# Patient Protection and Affordable Care Act/Title III/Subtitle A/Part I
## PART I--LINKING PAYMENT TO QUALITY OUTCOMES UNDER THE MEDICARE PROGRAM
### SEC. 3001. HOSPITAL VALUE-BASED PURCHASING PROGRAM.

    (a) Program-
       (1) IN GENERAL- Section 1886 of the Social Security Act (42 U.S.C. 1395ww), as amended by section 4102(a) of the HITECH Act (Public Law 111-5), is amended by adding at the end the following new subsection:
             `(o) Hospital Value-Based Purchasing Program-
                `(1) ESTABLISHMENT-
                   `(A) IN GENERAL- Subject to the succeeding provisions of this subsection, the Secretary shall establish a hospital value-based purchasing program (in this subsection referred to as the `Program') under which value-based incentive payments are made in a fiscal year to hospitals that meet the performance standards under paragraph (3) for the performance period for such fiscal year (as established under paragraph (4)).
                   `(B) PROGRAM TO BEGIN IN FISCAL YEAR 2013- The Program shall apply to payments for discharges occurring on or after October 1, 2012.
                   `(C) APPLICABILITY OF PROGRAM TO HOSPITALS-
                      `(i) IN GENERAL- For purposes of this subsection, subject to clause (ii), the term `hospital' means a subsection (d) hospital (as defined in subsection (d)(1)(B)).
                      `(ii) EXCLUSIONS- The term `hospital' shall not include, with respect to a fiscal year, a hospital--
                         `(I) that is subject to the payment reduction under subsection (b)(3)(B)(viii)(I) for such fiscal year;
                         `(II) for which, during the performance period for such fiscal year, the Secretary has cited deficiencies that pose immediate jeopardy to the health or safety of patients;
                         `(III) for which there are not a minimum number (as determined by the Secretary) of measures that apply to the hospital for the performance period for such fiscal year; or
                         `(IV) for which there are not a minimum number (as determined by the Secretary) of cases for the measures that apply to the hospital for the performance period for such fiscal year.
                      `(iii) INDEPENDENT ANALYSIS- For purposes of determining the minimum numbers under subclauses (III) and (IV) of clause (ii), the Secretary shall have conducted an independent analysis of what numbers are appropriate.
                      `(iv) EXEMPTION- In the case of a hospital that is paid under section 1814(b)(3), the Secretary may exempt such hospital from the application of this subsection if the State which is paid under such section submits an annual report to the Secretary describing how a similar program in the State for a participating hospital or hospitals achieves or surpasses the measured results in terms of patient health outcomes and cost savings established under this subsection.
                `(2) MEASURES-
                   `(A) IN GENERAL- The Secretary shall select measures for purposes of the Program. Such measures shall be selected from the measures specified under subsection (b)(3)(B)(viii).
                   `(B) REQUIREMENTS-
                      `(i) FOR FISCAL YEAR 2013- For value-based incentive payments made with respect to discharges occurring during fiscal year 2013, the Secretary shall ensure the following:
                         `(I) CONDITIONS OR PROCEDURES- Measures are selected under subparagraph (A) that cover at least the following 5 specific conditions or procedures:
                            `(aa) Acute myocardial infarction (AMI).
                            `(bb) Heart failure.
                            `(cc) Pneumonia.
                            `(dd) Surgeries, as measured by the Surgical Care Improvement Project (formerly referred to as `Surgical Infection Prevention' for discharges occurring before July 2006).
                            `(ee) Healthcare-associated infections, as measured by the prevention metrics and targets established in the HHS Action Plan to Prevent Healthcare-Associated Infections (or any successor plan) of the Department of Health and Human Services.
                         `(II) HCAHPS- Measures selected under subparagraph (A) shall be related to the Hospital Consumer Assessment of Healthcare Providers and Systems survey (HCAHPS).
                      `(ii) INCLUSION OF EFFICIENCY MEASURES- For value-based incentive payments made with respect to discharges occurring during fiscal year 2014 or a subsequent fiscal year, the Secretary shall ensure that measures selected under subparagraph (A) include efficiency measures, including measures of `Medicare spending per beneficiary'. Such measures shall be adjusted for factors such as age, sex, race, severity of illness, and other factors that the Secretary determines appropriate.
                   `(C) LIMITATIONS-
                      `(i) TIME REQUIREMENT FOR PRIOR REPORTING AND NOTICE- The Secretary may not select a measure under subparagraph (A) for use under the Program with respect to a performance period for a fiscal year (as established under paragraph (4)) unless such measure has been specified under subsection (b)(3)(B)(viii) and included on the Hospital Compare Internet website for at least 1 year prior to the beginning of such performance period.
                      `(ii) MEASURE NOT APPLICABLE UNLESS HOSPITAL FURNISHES SERVICES APPROPRIATE TO THE MEASURE- A measure selected under subparagraph (A) shall not apply to a hospital if such hospital does not furnish services appropriate to such measure.
                   `(D) REPLACING MEASURES- Subclause (VI) of subsection (b)(3)(B)(viii) shall apply to measures selected under subparagraph (A) in the same manner as such subclause applies to measures selected under such subsection.
                `(3) PERFORMANCE STANDARDS-
                   `(A) ESTABLISHMENT- The Secretary shall establish performance standards with respect to measures selected under paragraph (2) for a performance period for a fiscal year (as established under paragraph (4)).
                   `(B) ACHIEVEMENT AND IMPROVEMENT- The performance standards established under subparagraph (A) shall include levels of achievement and improvement.
                   `(C) TIMING- The Secretary shall establish and announce the performance standards under subparagraph (A) not later than 60 days prior to the beginning of the performance period for the fiscal year involved.
                   `(D) CONSIDERATIONS IN ESTABLISHING STANDARDS- In establishing performance standards with respect to measures under this paragraph, the Secretary shall take into account appropriate factors, such as--
                      `(i) practical experience with the measures involved, including whether a significant proportion of hospitals failed to meet the performance standard during previous performance periods;
                      `(ii) historical performance standards;
                      `(iii) improvement rates; and
                      `(iv) the opportunity for continued improvement.
                `(4) PERFORMANCE PERIOD- For purposes of the Program, the Secretary shall establish the performance period for a fiscal year. Such performance period shall begin and end prior to the beginning of such fiscal year.
                `(5) HOSPITAL PERFORMANCE SCORE-
                   `(A) IN GENERAL- Subject to subparagraph (B), the Secretary shall develop a methodology for assessing the total performance of each hospital based on performance standards with respect to the measures selected under paragraph (2) for a performance period (as established under paragraph (4)). Using such methodology, the Secretary shall provide for an assessment (in this subsection referred to as the `hospital performance score') for each hospital for each performance period.
                   `(B) APPLICATION-
                      `(i) APPROPRIATE DISTRIBUTION- The Secretary shall ensure that the application of the methodology developed under subparagraph (A) results in an appropriate distribution of value-based incentive payments under paragraph (6) among hospitals achieving different levels of hospital performance scores, with hospitals achieving the highest hospital performance scores receiving the largest value-based incentive payments.
                      `(ii) HIGHER OF ACHIEVEMENT OR IMPROVEMENT- The methodology developed under subparagraph (A) shall provide that the hospital performance score is determined using the higher of its achievement or improvement score for each measure.
                      `(iii) WEIGHTS- The methodology developed under subparagraph (A) shall provide for the assignment of weights for categories of measures as the Secretary determines appropriate.
                      `(iv) NO MINIMUM PERFORMANCE STANDARD- The Secretary shall not set a minimum performance standard in determining the hospital performance score for any hospital.
                      `(v) REFLECTION OF MEASURES APPLICABLE TO THE HOSPITAL- The hospital performance score for a hospital shall reflect the measures that apply to the hospital.
                `(6) CALCULATION OF VALUE-BASED INCENTIVE PAYMENTS-
                   `(A) IN GENERAL- In the case of a hospital that the Secretary determines meets (or exceeds) the performance standards under paragraph (3) for the performance period for a fiscal year (as established under paragraph (4)), the Secretary shall increase the base operating DRG payment amount (as defined in paragraph (7)(D)), as determined after application of paragraph (7)(B)(i), for a hospital for each discharge occurring in such fiscal year by the value-based incentive payment amount.
                   `(B) VALUE-BASED INCENTIVE PAYMENT AMOUNT- The value-based incentive payment amount for each discharge of a hospital in a fiscal year shall be equal to the product of--
