ACE OMB Social Security Act

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Evaluation of the Acute Care Episode (ACE) Demonstration
Social Security Act Title XXI Section 1866C
HEALTH CARE QUALITY DEMONSTRATION PROGRAM
Sec. 1866C. [42 U.S.C. 1395cc-3] (a) Definitions.—In this section:
(1) Beneficiary.—The term “beneficiary” means an individual who is entitled to benefits under
part A and enrolled under part B, including any individual who is enrolled in a Medicare
Advantage plan under part C.
(2) Health care group.—
(A) In general.—The term “health care group” means—
(i) a group of physicians that is organized at least in part for the purpose of providing physician's
services under this title;
(ii) an integrated health care delivery system that delivers care through coordinated hospitals,
clinics, home health agencies, ambulatory surgery centers, skilled nursing facilities,
rehabilitation facilities and clinics, and employed, independent, or contracted physicians; or
(iii) an organization representing regional coalitions of groups or systems described in clause (i)
or (ii).
(B) Inclusion.—As the Secretary determines appropriate, a health care group may include a
hospital or any other individual or entity furnishing items or services for which payment may
be made under this title that is affiliated with the health care group under an arrangement
structured so that such hospital, individual, or entity participates in a demonstration project
under this section.
(3) Physician.—Except as otherwise provided for by the Secretary, the term “physician” means
any individual who furnishes services that may be paid for as physicians' services under this
title.
(b) Demonstration Projects.—The Secretary shall establish a 5-year demonstration program
under which the Secretary shall approve demonstration projects that examine health delivery
factors that encourage the delivery of improved quality in patient care, including—
(1) the provision of incentives to improve the safety of care provided to beneficiaries;
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The Centers for Medicare & Medicaid Services' Office of Research, Development, and
Information (ORDI) strives to make information available to all. Nevertheless, portions of our
files including charts, tables, and graphics may be difficult to read using assistive technology.
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(2) the appropriate use of best practice guidelines by providers and services by beneficiaries;
(3) reduced scientific uncertainty in the delivery of care through the examination of variations in
the utilization and allocation of services, and outcomes measurement and research;
(4) encourage shared decision making between providers and patients;
(5) the provision of incentives for improving the quality and safety of care and achieving the
efficient allocation of resources;
(6) the appropriate use of culturally and ethnically sensitive health care delivery; and
(7) the financial effects on the health care marketplace of altering the incentives for care delivery
and changing the allocation of resources.
(c) Administration by Contract.—
(1) In general.—Except as otherwise provided in this section, the Secretary may administer the
demonstration program established under this section in a manner that is similar to the
manner in which the demonstration program established under section 1866A is administered
in accordance with section 1866B.
(2) Alternative payment systems.—A health care group that receives assistance under this
section may, with respect to the demonstration project to be carried out with such assistance,
include proposals for the use of alternative payment systems for items and services provided
to beneficiaries by the group that are designed to—
(A) encourage the delivery of high quality care while accomplishing the objectives described in
subsection (b); and
(B) streamline documentation and reporting requirements otherwise required under this title.
(3) Benefits.—A health care group that receives assistance under this section may, with respect
to the demonstration project to be carried out with such assistance, include modifications to
the package of benefits available under the original medicare fee-for-service program under
parts A and B or the package of benefits available through a Medicare Advantage plan under
part C. The criteria employed under the demonstration program under this section to evaluate
outcomes and determine best practice guidelines and incentives shall not be used as a basis
for the denial of medicare benefits under the demonstration program to patients against their
wishes (or if the patient is incompetent, against the wishes of the patient's surrogate) on the
basis of the patient's age or expected length of life or of the patient's present or predicted
disability, degree of medical dependency, or quality of life.
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The Centers for Medicare & Medicaid Services' Office of Research, Development, and
Information (ORDI) strives to make information available to all. Nevertheless, portions of our
files including charts, tables, and graphics may be difficult to read using assistive technology.
Persons with disabilities experiencing problems accessing portions of any file should contact
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(d) Eligibility Criteria.—To be eligible to receive assistance under this section, an entity shall
(1) be a health care group;
(2) meet quality standards established by the Secretary, including—
(A) the implementation of continuous quality improvement mechanisms that are aimed at
integrating community-based support services, primary care, and referral care;
(B) the implementation of activities to increase the delivery of effective care to beneficiaries;
(C) encouraging patient participation in preference-based decisions;
(D) the implementation of activities to encourage the coordination and integration of medical
service delivery; and
(E) the implementation of activities to measure and document the financial impact on the health
care marketplace of altering the incentives of health care delivery and changing the allocation
of resources; and
(3) meet such other requirements as the Secretary may establish.
(e) Waiver Authority.—The Secretary may waive such requirements of titles XI and XVIII as
may be necessary to carry out the purposes of the demonstration program established under
this section.
(f) Budget Neutrality.—With respect to the 5-year period of the demonstration program under
subsection (b), the aggregate expenditures under this title for such period shall not exceed the
aggregate expenditures that would have been expended under this title if the program
established under this section had not been implemented.
(g) Notice Requirements.—In the case of an individual that receives health care items or services
under a demonstration program carried out under this section, the Secretary shall ensure that
such individual is notified of any waivers of coverage or payment rules that are applicable to
such individual under this title as a result of the participation of the individual in such
program.
(h) Participation and Support by Federal Agencies.—In carrying out the demonstration program
under this section, the Secretary may direct—

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The Centers for Medicare & Medicaid Services' Office of Research, Development, and
Information (ORDI) strives to make information available to all. Nevertheless, portions of our
files including charts, tables, and graphics may be difficult to read using assistive technology.
Persons with disabilities experiencing problems accessing portions of any file should contact
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(1) the Director of the National Institutes of Health to expand the efforts of the Institutes to
evaluate current medical technologies and improve the foundation for evidence-based
practice;
(2) the Administrator of the Agency for Healthcare Research and Quality to, where possible and
appropriate, use the program under this section as a laboratory for the study of quality
improvement strategies and to evaluate, monitor, and disseminate information relevant to
such program; and
(3) the Administrator of the Centers for Medicare & Medicaid Services and the Administrator of
the Center for Medicare Choices to support linkages of relevant Medicare data to registry
information from participating health care groups for the beneficiary populations served by
the participating groups, for analysis supporting the purposes of the demonstration program,
consistent with the applicable provisions of the Health Insurance Portability and
Accountability Act of 1996.

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