To amend title XVIII of the Social Security Act to improve the quality of care in skilled nursing facilities under the Medicare Program through development of quality measures and changes in reimbursement.

Summary: Long Term Care Quality Improvement Act of 2004 - Amends title XVIII (Medicare) of the Social Security Act with respect to: (1) detailed reporting of nursing expenditures; (2) development and reporting of new quality measures; and (3) linking payments to quality performance.

Directs the Secretary of Health and Human Services to study current and future financing of quality nursing facility care.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Long Term Care Quality Improvement 
Act of 2004''.

SEC. 2. IMPROVEMENT IN QUALITY OF LONG TERM CARE IN SKILLED NURSING 
              FACILITIES UNDER MEDICARE.

    (a) Detailed Reporting of Nursing Expenditures.--Section 1888 of 
the Social Security Act (42 U.S.C. 1395yy) is amended by adding at the 
end the following new subsection:
    ``(f) Detailed Reporting of Nursing Expenditures.--
            ``(1) In general.--For cost reports submitted for cost 
        reporting periods beginning on or after four months after the 
        date of the enactment of this subsection, skilled nursing 
        facilities shall separately report expenditures for wages and 
        benefits for nursing staff (by staff level, breaking out at a 
        minimum registered nurses, licensed professional nurses, and 
        certified nurse assistants).
            ``(2) Modification of form.--The Secretary, in consultation 
        with private sector accountants experienced with medicare and 
        medicaid nursing facility home cost reports, shall redesign 
        such reports to meet the requirement of paragraph (1).''.
    (b) Development and Reporting of New Quality Measures.--Such 
section is further amended by adding at the end the following new 
subsection:
    ``(g) Reporting on Quality.--
            ``(1) In general.--The Secretary shall identify and develop 
        in accordance with this subsection quality measures appropriate 
        for use with a payment system under this subsection. Such 
        measures shall be developed in consultation with measurement 
        experts, the Medicare Payment Advisory Commission, the 
        Institute of Medicine, and representatives of providers and 
        consumers.
            ``(2) Contents.--The quality measures under this 
        subsection--
                    ``(A) shall include process measures;
                    ``(B) may include structural measures, such as 
                spending on direct care staffing or implementation of 
                new technologies;
                    ``(C) may include outcome measures that are risk 
                adjusted with sufficient precision to be used in a 
                payment system;
                    ``(D) shall be valid and reliable;
                    ``(E) shall be structured so that data collection 
                systems involving new technologies can be used in a 
                manner that minimizes provider burden and increases 
                accuracy, particularly with respect to process 
                measures;
                    ``(F) shall include at least one quality measure 
                that addresses nursing home staffing level and mix; and
                    ``(G) shall make special provision for small 
                skilled nursing facilities by establishing criteria for 
                determining whether a nursing facility is large enough 
                to yield meaningful data on each measure.
            ``(3) Posting.--The Secretary shall post on the Secretary's 
        website relating to the medicare program a description of the 
        new quality performance measures that are developed under this 
        subsection when they are implemented.''.
    (c) Linking Payments to Quality Performance.--Such section is 
further amended by adding at the end the following new subsection:
    ``(h) Base Payments; Adjustment in Payment for Quality 
Performance.--
            ``(1) Maintenance of fiscal year 2005 payment rates as a 
        floor.--Except as provided under this subsection, and 
        notwithstanding any other provision of law, the payment rates 
        established under subsection (e) shall in no case be less than 
        the RUG rates that are effective as of October 1, 2004, as 
        adjusted annually under subsection (e)(4)(E).
            ``(2) Development of payment adjustment methods.--
                    ``(A) In general.--The Secretary shall develop and 
                test one or more methods for linking payment rates 
                under this section to quality. Such methods shall be 
                identified in consultation with the Institute of 
                Medicine, the Medicare Payment Advisory Commission, 
                measurement experts, and representatives of consumers 
                and providers.
                    ``(B) Link to quality.--Such methods shall make a 
                portion of a provider's payment under this title 
                dependent on performance on one or more appropriate 
                indicators of quality, as measured under subsection 
                (f). At least one of the methods tested shall involve 
                special payments for facilities that enhance quality by 
                providing more direct care staffing than others, 
                controlling for case mix. The Secretary may test such 
                methods through pilot studies, demonstration projects, 
                and other appropriate methods.
                    ``(C) Deadline.-- Development and testing of 
                appropriate quality measures and new payment methods 
                for skilled nursing facilities under this subsection 
                shall be completed, to the extent feasible, in 
                conformance with timelines that may be recommended by 
                the Institute of Medicine in its report on linking 
                payments under this section to performance, but in no 
                case later than 54 months after the date of the 
                enactment of this subsection.''.
    (d) Analysis of the Adequacy of Public Payments and Future 
Financing Options.--The Secretary of Health and Human Services shall 
conduct a study of current and future financing of quality nursing 
facility care. Such study shall include an examination of the 
following:
            (1) The adequacy of Medicaid financing to pay for the 
        quality of care required by State and Federal law and 
        regulations.
            (2) Medicare's cross-subsidization of care for Medicaid 
        patients.
            (3) Total industry margins for skilled nursing facilities.
            (4) The impact of current trends, including litigation and 
        staffing shortages, on nursing facility costs.
            (5) The impact of demographic changes in relation to 
        provision of long-term care services.
            (6) Options for redressing any current problems with 
        payment for nursing facility services.
            (7) Options for financing quality long term care, including 
        nursing home care, over the next five decades.
    (e) Reports on Activities.--
            (1) Annual reports.--The Secretary shall submit annually to 
        Congress a report on the amendments made by subsections (a) 
        through (c) until the submission of the final report under 
        paragraph (2).
            (2) Final report.--The Secretary shall submit to Congress a 
        final report on such activities not later than 5 years after 
        the date of the enactment of this Act. The final report shall 
        include the following:
                    (A) The results of the study performed under 
                subsection (d) and the impact of such amendments on the 
                quality of care in skilled nursing facilities.
                    (B) Recommendations for changes to the medicare 
                payment system for extended care services in order to 
                enhance quality in skilled nursing facilities.
                    (C) An analysis of the pros and cons of alternative 
                approaches to addressing other issues identified in 
                such study.