                      `(i) the base operating DRG payment amount (as defined in paragraph (7)(D)) for the discharge for the hospital for such fiscal year; and
                      `(ii) the value-based incentive payment percentage specified under subparagraph (C) for the hospital for such fiscal year.
                   `(C) VALUE-BASED INCENTIVE PAYMENT PERCENTAGE-
                      `(i) IN GENERAL- The Secretary shall specify a value-based incentive payment percentage for a hospital for a fiscal year.
                      `(ii) REQUIREMENTS- In specifying the value-based incentive payment percentage for each hospital for a fiscal year under clause (i), the Secretary shall ensure that--
                         `(I) such percentage is based on the hospital performance score of the hospital under paragraph (5); and
                         `(II) the total amount of value-based incentive payments under this paragraph to all hospitals in such fiscal year is equal to the total amount available for value-based incentive payments for such fiscal year under paragraph (7)(A), as estimated by the Secretary.
                `(7) FUNDING FOR VALUE-BASED INCENTIVE PAYMENTS-
                   `(A) AMOUNT- The total amount available for value-based incentive payments under paragraph (6) for all hospitals for a fiscal year shall be equal to the total amount of reduced payments for all hospitals under subparagraph (B) for such fiscal year, as estimated by the Secretary.
                   `(B) ADJUSTMENT TO PAYMENTS-
                      `(i) IN GENERAL- The Secretary shall reduce the base operating DRG payment amount (as defined in subparagraph (D)) for a hospital for each discharge in a fiscal year (beginning with fiscal year 2013) by an amount equal to the applicable percent (as defined in subparagraph (C)) of the base operating DRG payment amount for the discharge for the hospital for such fiscal year. The Secretary shall make such reductions for all hospitals in the fiscal year involved, regardless of whether or not the hospital has been determined by the Secretary to have earned a value-based incentive payment under paragraph (6) for such fiscal year.
                      `(ii) NO EFFECT ON OTHER PAYMENTS- Payments described in items (aa) and (bb) of subparagraph (D)(i)(II) for a hospital shall be determined as if this subsection had not been enacted.
                   `(C) APPLICABLE PERCENT DEFINED- For purposes of subparagraph (B), the term `applicable percent' means--
                      `(i) with respect to fiscal year 2013, 1.0 percent;
                      `(ii) with respect to fiscal year 2014, 1.25 percent;
                      `(iii) with respect to fiscal year 2015, 1.5 percent;
                      `(iv) with respect to fiscal year 2016, 1.75 percent; and
                      `(v) with respect to fiscal year 2017 and succeeding fiscal years, 2 percent.
                   `(D) BASE OPERATING DRG PAYMENT AMOUNT DEFINED-
                      `(i) IN GENERAL- Except as provided in clause (ii), in this subsection, the term `base operating DRG payment amount' means, with respect to a hospital for a fiscal year--
                         `(I) the payment amount that would otherwise be made under subsection (d) (determined without regard to subsection (q)) for a discharge if this subsection did not apply; reduced by
                         `(II) any portion of such payment amount that is attributable to--
                            `(aa) payments under paragraphs (5)(A), (5)(B), (5)(F), and (12) of subsection (d); and
                            `(bb) such other payments under subsection (d) determined appropriate by the Secretary.
                      `(ii) SPECIAL RULES FOR CERTAIN HOSPITALS-
                         `(I) SOLE COMMUNITY HOSPITALS AND MEDICARE-DEPENDENT, SMALL RURAL HOSPITALS- In the case of a medicare-dependent, small rural hospital (with respect to discharges occurring during fiscal year 2012 and 2013) or a sole community hospital, in applying subparagraph (A)(i), the payment amount that would otherwise be made under subsection (d) shall be determined without regard to subparagraphs (I) and (L) of subsection (b)(3) and subparagraphs (D) and (G) of subsection (d)(5).
                         `(II) HOSPITALS PAID UNDER SECTION 1814- In the case of a hospital that is paid under section 1814(b)(3), the term `base operating DRG payment amount' means the payment amount under such section.
                `(8) ANNOUNCEMENT OF NET RESULT OF ADJUSTMENTS- Under the Program, the Secretary shall, not later than 60 days prior to the fiscal year involved, inform each hospital of the adjustments to payments to the hospital for discharges occurring in such fiscal year under paragraphs (6) and (7)(B)(i).
                `(9) NO EFFECT IN SUBSEQUENT FISCAL YEARS- The value-based incentive payment under paragraph (6) and the payment reduction under paragraph (7)(B)(i) shall each apply only with respect to the fiscal year involved, and the Secretary shall not take into account such value-based incentive payment or payment reduction in making payments to a hospital under this section in a subsequent fiscal year.
                `(10) PUBLIC REPORTING-
                   `(A) HOSPITAL SPECIFIC INFORMATION-
                      `(i) IN GENERAL- The Secretary shall make information available to the public regarding the performance of individual hospitals under the Program, including--
                         `(I) the performance of the hospital with respect to each measure that applies to the hospital;
                         `(II) the performance of the hospital with respect to each condition or procedure; and
                         `(III) the hospital performance score assessing the total performance of the hospital.
                      `(ii) OPPORTUNITY TO REVIEW AND SUBMIT CORRECTIONS- The Secretary shall ensure that a hospital has the opportunity to review, and submit corrections for, the information to be made public with respect to the hospital under clause (i) prior to such information being made public.
                      `(iii) WEBSITE- Such information shall be posted on the Hospital Compare Internet website in an easily understandable format.
                   `(B) AGGREGATE INFORMATION- The Secretary shall periodically post on the Hospital Compare Internet website aggregate information on the Program, including--
                      `(i) the number of hospitals receiving value-based incentive payments under paragraph (6) and the range and total amount of such value-based incentive payments; and
                      `(ii) the number of hospitals receiving less than the maximum value-based incentive payment available to the hospital for the fiscal year involved and the range and amount of such payments.
                `(11) IMPLEMENTATION-
                   `(A) APPEALS- The Secretary shall establish a process by which hospitals may appeal the calculation of a hospital's performance assessment with respect to the performance standards established under paragraph (3)(A) and the hospital performance score under paragraph (5). The Secretary shall ensure that such process provides for resolution of such appeals in a timely manner.
                   `(B) LIMITATION ON REVIEW- Except as provided in subparagraph (A), there shall be no administrative or judicial review under section 1869, section 1878, or otherwise of the following:
                      `(i) The methodology used to determine the amount of the value-based incentive payment under paragraph (6) and the determination of such amount.
                      `(ii) The determination of the amount of funding available for such value-based incentive payments under paragraph (7)(A) and the payment reduction under paragraph (7)(B)(i).
                      `(iii) The establishment of the performance standards under paragraph (3) and the performance period under paragraph (4).
                      `(iv) The measures specified under subsection (b)(3)(B)(viii) and the measures selected under paragraph (2).
                      `(v) The methodology developed under paragraph (5) that is used to calculate hospital performance scores and the calculation of such scores.
                      `(vi) The validation methodology specified in subsection (b)(3)(B)(viii)(XI).
                   `(C) CONSULTATION WITH SMALL HOSPITALS- The Secretary shall consult with small rural and urban hospitals on the application of the Program to such hospitals.
                `(12) PROMULGATION OF REGULATIONS- The Secretary shall promulgate regulations to carry out the Program, including the selection of measures under paragraph (2), the methodology developed under paragraph (5) that is used to calculate hospital performance scores, and the methodology used to determine the amount of value-based incentive payments under paragraph (6).'.
       (2) AMENDMENTS FOR REPORTING OF HOSPITAL QUALITY INFORMATION- Section 1886(b)(3)(B)(viii) of the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(viii)) is amended--
          (A) in subclause (II), by adding at the end the following sentence: `The Secretary may require hospitals to submit data on measures that are not used for the determination of value-based incentive payments under subsection (o).';
          (B) in subclause (V), by striking `beginning with fiscal year 2008' and inserting `for fiscal years 2008 through 2012';
          (C) in subclause (VII), in the first sentence, by striking `data submitted' and inserting `information regarding measures submitted'; and
          (D) by adding at the end the following new subclauses:
                         `(VIII) Effective for payments beginning with fiscal year 2013, with respect to quality measures for outcomes of care, the Secretary shall provide for such risk adjustment as the Secretary determines to be appropriate to maintain incentives for hospitals to treat patients with severe illnesses or conditions.
