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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1776 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 1776

     To amend title XVIII of the Social Security Act to expand the 
  development of quality measures for inpatient hospital services, to 
implement a performance-based payment methodology for the provision of 
   such services under the Medicare Program, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             March 30, 2009

 Mr. Altmire introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL

 
     To amend title XVIII of the Social Security Act to expand the 
  development of quality measures for inpatient hospital services, to 
implement a performance-based payment methodology for the provision of 
   such services under the Medicare Program, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Quality FIRST (From Incentives, 
Reporting, Standards, and Technology) Act of 2009''.

SEC. 2. EXPANSION OF REPORTING AND DEVELOPMENT OF QUALITY MEASURES FOR 
              INPATIENT HOSPITAL SERVICES; IMPLEMENTATION OF 
              PERFORMANCE-BASED PAYMENT UNDER THE PROSPECTIVE PAYMENT 
              SYSTEM FOR SUCH SERVICES.

    (a) In General.--Title XVIII of the Social Security Act (42 U.S.C. 
1395 et seq.) is amended by inserting after section 1886 the following 
new section:

   ``performance-based payment system for inpatient hospital services

    ``Sec. 1886A.  (a) Expansion of Reporting and Development of 
Quality Measures.--
            ``(1) Requirement to report data on quality measures.--For 
        purposes of section 1886(b)(3)(B)(i) for fiscal year 2010 and 
        each subsequent fiscal year before fiscal year 2014, in the 
        case of a hospital that does not submit, to the Secretary in 
        accordance with this section, data required to be submitted on 
        specified quality measures (as defined in paragraph (4)(A)) 
        with respect to such fiscal year, the applicable percentage 
        increase under section 1886(b)(3)(B)(i) for such fiscal year 
        shall be reduced by 2.0 percentage points (or 1.5, 1.0, and 0.5 
        percentage points in the case of fiscal years 2011, 2012, and 
        2013, respectively).
            ``(2) Application of reduction only to fiscal year 
        involved.--Any reduction under paragraph (1) shall apply only 
        with respect to the fiscal year involved. The Secretary shall 
        not take into account such reduction in computing the 
        applicable percentage increase under section 1886(b)(3)(B)(i) 
        for a subsequent fiscal year.
            ``(3) Data submission.--Each hospital shall submit to the 
        Secretary the required data on specified quality measures under 
        this section in the form and manner provided under subsection 
        (h).
            ``(4) Definitions.--In this section:
                    ``(A) The term `specified quality measures' means 
                quality measures--
                            ``(i) specified under clause (vii)(II) of 
                        section 1886(b)(3)(B);
                            ``(ii) selected under clause (viii) of such 
                        section; and
                            ``(iii) selected under subsection (b).
                    ``(B) The term `hospital' means a subsection (d) 
                hospital (as defined in section 1886(d)(1)(B)).
    ``(b) Addition of New Quality Measures.--
            ``(1) In general.--In addition to the specified quality 
        measures described in clauses (i) and (ii) of subsection 
        (a)(4)(A), the Secretary shall select under this subsection 
        such quality measures as the Secretary determines to be 
        appropriate for the measurement of the quality of care 
        furnished by hospitals in inpatient settings.
            ``(2) Expansion and refinement of performance measures.--
        Effective for payments beginning with fiscal year 2009, in 
        selecting additional quality measures under paragraph (1), the 
        Secretary shall expand and revise the baseline set of 
        performance measures adopted under section 
        1886(b)(3)(B)(viii)(IV). Subject to the succeeding provisions 
        of this subsection, the Secretary shall add such additional 
        measures that reflect consensus among affected parties and, to 
        the extent feasible and practicable, shall include measures set 
        forth by one or more national consensus-building organizations 
        (as defined in paragraph (4)(B)).
