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.''.
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.
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