                         `(IX)(aa) Subject to item (bb), effective for payments beginning with fiscal year 2013, each measure specified by the Secretary under this clause shall be endorsed by the entity with a contract under section 1890(a).
                            `(bb) In the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a), the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.
                         `(X) To the extent practicable, the Secretary shall, with input from consensus organizations and other stakeholders, take steps to ensure that the measures specified by the Secretary under this clause are coordinated and aligned with quality measures applicable to--
                            `(aa) physicians under section 1848(k); and
                            `(bb) other providers of services and suppliers under this title.
                         `(XI) The Secretary shall establish a process to validate measures specified under this clause as appropriate. Such process shall include the auditing of a number of randomly selected hospitals sufficient to ensure validity of the reporting program under this clause as a whole and shall provide a hospital with an opportunity to appeal the validation of measures reported by such hospital.'.
       (3) WEBSITE IMPROVEMENTS- Section 1886(b)(3)(B) of the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)), as amended by section 4102(b) of the HITECH Act (Public Law 111-5), is amended by adding at the end the following new clause:
                      `(x)(I) The Secretary shall develop standard Internet website reports tailored to meet the needs of various stakeholders such as hospitals, patients, researchers, and policymakers. The Secretary shall seek input from such stakeholders in determining the type of information that is useful and the formats that best facilitate the use of the information.
                         `(II) The Secretary shall modify the Hospital Compare Internet website to make the use and navigation of that website readily available to individuals accessing it.'.
       (4) GAO STUDY AND REPORT-
          (A) STUDY- The Comptroller General of the United States shall conduct a study on the performance of the hospital value-based purchasing program established under section 1886(o) of the Social Security Act, as added by paragraph (1). Such study shall include an analysis of the impact of such program on--
             (i) the quality of care furnished to Medicare beneficiaries, including diverse Medicare beneficiary populations (such as diverse in terms of race, ethnicity, and socioeconomic status);
             (ii) expenditures under the Medicare program, including any reduced expenditures under Part A of title XVIII of such Act that are attributable to the improvement in the delivery of inpatient hospital services by reason of such hospital value-based purchasing program;
             (iii) the quality performance among safety net hospitals and any barriers such hospitals face in meeting the performance standards applicable under such hospital value-based purchasing program; and
             (iv) the quality performance among small rural and small urban hospitals and any barriers such hospitals face in meeting the performance standards applicable under such hospital value-based purchasing program.
          (B) REPORTS-
             (i) INTERIM REPORT- Not later than October 1, 2015, the Comptroller General of the United States shall submit to Congress an interim report containing the results of the study conducted under subparagraph (A), together with recommendations for such legislation and administrative action as the Comptroller General determines appropriate.
             (ii) FINAL REPORT- Not later than July 1, 2017, the Comptroller General of the United States shall submit to Congress a report containing the results of the study conducted under subparagraph (A), together with recommendations for such legislation and administrative action as the Comptroller General determines appropriate.
       (5) HHS STUDY AND REPORT-
          (A) STUDY- The Secretary of Health and Human Services shall conduct a study on the performance of the hospital value-based purchasing program established under section 1886(o) of the Social Security Act, as added by paragraph (1). Such study shall include an analysis--
             (i) of ways to improve the hospital value-based purchasing program and ways to address any unintended consequences that may occur as a result of such program;
             (ii) of whether the hospital value-based purchasing program resulted in lower spending under the Medicare program under title XVIII of such Act or other financial savings to hospitals;
             (iii) the appropriateness of the Medicare program sharing in any savings generated through the hospital value-based purchasing program; and
             (iv) any other area determined appropriate by the Secretary.
          (B) REPORT- Not later than January 1, 2016, the Secretary of Health and Human Services shall submit to Congress a report containing the results of the study conducted under subparagraph (A), together with recommendations for such legislation and administrative action as the Secretary determines appropriate.
    (b) Value-Based Purchasing Demonstration Programs-
       (1) VALUE-BASED PURCHASING DEMONSTRATION PROGRAM FOR INPATIENT CRITICAL ACCESS HOSPITALS-
          (A) ESTABLISHMENT-
             (i) IN GENERAL- Not later than 2 years after the date of enactment of this Act, the Secretary of Health and Human Services (in this subsection referred to as the `Secretary') shall establish a demonstration program under which the Secretary establishes a value-based purchasing program under the Medicare program under title XVIII of the Social Security Act for critical access hospitals (as defined in paragraph (1) of section 1861(mm) of such Act (42 U.S.C. 1395x(mm))) with respect to inpatient critical access hospital services (as defined in paragraph (2) of such section) in order to test innovative methods of measuring and rewarding quality and efficient health care furnished by such hospitals.
             (ii) DURATION- The demonstration program under this paragraph shall be conducted for a 3-year period.
             (iii) SITES- The Secretary shall conduct the demonstration program under this paragraph at an appropriate number (as determined by the Secretary) of critical access hospitals. The Secretary shall ensure that such hospitals are representative of the spectrum of such hospitals that participate in the Medicare program.
          (B) WAIVER AUTHORITY- The Secretary may waive such requirements of titles XI and XVIII of the Social Security Act as may be necessary to carry out the demonstration program under this paragraph.
          (C) BUDGET NEUTRALITY REQUIREMENT- In conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.
          (D) REPORT- Not later than 18 months after the completion of the demonstration program under this paragraph, the Secretary shall submit to Congress a report on the demonstration program together with--
             (i) recommendations on the establishment of a permanent value-based purchasing program under the Medicare program for critical access hospitals with respect to inpatient critical access hospital services; and
             (ii) recommendations for such other legislation and administrative action as the Secretary determines appropriate.
       (2) VALUE-BASED PURCHASING DEMONSTRATION PROGRAM FOR HOSPITALS EXCLUDED FROM HOSPITAL VALUE-BASED PURCHASING PROGRAM AS A RESULT OF INSUFFICIENT NUMBERS OF MEASURES AND CASES-
          (A) ESTABLISHMENT-
             (i) IN GENERAL- Not later than 2 years after the date of enactment of this Act, the Secretary shall establish a demonstration program under which the Secretary establishes a value-based purchasing program under the Medicare program under title XVIII of the Social Security Act for applicable hospitals (as defined in clause (ii)) with respect to inpatient hospital services (as defined in section 1861(b) of the Social Security Act (42 U.S.C. 1395x(b))) in order to test innovative methods of measuring and rewarding quality and efficient health care furnished by such hospitals.
             (ii) APPLICABLE HOSPITAL DEFINED- For purposes of this paragraph, the term `applicable hospital' means a hospital described in subclause (III) or (IV) of section 1886(o)(1)(C)(ii) of the Social Security Act, as added by subsection (a)(1).
             (iii) DURATION- The demonstration program under this paragraph shall be conducted for a 3-year period.
             (iv) SITES- The Secretary shall conduct the demonstration program under this paragraph at an appropriate number (as determined by the Secretary) of applicable hospitals. The Secretary shall ensure that such hospitals are representative of the spectrum of such hospitals that participate in the Medicare program.
          (B) WAIVER AUTHORITY- The Secretary may waive such requirements of titles XI and XVIII of the Social Security Act as may be necessary to carry out the demonstration program under this paragraph.
          (C) BUDGET NEUTRALITY REQUIREMENT- In conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.
          (D) REPORT- Not later than 18 months after the completion of the demonstration program under this paragraph, the Secretary shall submit to Congress a report on the demonstration program together with--
             (i) recommendations on the establishment of a permanent value-based purchasing program under the Medicare program for applicable hospitals with respect to inpatient hospital services; and
             (ii) recommendations for such other legislation and administrative action as the Secretary determines appropriate.