            ``(3) Requirement for evidence-based measures.--
                    ``(A) In general.--With respect to fiscal year 2009 
                and each subsequent fiscal year, the Secretary may not 
                add any quality measure under this subsection unless 
                that quality measure--
                            ``(i) is evidence-based and statistically 
                        valid;
                            ``(ii) subject to paragraph (7)(C), is 
                        endorsed by the National Quality Forum or such 
                        other similar consensus-building organization 
                        as the Secretary may designate;
                            ``(iii) is recommended for use by the 
                        Hospital Quality Alliance; and
                            ``(iv) has been sufficiently field tested, 
                        as provided in subparagraph (C), to ensure the 
                        measure is accurate and efficacious and to 
                        determine the resources required of a hospital 
                        to collect and report data on the measure.
                    ``(B) Prohibition on use of quality measure for 
                public reporting or performance-based payment unless 
                endorsed and recommended.--A quality measure proposed 
                to be added under this subsection may not be made 
                available to the public under subsection (e) or 
                otherwise, or used in the performance-based payment 
                program under subsection (f), before the date on which 
                the measure has been endorsed as provided in 
                subparagraph (A)(ii) and recommended as provided in 
                subparagraph (A)(iii).
                    ``(C) Field testing.--The Secretary may not specify 
                a measure under this paragraph for use in the 
                determination of performance-based payments under this 
                section unless there has been a field test of the 
                measure for a period of not less than six months. For 
                purposes of the preceding sentence, the term `field 
                test' means, with respect to a measure, the voluntary 
                implementation of the measure by hospitals to test the 
                feasibility, usefulness, and costs associated with 
                implementing the measure, including--
                            ``(i) validating the accuracy, precision, 
                        sensitivity, specificity, predictive value, and 
                        efficacy of the measure;
                            ``(ii) determining whether the measure is 
                        useful for the internal quality improvement 
                        efforts of hospitals;
                            ``(iii) evaluating the training, staffing, 
                        and time required for data collection and 
                        submission;
                            ``(iv) assessing the unintended 
                        consequences, if any, associated with the use 
                        of the measure;
                            ``(v) assessing issues relating to data 
                        quality (such as accuracy and completeness of 
                        data), comparability across hospitals, and data 
                        sources; and
                            ``(vi) determining whether all data 
                        elements required on the measure are capable of 
                        being transmitted to the Secretary on a timely 
                        basis and evaluating the ability of automated 
                        data capture through health information 
                        technology systems.
            ``(4) Requirement for collaboration with consensus 
        organizations.--
                    ``(A) In general.--With respect to fiscal year 2010 
                and each subsequent fiscal year, the Secretary shall 
                collaborate with consensus-building organizations to 
                develop new quality measures in each of the following 
                areas of inpatient hospital services:
                            ``(i) Efficiency.
                            ``(ii) Clinical effectiveness.
                            ``(iii) Patient-centeredness.
                            ``(iv) Care coordination.
                            ``(v) Patient safety.
                            ``(vi) Performance in areas where the 
                        Secretary identifies a need for an appropriate 
                        quality measure.
                    ``(B) Consensus-building organization.--For 
                purposes of this subsection, the term `consensus-
                building organization' means an organization, such as 
                the National Quality Forum, that the Secretary 
                identifies as--
                            ``(i) having experience in using a 
                        transparent process for reaching a group 
                        consensus with respect to measures relating to 
                        performance of hospitals providing inpatient 
                        hospital services; and
                            ``(ii) including in such process 
                        representatives of the Secretary, hospitals, 
                        physicians' organizations, individuals entitled 
                        to benefits under part A, experts in health 
                        care quality, experts in measure development, 
                        organizations with experience in measure 
                        implementation, and individuals with experience 
                        in the delivery of health care in urban, rural, 
                        and frontier areas and to underserved 
                        populations and those who serve a 
                        disproportionate share of minority patients.
            ``(5) Alternative measures for patient outcomes and 
        experience.--
                    ``(A) In general.--In addition to the quality 
                measures for clinical process selected by the Secretary 
                under section 1886(b)(3)(B)(viii), the Secretary shall 
                consider alternative methodologies to measure quality 
                that reflect patient outcomes and patient experience of 
                care measures. Of the alternative methodologies 
                available for the consideration of the Secretary, 
                quality measures under this paragraph shall be based on 
                a set of criteria that include importance, feasibility, 
                scientific acceptability, improvability, usability, 
                controllability, potential for unintended consequences, 
                and contribution to comprehensiveness.
