To establish under the Medicare Program under title XVIII of the Social Security Act incentives to health care providers for delivering high-quality, cost-effective health care to Medicare beneficiaries.

Summary: Medicare Value and Quality Act of 2003 - Directs the Secretary of Health and Human Services to establish a mechanism for providing economic incentives to providers of inpatient hospital services that deliver high-quality health care at low costs to encourage the provision of high-quality cost-effective health care to beneficiaries under the Medicare program under title XVIII of the Social Security Act. Requires the Agency for Healthcare Research and Quality to establish a value and quality ranking methodology for the award of bonus payments to such providers.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Value and Quality Act of 
2003''.

SEC. 2. FINDINGS.

    The House makes the following findings:
            (1) The United States Government should reward physicians, 
        hospitals, and other health care providers that provide high-
        quality, cost-effective health care to beneficiaries under the 
        medicare program.
            (2) The Journal of the American Medical Association has 
        published quality indicators in an article entitled ``Quality 
        of Medical Care Delivered to Medicare Beneficiaries: A Profile 
        at State and National Levels''.
            (3) The cost of health care is--
                    (A) reflected in the type and volume of physicians' 
                services and in physician ordering and prescribing 
                behavior; and
                    (B) reflected in the amount of the average payment 
                to hospitals under the medicare program for each 
                medicare beneficiary in each State.
            (4) Physician and hospital practice patterns contribute to 
        the total cost and quality of care for each medicare 
        beneficiary in each State.
            (5) The original medicare fee-for-service program under 
        parts A and B of title XVIII of the Social Security Act does 
        not include a mechanism to pay for interventions designed to 
        improve quality of care.

SEC. 3. TO ENCOURAGE THE PROVISION OF HIGH-QUALITY, COST-EFFECTIVE 
              INPATIENT HOSPITAL SERVICES.

    (a) Purpose.--The purpose under this section is to encourage the 
provision of high-quality, cost-effective health care to beneficiaries 
under the medicare program under title XVIII of the Social Security Act 
(42 U.S.C. 1395 et seq.) by providing incentive payments to hospitals 
located in States in which high-quality and cost-effective services are 
being provided in order to finance further quality improvements.
    (b) Intent.--It is the intent of Congress to provide incentives for 
States to deliver high quality health care and to create incentives 
that assure medicare recognizes value in the products and services that 
the program purchases on behalf of medicare beneficiaries.
    (c) Mechanism.--
            (1) Establishment.--Not later than 6 months after the date 
        of enactment of this Act, the Secretary shall establish a 
        mechanism under which--
                    (A) the Secretary provides economic incentives to 
                providers of inpatient hospital services that deliver 
                high-quality health care at low costs in accordance 
                with the methodology established by the Agency for 
                Healthcare Research and Quality under paragraph (2) 
                with a 5 percent add-on bonus payment to providers of 
                inpatient hospital services within the top ten 
                performing States; and
                    (B) the Secretary necessarily recognizes and 
                includes measurements that factor both the quality of 
                care delivered in a medicare purchasing region or in 
                the event that purchasing regions are not developed, 
                then in a State, to medicare beneficiaries and 
                consumption of resources, including but not limited to 
                labor, technology, capital infrastructure and 
                pharmaceuticals in the delivery of services to medicare 
                beneficiaries under the medicare program under title 
                XVIII of the Social Security Act.
            (2) Value and quality ranking methodology.--
                    (A) In general.--The Agency for Healthcare Research 
                and Quality shall establish a value and quality ranking 
                methodology under which the Secretary awards bonus 
                payments to providers of inpatient hospital services 
                located in those States that demonstrate that such 
                providers in the State are providing high value because 
                of the high-quality, cost-effective health care 
                services being provided to medicare beneficiaries.
                    (B) Basis.--The methodology established under 
                subparagraph (A) shall be based on the rank and 
                performance on medicare quality indicators published 
                annually in the Journal of the American Medical 
                Association (JAMA) that uses Medicare's current quality 
                of care measures. Cost rankings will be based on the 
                Centers for Medicare and Medicaid Services (CMS) annual 
                report ranking States based on average Medicare 
                spending per recipient for each State.
    (d) Definitions.--In this section:
            (1) Provider of inpatient hospital services.--The term 
        ``provider of inpatient hospital services'' means any 
        individual or entity that receives payment under the medicare 
        program under title XVIII of the Social Security Act (42 U.S.C. 
        1395 et seq.) for providing an inpatient hospital service (as 
        defined in section 1861(b) of such Act (42 U.S.C. 1395x(b))).
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.