### SEC. 3002. IMPROVEMENTS TO THE PHYSICIAN QUALITY REPORTING SYSTEM.

    (a) Extension- Section 1848(m) of the Social Security Act (42 U.S.C. 1395w-4(m)) is amended--
       (1) in paragraph (1)--
          (A) in subparagraph (A), in the matter preceding clause (i), by striking `2010' and inserting `2014'; and
          (B) in subparagraph (B)--
             (i) in clause (i), by striking `and' at the end;
             (ii) in clause (ii), by striking the period at the end and inserting a semicolon; and
             (iii) by adding at the end the following new clauses:
                      `(iii) for 2011, 1.0 percent; and
                      `(iv) for 2012, 2013, and 2014, 0.5 percent.';
       (2) in paragraph (3)--
          (A) in subparagraph (A), in the matter preceding clause (i), by inserting `(or, for purposes of subsection (a)(8), for the quality reporting period for the year)' after `reporting period'; and
          (B) in subparagraph (C)(i), by inserting `, or, for purposes of subsection (a)(8), for a quality reporting period for the year' after `(a)(5), for a reporting period for a year';
       (3) in paragraph (5)(E)(iv), by striking `subsection (a)(5)(A)' and inserting `paragraphs (5)(A) and (8)(A) of subsection (a)'; and
       (4) in paragraph (6)(C)--
          (A) in clause (i)(II), by striking `, 2009, 2010, and 2011' and inserting `and subsequent years'; and
          (B) in clause (iii)--
             (i) by inserting `(a)(8)' after `(a)(5)'; and
             (ii) by striking `under subparagraph (D)(iii) of such subsection' and inserting `under subsection (a)(5)(D)(iii) or the quality reporting period under subsection (a)(8)(D)(iii), respectively'.
    (b) Incentive Payment Adjustment for Quality Reporting- Section 1848(a) of the Social Security Act (42 U.S.C. 1395w-4(a)) is amended by adding at the end the following new paragraph:
                `(8) INCENTIVES FOR QUALITY REPORTING-
                   `(A) ADJUSTMENT-
                      `(i) IN GENERAL- With respect to covered professional services furnished by an eligible professional during 2015 or any subsequent year, if the eligible professional does not satisfactorily submit data on quality measures for covered professional services for the quality reporting period for the year (as determined under subsection (m)(3)(A)), the fee schedule amount for such services furnished by such professional during the year (including the fee schedule amount for purposes of determining a payment based on such amount) shall be equal to the applicable percent of the fee schedule amount that would otherwise apply to such services under this subsection (determined after application of paragraphs (3), (5), and (7), but without regard to this paragraph).
                      `(ii) APPLICABLE PERCENT- For purposes of clause (i), the term `applicable percent' means--
                         `(I) for 2015, 98.5 percent; and
                         `(II) for 2016 and each subsequent year, 98 percent.
                   `(B) APPLICATION-
                      `(i) PHYSICIAN REPORTING SYSTEM RULES- Paragraphs (5), (6), and (8) of subsection (k) shall apply for purposes of this paragraph in the same manner as they apply for purposes of such subsection.
                      `(ii) INCENTIVE PAYMENT VALIDATION RULES- Clauses (ii) and (iii) of subsection (m)(5)(D) shall apply for purposes of this paragraph in a similar manner as they apply for purposes of such subsection.
                   `(C) DEFINITIONS- For purposes of this paragraph:
                      `(i) ELIGIBLE PROFESSIONAL; COVERED PROFESSIONAL SERVICES- The terms `eligible professional' and `covered professional services' have the meanings given such terms in subsection (k)(3).
                      `(ii) PHYSICIAN REPORTING SYSTEM- The term `physician reporting system' means the system established under subsection (k).
                      `(iii) QUALITY REPORTING PERIOD- The term `quality reporting period' means, with respect to a year, a period specified by the Secretary.'.
    (c) Maintenance of Certification Programs-
       (1) IN GENERAL- Section 1848(k)(4) of the Social Security Act (42 U.S.C. 1395w-4(k)(4)) is amended by inserting `or through a Maintenance of Certification program operated by a specialty body of the American Board of Medical Specialties that meets the criteria for such a registry' after `Database)'.
       (2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply for years after 2010.
    (d) Integration of Physician Quality Reporting and EHR Reporting- Section 1848(m) of the Social Security Act (42 U.S.C. 1395w-4(m)) is amended by adding at the end the following new paragraph:
                `(7) INTEGRATION OF PHYSICIAN QUALITY REPORTING AND EHR REPORTING- Not later than January 1, 2012, the Secretary shall develop a plan to integrate reporting on quality measures under this subsection with reporting requirements under subsection (o) relating to the meaningful use of electronic health records. Such integration shall consist of the following:
                   `(A) The selection of measures, the reporting of which would both demonstrate--
                      `(i) meaningful use of an electronic health record for purposes of subsection (o); and
                      `(ii) quality of care furnished to an individual.
                   `(B) Such other activities as specified by the Secretary.'.
    (e) Feedback- Section 1848(m)(5) of the Social Security Act (42 U.S.C. 1395w-4(m)(5)) is amended by adding at the end the following new subparagraph:
                   `(H) FEEDBACK- The Secretary shall provide timely feedback to eligible professionals on the performance of the eligible professional with respect to satisfactorily submitting data on quality measures under this subsection.'.
    (f) Appeals- Such section is further amended--
       (1) in subparagraph (E), by striking `There shall' and inserting `Except as provided in subparagraph (I), there shall'; and
       (2) by adding at the end the following new subparagraph:
                         `(I) INFORMAL APPEALS PROCESS- The Secretary shall, by not later than January 1, 2011, establish and have in place an informal process for eligible professionals to seek a review of the determination that an eligible professional did not satisfactorily submit data on quality measures under this subsection.'.