                    ``(B) Risk-adjustment.--With respect to quality 
                measures for outcomes of care, the Secretary shall 
                provide for an appropriate adjustment for such risk 
                factors as age, disability status, gender, 
                institutional status, and such other factors as the 
                Secretary determines to be appropriate to maintain 
                incentives for hospitals to treat patients with severe 
                illnesses or conditions.
            ``(6) Submission of data on proposed new quality 
        measures.--
                    ``(A) Preliminary data submission period.--With 
                respect to any proposed new quality measure identified 
                by the Secretary as a possible addition to specified 
                quality measures in effect, data that are required to 
                be submitted by hospitals for that new quality measure 
                shall be submitted for a preliminary period of such 
                length as the Secretary may specify.
                    ``(B) Confidentiality of information.--Any data 
                submitted under subparagraph (A) during the preliminary 
                data submission period shall be treated as a 
                confidential submission of information and may not be 
                made available to the public.
                    ``(C) Application to performance-based payments.--A 
                new quality measure may not be incorporated in the 
                performance-based payment program established under 
                subsection (f) unless--
                            ``(i) the preliminary data submission 
                        period under subparagraph (A) is completed;
                            ``(ii) the Secretary ensures that data have 
                        been made available to the public under 
                        subsection (e) for such period as the Secretary 
                        determines to be appropriate to provide 
                        adequate notice to the parties concerned; and
                            ``(iii) the requirements of paragraph (3) 
                        have been met.
            ``(7) Alignment of inpatient hospital quality measures with 
        quality measures of other providers and suppliers.--
                    ``(A) In general.--The Secretary shall ensure that 
                the specified quality measures applicable to hospitals 
                are coordinated with quality measures applicable to 
                physicians under section 1848(k) and with quality 
                measures applicable to other providers of services and 
                suppliers under this title.
                    ``(B) Use of quality measurement development 
                organizations.--If the Secretary determines that there 
                is evidence that a complementary quality measure in a 
                particular circumstance would improve the quality of 
                patient care, the Secretary shall enter into 
                arrangements with quality measurement development 
                organizations for the development of complementary 
                quality measures for hospitals, physicians, and other 
                providers of services and suppliers.
                    ``(C) Condition for selection.--For purposes of 
                paragraph (3), the Secretary may not accept the 
                endorsement of a quality measure by the National 
                Quality Forum or such other similar organization 
                designated by the Secretary under paragraph (3)(A)(ii) 
                unless the National Quality Forum or other organization 
                has ensured the alignment of the quality measure for 
                inpatient hospital services with one or more related 
                quality measures for physicians' services (if any).
    ``(c) Discontinued Use of Measures.--
            ``(1) Authority to discontinue use of measure.--The 
        Secretary may terminate the use of a specified quality measure 
        under this section if the Secretary determines that the 
        continued use of the measure is inappropriate or unnecessary by 
        reason of one or more of the following rationale:
                    ``(A) A change in science, technology, or practice 
                patterns.
                    ``(B) Subject to paragraph (2), a determination by 
                the Secretary that hospitals have achieved uniformly 
                high performance with respect to that measure (commonly 
                referred to as a `topped out measure').
                    ``(C) A determination by the Secretary that the 
                measure has been subsequently shown not to represent 
                the best clinical practice.
                    ``(D) Such other considerations as the Secretary 
                determines to be appropriate.
            ``(2) Provisions relating to topped out measures.--
                    ``(A) Continued reporting.--In the case of a 
                specified quality measure referred to in paragraph 
                (1)(B), the Secretary shall require the submission of 
                data from hospitals on such a measure notwithstanding 
                that such measures shall not be used for purposes of 
                the performance-based payment program under subsection 
                (f).
