
          under the Medicare program.
  
  SEC. 3. IMPROVEMENTS TO THE MEDICARE HOSPITAL READMISSIONS REDUCTION 
                PROGRAM.
  
      Section 1886(q) of the Social Security Act (42 U.S.C. 1395ww(q)) is 
  amended--
              (1) in paragraph (4)(C)--
                      (A) in clause (i), in the matter preceding 
                  subclause (I), by striking ``clause (ii)'' and 
                  inserting ``clauses (ii) and (iii)''; and
                      (B) by adding at the end the following new clause:
                              ``(iii) Adjustment for socioeconomic 
                          status.--
                                      ``(I) In general.--In determining a 
                                  hospital's excess readmission ratio 
                                  under clause (i) for purposes of making 
                                  payments for discharges occurring on or 
                                  after October 1, 2016, the Secretary 
                                  shall risk adjust readmissions to 
                                  account for the socioeconomic status of 
                                  the patients served by the hospital.
                                      ``(II) Socioeconomic status.--For 
                                  purposes of subclause (I), subject to 
                                  subclauses (III) and (V), the Secretary 
                                  shall, to the maximum extent 
                                  practicable, utilize the most recent 
                                  data available from the Bureau of the 
                                  Census in order to develop a 
                                  quantitative method to adjust for 
                                  socioeconomic status. In developing 
                                  such quantitative method, the 
                                  Secretary--
                                              ``(aa) shall, to the 
                                          maximum extent practicable, use 
                                          inputs that address at least 
                                          one of the following factors--
  
                                                      ``(AA) income;
  
                                                      ``(BB) education 
                                                  level; and
  
                                                      ``(CC) poverty 
                                                  rate; and
  
                                              ``(bb) may include inputs 
                                          that address other 
                                          socioeconomic and 
                                          sociodemographic factors 
                                          determined appropriate by the 
                                          Secretary.
                                      ``(III) Revision of inputs.--The 
                                  Secretary may revise the inputs for 
                                  such quantitative method under 
                                  subclause (II) on an annual basis to 
                                  improve the accuracy and validity of 
                                  the adjustment under subclause (I).
                                      ``(IV) Patients served by the 
                                  hospital.--For purposes of subclause 
                                  (I), the Secretary shall, to the 
                                  maximum extent practicable, measure the 
                                  socioeconomic status for all patients 
                                  served by each hospital. The Secretary 
                                  may supplement incomplete or 
                                  inaccessible patient-level data with 
                                  data related to the geographic region 
                                  of the patients served by the hospital.
                                      ``(V) Use of alternative adjustment 
                                  method.--
                                              ``(aa) In general.--For 
                                          purposes of subclause (I), in 
                                          the case of payments for 
                                          discharges occurring on or 
                                          after October 1, 2017, the 
                                          Secretary may apply a 
                                          socioeconomic status adjustment 
                                          using a method other than the 
                                          method described in subclause 
                                          (II), such as peer groupings 
                                          and stratification.
                                              ``(bb) Comparative 
                                          analysis.--Prior to the 
                                          application of the alternative 
                                          adjustment method under item 
                                          (aa), the Secretary shall 
                                          conduct a comparative analysis 
                                          of such alternative adjustment 
                                          method and the method described 
                                          in subclause (II). The 
                                          Secretary shall publish the 
                                          results of such comparative 
                                          analysis and the proposed 
                                          alternative adjustment method 
                                          in the Federal Register and 
                                          seek public comment on such 
                                          method.
                                              ``(cc) Requirement.--The 
                                          Secretary may not apply any 
                                          alternative adjustment method 
                                          under item (aa) unless the 
                                          Secretary determines that such 
                                          alternative method will 
                                          demonstrate an aggregate 
                                          improvement in the accuracy and 
                                          effectiveness of hospital 
                                          readmissions reduction program 
                                          incentives and measurements 
                                          compared to the adjustment 
                                          required under subclause 
                                          (I).'';
              (2) in paragraph (6)(A), by adding the following before the 
          period at the end: ``, including information on the results of 
          the readmission measures under this subsection (both before and 
          after the adjustment under paragraph (4)(C)(iii)) and the 
          penalties under this subsection (both before and after such 
          adjustment)''; and
              (3) by adding at the end the following new paragraph:
              ``(9) Adjustment.--The Secretary shall make proportional 
          adjustments to base operating DRG payment amounts (as defined 
          in paragraph (2)) of applicable hospitals to assure that the 
          application of paragraph (4)(C)(iii) does not result in 
          aggregate payments under this section in a fiscal year that are 
          greater or less than those that would otherwise be made under 
          this section in such fiscal year, as estimated by the 
          Secretary.''.
target: Hospital Readmissions Program Accuracy and Accountability Act of 2014 - Amends title XVIII (Medicare) of the Social Security Act, with respect to the Hospital Readmissions Reduction Program, to direct the Secretary of Health and Human Services (HHS), in determining a hospital's excess readmission ratio for purposes of making payments for discharges starting in FY2016, to risk adjust readmissions to account for patient socioeconomic status.
feat_title: Hospital Readmissions Program Accuracy and Accountability Act of 2014