### SEC. 3003. IMPROVEMENTS TO THE PHYSICIAN FEEDBACK PROGRAM.

    (a) In General- Section 1848(n) of the Social Security Act (42 U.S.C. 1395w-4(n)) is amended--
       (1) in paragraph (1)--
          (A) in subparagraph (A)--
             (i) by striking `GENERAL- The Secretary' and inserting `GENERAL-
                      `(i) ESTABLISHMENT- The Secretary';
             (ii) in clause (i), as added by clause (i), by striking `the `Program')' and all that follows through the period at the end of the second sentence and inserting `the `Program').'; and
             (iii) by adding at the end the following new clauses:
                      `(ii) REPORTS ON RESOURCES- The Secretary shall use claims data under this title (and may use other data) to provide confidential reports to physicians (and, as determined appropriate by the Secretary, to groups of physicians) that measure the resources involved in furnishing care to individuals under this title.
                      `(iii) INCLUSION OF CERTAIN INFORMATION- If determined appropriate by the Secretary, the Secretary may include information on the quality of care furnished to individuals under this title by the physician (or group of physicians) in such reports.'; and
          (B) in subparagraph (B), by striking `subparagraph (A)' and inserting `subparagraph (A)(ii)';
       (2) in paragraph (4)--
          (A) in the heading, by inserting `INITIAL' after `FOCUS'; and
          (B) in the matter preceding subparagraph (A), by inserting `initial' after `focus the';
       (3) in paragraph (6), by adding at the end the following new sentence: `For adjustments for reports on utilization under paragraph (9), see subparagraph (D) of such paragraph.'; and
       (4) by adding at the end the following new paragraphs:
                `(9) REPORTS ON UTILIZATION-
                   `(A) DEVELOPMENT OF EPISODE GROUPER-
                      `(i) IN GENERAL- The Secretary shall develop an episode grouper that combines separate but clinically related items and services into an episode of care for an individual, as appropriate.
                      `(ii) TIMELINE FOR DEVELOPMENT- The episode grouper described in subparagraph (A) shall be developed by not later than January 1, 2012.
                      `(iii) PUBLIC AVAILABILITY- The Secretary shall make the details of the episode grouper described in subparagraph (A) available to the public.
                      `(iv) ENDORSEMENT- The Secretary shall seek endorsement of the episode grouper described in subparagraph (A) by the entity with a contract under section 1890(a).
                   `(B) REPORTS ON UTILIZATION- Effective beginning with 2012, the Secretary shall provide reports to physicians that compare, as determined appropriate by the Secretary, patterns of resource use of the individual physician to such patterns of other physicians.
                   `(C) ANALYSIS OF DATA- The Secretary shall, for purposes of preparing reports under this paragraph, establish methodologies as appropriate, such as to--
                      `(i) attribute episodes of care, in whole or in part, to physicians;
                      `(ii) identify appropriate physicians for purposes of comparison under subparagraph (B); and
                      `(iii) aggregate episodes of care attributed to a physician under clause (i) into a composite measure per individual.
                   `(D) DATA ADJUSTMENT- In preparing reports under this paragraph, the Secretary shall make appropriate adjustments, including adjustments--
                      `(i) to account for differences in socioeconomic and demographic characteristics, ethnicity, and health status of individuals (such as to recognize that less healthy individuals may require more intensive interventions); and
                      `(ii) to eliminate the effect of geographic adjustments in payment rates (as described in subsection (e)).
                   `(E) PUBLIC AVAILABILITY OF METHODOLOGY- The Secretary shall make available to the public--
                      `(i) the methodologies established under subparagraph (C);
                      `(ii) information regarding any adjustments made to data under subparagraph (D); and
                      `(iii) aggregate reports with respect to physicians.
                   `(F) DEFINITION OF PHYSICIAN- In this paragraph:
                      `(i) IN GENERAL- The term `physician' has the meaning given that term in section 1861(r)(1).
                      `(ii) TREATMENT OF GROUPS- Such term includes, as the Secretary determines appropriate, a group of physicians.
                   `(G) LIMITATIONS ON REVIEW- There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of the establishment of the methodology under subparagraph (C), including the determination of an episode of care under such methodology.
                `(10) COORDINATION WITH OTHER VALUE-BASED PURCHASING REFORMS- The Secretary shall coordinate the Program with the value-based payment modifier established under subsection (p) and, as the Secretary determines appropriate, other similar provisions of this title.'.
    (b) Conforming Amendment- Section 1890(b) of the Social Security Act (42 U.S.C. 1395aaa(b)) is amended by adding at the end the following new paragraph:
                `(6) REVIEW AND ENDORSEMENT OF EPISODE GROUPER UNDER THE PHYSICIAN FEEDBACK PROGRAM- The entity shall provide for the review and, as appropriate, the endorsement of the episode grouper developed by the Secretary under section 1848(n)(9)(A). Such review shall be conducted on an expedited basis.'.