                    ``(B) Review of hospital performance.--In the case 
                of a specified quality measure referred to in paragraph 
                (1)(B), the Secretary shall monitor performance of 
                hospitals on such measure to ensure that hospitals 
                maintain high levels of performance.
                    ``(C) Authority to reinstate.--
                            ``(i) In general.--Subject to clause (ii), 
                        for purposes of the performance-based payment 
                        program under subsection (f), the Secretary may 
                        reinstate the use of a specified quality 
                        measure referred to in paragraph (1)(B) that 
                        has been terminated under paragraph (1) if the 
                        Secretary determines that a significant 
                        percentage of hospitals fails to meet the 
                        performance threshold for that quality measure.
                            ``(ii) Notice.--The authority under clause 
                        (i) shall not apply before the conclusion of a 
                        period, of not less than one year, of notice to 
                        the public indicating the intent of the 
                        Secretary to reinstate such specified quality 
                        measure.
            ``(3) Regular review of measures.--The Secretary shall 
        periodically reassess specified quality measures to determine 
        whether the continued use of such measures is appropriate and 
        necessary for purposes of public reporting under subsection (e) 
        and performance-based payment under subsection (f).
    ``(d) Development of Composite Measures.--
            ``(1) In general.--The Secretary shall combine individual 
        specified quality measures into composite measures that assess 
        the overall quality of care for a clinical condition or in a 
        performance area.
            ``(2) Considerations.--In carrying out paragraph (1), the 
        Secretary shall--
                    ``(A) evaluate the adequacy of individual specified 
                quality measures in each significant clinical condition 
                or performance area, including the validity of such 
                measures for the creation of a composite measure; and
                    ``(B) determine the best methodology to report 
                composite quality measures for those areas of clinical 
                practice with a limited number of specified quality 
                measures, including how to incorporate such composite 
                measures in the performance-based payment program under 
                subsection (f).
    ``(e) Public Reporting.--
            ``(1) Continuation of public reporting requirements.--
        Procedures established under subclause (VII) of section 
        1886(b)(3)(B)(viii) for making data submitted by a hospital 
        under subclause (I) of such section available to the public 
        shall, as modified by the succeeding provisions of this 
        subsection, apply to data required to be submitted under this 
        section on all specified quality measures.
            ``(2) General reporting requirements.--The Secretary shall 
        report quality measures of process, structure, outcome, patient 
        perspectives on care, efficiency, and costs of care that relate 
        to services furnished in inpatient hospital settings on the 
        Hospital Compare Internet website maintained by the Department 
        of Health and Human Services.
            ``(3) Prompt dissemination of information on quality.--The 
        Secretary shall review ways in which information on the quality 
        of inpatient hospital services can be used more effectively by 
        hospitals to increase the quality of patient care and to 
        improve performance in the delivery of inpatient hospital 
        services. The Secretary shall provide for the dissemination of 
        appropriate and timely quality information to such hospitals in 
        a manner that most effectively contributes to continuous 
        quality improvement by the hospitals.
            ``(4) Dissemination on quality information to patients.--
                    ``(A) In general.--The Secretary shall make 
                available to the public information on the quality of 
                inpatient hospital services provided by hospitals to 
                patients in a manner that facilitates informed and 
                balanced decisionmaking by patients and physicians.
                    ``(B) Requirements for comparative information.--
                Insofar as the Secretary makes information on the 
                quality of inpatient hospital services provided by 
                hospitals to patients available for purposes of 
                comparison among hospitals, the Secretary shall only 
                present such information by specific clinical condition 
                or performance area and may not aggregate results 
                across clinical conditions or performance areas or 
                otherwise make available information indicating an 
                overall ranking of hospitals.
            ``(5) Website improvements.--
                    ``(A) Tailored standard reports.--The Secretary 
                shall develop a series of standard Internet website 
                reports tailored to respond to the differing needs of 
                hospitals, patients, researchers, policymakers, and 
                such other stakeholders as the Secretary may identify. 