### SEC. 3004. QUALITY REPORTING FOR LONG-TERM CARE HOSPITALS, INPATIENT REHABILITATION HOSPITALS, AND HOSPICE PROGRAMS.

    (a) Long-term Care Hospitals- Section 1886(m) of the Social Security Act (42 U.S.C. 1395ww(m)), as amended by section 3401(c), is amended by adding at the end the following new paragraph:
                `(5) QUALITY REPORTING-
                   `(A) REDUCTION IN UPDATE FOR FAILURE TO REPORT-
                      `(i) IN GENERAL- Under the system described in paragraph (1), for rate year 2014 and each subsequent rate year, in the case of a long-term care hospital that does not submit data to the Secretary in accordance with subparagraph (C) with respect to such a rate year, any annual update to a standard Federal rate for discharges for the hospital during the rate year, and after application of paragraph (3), shall be reduced by 2 percentage points.
                      `(ii) SPECIAL RULE- The application of this subparagraph may result in such annual update being less than 0.0 for a rate year, and may result in payment rates under the system described in paragraph (1) for a rate year being less than such payment rates for the preceding rate year.
                   `(B) NONCUMULATIVE APPLICATION- Any reduction under subparagraph (A) shall apply only with respect to the rate year involved and the Secretary shall not take into account such reduction in computing the payment amount under the system described in paragraph (1) for a subsequent rate year.
                   `(C) SUBMISSION OF QUALITY DATA- For rate year 2014 and each subsequent rate year, each long-term care hospital shall submit to the Secretary data on quality measures specified under subparagraph (D). Such data shall be submitted in a form and manner, and at a time, specified by the Secretary for purposes of this subparagraph.
                   `(D) QUALITY MEASURES-
                      `(i) IN GENERAL- Subject to clause (ii), any measure specified by the Secretary under this subparagraph must have been endorsed by the entity with a contract under section 1890(a).
                      `(ii) EXCEPTION- In the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a), the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.
                      `(iii) TIME FRAME- Not later than October 1, 2012, the Secretary shall publish the measures selected under this subparagraph that will be applicable with respect to rate year 2014.
                   `(E) PUBLIC AVAILABILITY OF DATA SUBMITTED- The Secretary shall establish procedures for making data submitted under subparagraph (C) available to the public. Such procedures shall ensure that a long-term care hospital has the opportunity to review the data that is to be made public with respect to the hospital prior to such data being made public. The Secretary shall report quality measures that relate to services furnished in inpatient settings in long-term care hospitals on the Internet website of the Centers for Medicare & Medicaid Services.'.
    (b) Inpatient Rehabilitation Hospitals- Section 1886(j) of the Social Security Act (42 U.S.C. 1395ww(j)) is amended--
       (1) by redesignating paragraph (7) as paragraph (8); and
       (2) by inserting after paragraph (6) the following new paragraph:
                `(7) QUALITY REPORTING-
                   `(A) REDUCTION IN UPDATE FOR FAILURE TO REPORT-
                      `(i) IN GENERAL- For purposes of fiscal year 2014 and each subsequent fiscal year, in the case of a rehabilitation facility that does not submit data to the Secretary in accordance with subparagraph (C) with respect to such a fiscal year, after determining the increase factor described in paragraph (3)(C), and after application of paragraph (3)(D), the Secretary shall reduce such increase factor for payments for discharges occurring during such fiscal year by 2 percentage points.
                      `(ii) SPECIAL RULE- The application of this subparagraph may result in the increase factor described in paragraph (3)(C) being less than 0.0 for a fiscal year, and may result in payment rates under this subsection for a fiscal year being less than such payment rates for the preceding fiscal year.
                   `(B) NONCUMULATIVE APPLICATION- Any reduction under subparagraph (A) shall apply only with respect to the fiscal year involved and the Secretary shall not take into account such reduction in computing the payment amount under this subsection for a subsequent fiscal year.
                   `(C) SUBMISSION OF QUALITY DATA- For fiscal year 2014 and each subsequent rate year, each rehabilitation facility shall submit to the Secretary data on quality measures specified under subparagraph (D). Such data shall be submitted in a form and manner, and at a time, specified by the Secretary for purposes of this subparagraph.
                   `(D) QUALITY MEASURES-
                      `(i) IN GENERAL- Subject to clause (ii), any measure specified by the Secretary under this subparagraph must have been endorsed by the entity with a contract under section 1890(a).
                      `(ii) EXCEPTION- In the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a), the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.
                      `(iii) TIME FRAME- Not later than October 1, 2012, the Secretary shall publish the measures selected under this subparagraph that will be applicable with respect to fiscal year 2014.
                   `(E) PUBLIC AVAILABILITY OF DATA SUBMITTED- The Secretary shall establish procedures for making data submitted under subparagraph (C) available to the public. Such procedures shall ensure that a rehabilitation facility has the opportunity to review the data that is to be made public with respect to the facility prior to such data being made public. The Secretary shall report quality measures that relate to services furnished in inpatient settings in rehabilitation facilities on the Internet website of the Centers for Medicare & Medicaid Services.'.
    (c) Hospice Programs- Section 1814(i) of the Social Security Act (42 U.S.C. 1395f(i)) is amended--
       (1) by redesignating paragraph (5) as paragraph (6); and
       (2) by inserting after paragraph (4) the following new paragraph:
                `(5) QUALITY REPORTING-
                   `(A) REDUCTION IN UPDATE FOR FAILURE TO REPORT-
                      `(i) IN GENERAL- For purposes of fiscal year 2014 and each subsequent fiscal year, in the case of a hospice program that does not submit data to the Secretary in accordance with subparagraph (C) with respect to such a fiscal year, after determining the market basket percentage increase under paragraph (1)(C)(ii)(VII) or paragraph (1)(C)(iii), as applicable, and after application of paragraph (1)(C)(iv), with respect to the fiscal year, the Secretary shall reduce such market basket percentage increase by 2 percentage points.
                      `(ii) SPECIAL RULE- The application of this subparagraph may result in the market basket percentage increase under paragraph (1)(C)(ii)(VII) or paragraph (1)(C)(iii), as applicable, being less than 0.0 for a fiscal year, and may result in payment rates under this subsection for a fiscal year being less than such payment rates for the preceding fiscal year.
                   `(B) NONCUMULATIVE APPLICATION- Any reduction under subparagraph (A) shall apply only with respect to the fiscal year involved and the Secretary shall not take into account such reduction in computing the payment amount under this subsection for a subsequent fiscal year.
                   `(C) SUBMISSION OF QUALITY DATA- For fiscal year 2014 and each subsequent fiscal year, each hospice program shall submit to the Secretary data on quality measures specified under subparagraph (D). Such data shall be submitted in a form and manner, and at a time, specified by the Secretary for purposes of this subparagraph.
                   `(D) QUALITY MEASURES-
                      `(i) IN GENERAL- Subject to clause (ii), any measure specified by the Secretary under this subparagraph must have been endorsed by the entity with a contract under section 1890(a).
                      `(ii) EXCEPTION- In the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a), the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.
                      `(iii) TIME FRAME- Not later than October 1, 2012, the Secretary shall publish the measures selected under this subparagraph that will be applicable with respect to fiscal year 2014.
                   `(E) PUBLIC AVAILABILITY OF DATA SUBMITTED- The Secretary shall establish procedures for making data submitted under subparagraph (C) available to the public. Such procedures shall ensure that a hospice program has the opportunity to review the data that is to be made public with respect to the hospice program prior to such data being made public. The Secretary shall report quality measures that relate to hospice care provided by hospice programs on the Internet website of the Centers for Medicare & Medicaid Services.'.

### SEC. 3005. QUALITY REPORTING FOR PPS-EXEMPT CANCER HOSPITALS.

Section 1866 of the Social Security Act (42 U.S.C. 1395cc) is amended--
       (1) in subsection (a)(1)--
          (A) in subparagraph (U), by striking `and' at the end;
          (B) in subparagraph (V), by striking the period at the end and inserting `, and'; and
          (C) by adding at the end the following new subparagraph:
                   `(W) in the case of a hospital described in section 1886(d)(1)(B)(v), to report quality data to the Secretary in accordance with subsection (k).'; and
       (2) by adding at the end the following new subsection:
             `(k) Quality Reporting by Cancer Hospitals-
                `(1) IN GENERAL- For purposes of fiscal year 2014 and each subsequent fiscal year, a hospital described in section 1886(d)(1)(B)(v) shall submit data to the Secretary in accordance with paragraph (2) with respect to such a fiscal year.
                `(2) SUBMISSION OF QUALITY DATA- For fiscal year 2014 and each subsequent fiscal year, each hospital described in such section shall submit to the Secretary data on quality measures specified under paragraph (3). Such data shall be submitted in a form and manner, and at a time, specified by the Secretary for purposes of this subparagraph.
                `(3) QUALITY MEASURES-
                   `(A) IN GENERAL- Subject to subparagraph (B), any measure specified by the Secretary under this paragraph must have been endorsed by the entity with a contract under section 1890(a).
                   `(B) EXCEPTION- In the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a), the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.
                   `(C) TIME FRAME- Not later than October 1, 2012, the Secretary shall publish the measures selected under this paragraph that will be applicable with respect to fiscal year 2014.
                `(4) PUBLIC AVAILABILITY OF DATA SUBMITTED- The Secretary shall establish procedures for making data submitted under paragraph (4) available to the public. Such procedures shall ensure that a hospital described in section 1886(d)(1)(B)(v) has the opportunity to review the data that is to be made public with respect to the hospital prior to such data being made public. The Secretary shall report quality measures of process, structure, outcome, patients' perspective on care, efficiency, and costs of care that relate to services furnished in such hospitals on the Internet website of the Centers for Medicare & Medicaid Services.'.

### SEC. 3006. PLANS FOR A VALUE-BASED PURCHASING PROGRAM FOR SKILLED NURSING FACILITIES AND HOME HEALTH AGENCIES.

    (a) Skilled Nursing Facilities-
       (1) IN GENERAL- The Secretary of Health and Human Services (in this section referred to as the `Secretary') shall develop a plan to implement a value-based purchasing program for payments under the Medicare program under title XVIII of the Social Security Act for skilled nursing facilities (as defined in section 1819(a) of such Act (42 U.S.C. 1395i-3(a))).
       (2) DETAILS- In developing the plan under paragraph (1), the Secretary shall consider the following issues:
          (A) The ongoing development, selection, and modification process for measures (including under section 1890 of the Social Security Act (42 U.S.C. 1395aaa) and section 1890A such Act, as added by section 3014), to the extent feasible and practicable, of all dimensions of quality and efficiency in skilled nursing facilities.
             (i) IN GENERAL- Subject to clause (ii), any measure specified by the Secretary under subparagraph (A)(iii) must have been endorsed by the entity with a contract under section 1890(a).
             (ii) EXCEPTION- In the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a), the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.
          (B) The reporting, collection, and validation of quality data.
          (C) The structure of value-based payment adjustments, including the determination of thresholds or improvements in quality that would substantiate a payment adjustment, the size of such payments, and the sources of funding for the value-based bonus payments.
          (D) Methods for the public disclosure of information on the performance of skilled nursing facilities.
          (E) Any other issues determined appropriate by the Secretary.
       (3) CONSULTATION- In developing the plan under paragraph (1), the Secretary shall--
          (A) consult with relevant affected parties; and
          (B) consider experience with such demonstrations that the Secretary determines are relevant to the value-based purchasing program described in paragraph (1).
       (4) REPORT TO CONGRESS- Not later than October 1, 2011, the Secretary shall submit to Congress a report containing the plan developed under paragraph (1).
    (b) Home Health Agencies-
       (1) IN GENERAL- The Secretary of Health and Human Services (in this section referred to as the `Secretary') shall develop a plan to implement a value-based purchasing program for payments under the Medicare program under title XVIII of the Social Security Act for home health agencies (as defined in section 1861(o) of such Act (42 U.S.C. 1395x(o))).
       (2) DETAILS- In developing the plan under paragraph (1), the Secretary shall consider the following issues:
          (A) The ongoing development, selection, and modification process for measures (including under section 1890 of the Social Security Act (42 U.S.C. 1395aaa) and section 1890A such Act, as added by section 3014), to the extent feasible and practicable, of all dimensions of quality and efficiency in home health agencies.
          (B) The reporting, collection, and validation of quality data.
          (C) The structure of value-based payment adjustments, including the determination of thresholds or improvements in quality that would substantiate a payment adjustment, the size of such payments, and the sources of funding for the value-based bonus payments.
          (D) Methods for the public disclosure of information on the performance of home health agencies.
          (E) Any other issues determined appropriate by the Secretary.
       (3) CONSULTATION- In developing the plan under paragraph (1), the Secretary shall--
          (A) consult with relevant affected parties; and
          (B) consider experience with such demonstrations that the Secretary determines are relevant to the value-based purchasing program described in paragraph (1).
       (4) REPORT TO CONGRESS- Not later than October 1, 2011, the Secretary shall submit to Congress a report containing the plan developed under paragraph (1).

### SEC. 3007. VALUE-BASED PAYMENT MODIFIER UNDER THE PHYSICIAN FEE SCHEDULE.

Section 1848 of the Social Security Act (42 U.S.C. 1395w-4) is amended--
       (1) in subsection (b)(1), by inserting `subject to subsection (p),' after `1998,'; and
       (2) by adding at the end the following new subsection:
             `(p) Establishment of Value-based Payment Modifier-
                `(1) IN GENERAL- The Secretary shall establish a payment modifier that provides for differential payment to a physician or a group of physicians under the fee schedule established under subsection (b) based upon the quality of care furnished compared to cost (as determined under paragraphs (2) and (3), respectively) during a performance period. Such payment modifier shall be separate from the geographic adjustment factors established under subsection (e).
                `(2) QUALITY-
                   `(A) IN GENERAL- For purposes of paragraph (1), quality of care shall be evaluated, to the extent practicable, based on a composite of measures of the quality of care furnished (as established by the Secretary under subparagraph (B)).
                   `(B) MEASURES-
                      `(i) The Secretary shall establish appropriate measures of the quality of care furnished by a physician or group of physicians to individuals enrolled under this part, such as measures that reflect health outcomes. Such measures shall be risk adjusted as determined appropriate by the Secretary.
                      `(ii) The Secretary shall seek endorsement of the measures established under this subparagraph by the entity with a contract under section 1890(a).
                `(3) COSTS- For purposes of paragraph (1), costs shall be evaluated, to the extent practicable, based on a composite of appropriate measures of costs established by the Secretary (such as the composite measure under the methodology established under subsection (n)(9)(C)(iii)) that eliminate the effect of geographic adjustments in payment rates (as described in subsection (e)), and take into account risk factors (such as socioeconomic and demographic characteristics, ethnicity, and health status of individuals (such as to recognize that less healthy individuals may require more intensive interventions) and other factors determined appropriate by the Secretary.
                `(4) IMPLEMENTATION-
                   `(A) PUBLICATION OF MEASURES, DATES OF IMPLEMENTATION, PERFORMANCE PERIOD- Not later than January 1, 2012, the Secretary shall publish the following:
                      `(i) The measures of quality of care and costs established under paragraphs (2) and (3), respectively.
                      `(ii) The dates for implementation of the payment modifier (as determined under subparagraph (B)).
                      `(iii) The initial performance period (as specified under subparagraph (B)(ii)).
                   `(B) DEADLINES FOR IMPLEMENTATION-
                      `(i) INITIAL IMPLEMENTATION- Subject to the preceding provisions of this subparagraph, the Secretary shall begin implementing the payment modifier established under this subsection through the rulemaking process during 2013 for the physician fee schedule established under subsection (b).
                      `(ii) INITIAL PERFORMANCE PERIOD-
                         `(I) IN GENERAL- The Secretary shall specify an initial performance period for application of the payment modifier established under this subsection with respect to 2015.
                         `(II) PROVISION OF INFORMATION DURING INITIAL PERFORMANCE PERIOD- During the initial performance period, the Secretary shall, to the extent practicable, provide information to physicians and groups of physicians about the quality of care furnished by the physician or group of physicians to individuals enrolled under this part compared to cost (as determined under paragraphs (2) and (3), respectively) with respect to the performance period.
                      `(iii) APPLICATION- The Secretary shall apply the payment modifier established under this subsection for items and services furnished--
                         `(I) beginning on January 1, 2015, with respect to specific physicians and groups of physicians the Secretary determines appropriate; and
                         `(II) beginning not later than January 1, 2017, with respect to all physicians and groups of physicians.
                   `(C) BUDGET NEUTRALITY- The payment modifier established under this subsection shall be implemented in a budget neutral manner.
                `(5) SYSTEMS-BASED CARE- The Secretary shall, as appropriate, apply the payment modifier established under this subsection in a manner that promotes systems-based care.
                `(6) CONSIDERATION OF SPECIAL CIRCUMSTANCES OF CERTAIN PROVIDERS- In applying the payment modifier under this subsection, the Secretary shall, as appropriate, take into account the special circumstances of physicians or groups of physicians in rural areas and other underserved communities.
                `(7) APPLICATION- For purposes of the initial application of the payment modifier established under this subsection during the period beginning on January 1, 2015, and ending on December 31, 2016, the term `physician' has the meaning given such term in section 1861(r). On or after January 1, 2017, the Secretary may apply this subsection to eligible professionals (as defined in subsection (k)(3)(B)) as the Secretary determines appropriate.
                `(8) DEFINITIONS- For purposes of this subsection:
                   `(A) COSTS- The term `costs' means expenditures per individual as determined appropriate by the Secretary. In making the determination under the preceding sentence, the Secretary may take into account the amount of growth in expenditures per individual for a physician compared to the amount of such growth for other physicians.
                   `(B) PERFORMANCE PERIOD- The term `performance period' means a period specified by the Secretary.
                `(9) COORDINATION WITH OTHER VALUE-BASED PURCHASING REFORMS- The Secretary shall coordinate the value-based payment modifier established under this subsection with the Physician Feedback Program under subsection (n) and, as the Secretary determines appropriate, other similar provisions of this title.
                `(10) LIMITATIONS ON REVIEW- There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of--
                   `(A) the establishment of the value-based payment modifier under this subsection;
                   `(B) the evaluation of quality of care under paragraph (2), including the establishment of appropriate measures of the quality of care under paragraph (2)(B);
                   `(C) the evaluation of costs under paragraph (3), including the establishment of appropriate measures of costs under such paragraph;
                   `(D) the dates for implementation of the value-based payment modifier;
                   `(E) the specification of the initial performance period and any other performance period under paragraphs (4)(B)(ii) and (8)(B), respectively;
                   `(F) the application of the value-based payment modifier under paragraph (7); and
                   `(G) the determination of costs under paragraph (8)(A).'.

### SEC. 3008. PAYMENT ADJUSTMENT FOR CONDITIONS ACQUIRED IN HOSPITALS.

    (a) In General- Section 1886 of the Social Security Act (42 U.S.C. 1395ww), as amended by section 3001, is amended by adding at the end the following new subsection:
             `(p) Adjustment to Hospital Payments for Hospital Acquired Conditions-
                `(1) IN GENERAL- In order to provide an incentive for applicable hospitals to reduce hospital acquired conditions under this title, with respect to discharges from an applicable hospital occurring during fiscal year 2015 or a subsequent fiscal year, the amount of payment under this section or section 1814(b)(3), as applicable, for such discharges during the fiscal year shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under this section or section 1814(b)(3) (determined after the application of subsections (o) and (q) and section 1814(l)(4) but without regard to this subsection).
                `(2) APPLICABLE HOSPITALS-
                   `(A) IN GENERAL- For purposes of this subsection, the term `applicable hospital' means a subsection (d) hospital that meets the criteria described in subparagraph (B).
                   `(B) CRITERIA DESCRIBED-
                      `(i) IN GENERAL- The criteria described in this subparagraph, with respect to a subsection (d) hospital, is that the subsection (d) hospital is in the top quartile of all subsection (d) hospitals, relative to the national average, of hospital acquired conditions during the applicable period, as determined by the Secretary.
                      `(ii) RISK ADJUSTMENT- In carrying out clause (i), the Secretary shall establish and apply an appropriate risk adjustment methodology.
                   `(C) EXEMPTION- In the case of a hospital that is paid under section 1814(b)(3), the Secretary may exempt such hospital from the application of this subsection if the State which is paid under such section submits an annual report to the Secretary describing how a similar program in the State for a participating hospital or hospitals achieves or surpasses the measured results in terms of patient health outcomes and cost savings established under this subsection.
                `(3) HOSPITAL ACQUIRED CONDITIONS- For purposes of this subsection, the term `hospital acquired condition' means a condition identified for purposes of subsection (d)(4)(D)(iv) and any other condition determined appropriate by the Secretary that an individual acquires during a stay in an applicable hospital, as determined by the Secretary.
                `(4) APPLICABLE PERIOD- In this subsection, the term `applicable period' means, with respect to a fiscal year, a period specified by the Secretary.
                `(5) REPORTING TO HOSPITALS- Prior to fiscal year 2015 and each subsequent fiscal year, the Secretary shall provide confidential reports to applicable hospitals with respect to hospital acquired conditions of the applicable hospital during the applicable period.
                `(6) REPORTING HOSPITAL SPECIFIC INFORMATION-
                   `(A) IN GENERAL- The Secretary shall make information available to the public regarding hospital acquired conditions of each applicable hospital.
                   `(B) OPPORTUNITY TO REVIEW AND SUBMIT CORRECTIONS- The Secretary shall ensure that an applicable hospital has the opportunity to review, and submit corrections for, the information to be made public with respect to the hospital under subparagraph (A) prior to such information being made public.
                   `(C) WEBSITE- Such information shall be posted on the Hospital Compare Internet website in an easily understandable format.
                `(7) LIMITATIONS ON REVIEW- There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of the following:
                   `(A) The criteria described in paragraph (2)(A).
                   `(B) The specification of hospital acquired conditions under paragraph (3).
                   `(C) The specification of the applicable period under paragraph (4).
                   `(D) The provision of reports to applicable hospitals under paragraph (5) and the information made available to the public under paragraph (6).'.
    (b) Study and Report on Expansion of Healthcare Acquired Conditions Policy to Other Providers-
       (1) STUDY- The Secretary of Health and Human Services shall conduct a study on expanding the healthcare acquired conditions policy under subsection (d)(4)(D) of section 1886 of the Social Security Act (42 U.S.C. 1395ww) to payments made to other facilities under the Medicare program under title XVIII of the Social Security Act, including such payments made to inpatient rehabilitation facilities, long-term care hospitals (as described in subsection(d)(1)(B)(iv) of such section), hospital outpatient departments, and other hospitals excluded from the inpatient prospective payment system under such section, skilled nursing facilities, ambulatory surgical centers, and health clinics. Such study shall include an analysis of how such policies could impact quality of patient care, patient safety, and spending under the Medicare program.
       (2) REPORT- Not later than January 1, 2012, the Secretary shall submit to Congress a report containing the results of the study conducted under paragraph (1), together with recommendations for such legislation and administrative action as the Secretary determines appropriate.