                The Secretary shall seek input from such stakeholders 
                through such means as the Secretary determines to be 
                most effective, including meetings and surveys, to 
                determine the type of information that is useful to the 
                various stakeholders and the format that best 
                facilitates use of the reports and of the Hospital 
                Compare Internet website maintained by the Department 
                of Health and Human Services.
                    ``(B) Information and format.--The Secretary shall 
                modify the Hospital Compare Internet website maintained 
                by the Department of Health and Human Services to make 
                the use and navigation of that website readily 
                available to individuals accessing it. The Secretary 
                shall develop a flexible format to meet the differing 
                needs of the various stakeholders and shall modify the 
                website to permit a user to easily customize queries.
    ``(f) Performance-Based Payment Program.--
            ``(1) Establishment.--The Secretary shall establish a 
        program under which performance-based payments are made each 
        fiscal year to hospitals that provide high quality inpatient 
        hospital services to individuals who are entitled to benefits 
        under part A and who are inpatients of the hospital. The 
        Secretary shall implement the program under this subsection so 
        that performance-based payments are made to such hospitals in 
        fiscal year 2011 and each subsequent fiscal year.
            ``(2) Adjustment in payment based on quality performance.--
                    ``(A) Payment based on performance.--
                            ``(i) Increase in amount of payment for 
                        operating costs of inpatient hospital 
                        services.--Subject to subparagraph (B), from 
                        payment amounts reduced by the Secretary for 
                        operational costs of inpatient hospital 
                        services of a hospital for specified diagnosis-
                        related groups under section 1886(d)(1)(F)(i) 
                        with respect to a fiscal year, the Secretary 
                        shall make a performance-based payment to that 
                        hospital for such costs for that fiscal year in 
                        the amount determined under clause (ii) and in 
                        the manner specified in section 
                        1886(d)(1)(F)(iv).
                            ``(ii) Methodology to determine the amount 
                        of payment.--The Secretary shall determine the 
                        amount of the performance-based payment based 
                        on the hospital's performance on each specified 
                        clinical condition or performance area during 
                        the preceding year to individuals who are 
                        entitled to benefits under part A and are 
                        inpatients of the hospital using the payment 
                        and scoring methodologies contained in the 
                        Report to Congress submitted by the Centers for 
                        Medicare & Medicaid Services on November 21, 
                        2007, as modified by the succeeding provisions 
                        of this subsection.
                    ``(B) Requirement to submit data.--In order for a 
                hospital to be eligible for a performance-based payment 
                with respect to a fiscal year, the hospital must have 
                complied with the requirements under subsection (a)(1) 
                to submit data for specified quality measures.
                    ``(C) Measured clinical conditions for performance-
                based payments in fiscal year 2011.--
                            ``(i) Conditions measured.--With respect to 
                        performance-based payments made to a hospital 
                        under this paragraph in fiscal year 2011, the 
                        Secretary shall measure quality performance 
                        only for the following four specific conditions 
                        or clinical performance areas: acute myocardial 
                        infarction (AMI), heart failure, pneumonia, and 
                        Surgical Care Improvement Project (formerly 
                        referred to as `Surgical Infection Prevention' 
                        for discharges occurring before July 2006).
                            ``(ii) Measures cited in november 2007 cms 
                        report to congress.--In measuring quality 
                        performance for the conditions specified under 
                        clause (i), the Secretary shall use the 
                        specified quality measures identified as 
                        initial performance measures in the report 
                        referred to in subparagraph (A)(ii).
                            ``(iii) HCAHPS measures excluded from 
                        initial performance-based payments.--
                                    ``(I) In general.--In measuring 
                                quality performance under clause (i), 
                                except as provided in subclause (II), 
                                the Secretary may not include specified 
                                quality measures with respect to the 
                                Hospital Consumer Assessment of 
                                Healthcare Providers and Systems Survey 
                                (HCAHPS).
                                    ``(II) Use in subsequent years.--
                                Subject to subparagraph (D)(ii), the 
                                Secretary shall collect data on 
                                measures relating to assessment of care 
                                by consumers and make refinements to 
                                such measures for use in measuring 
                                performance for fiscal years after 
                                fiscal year 2011 for performance-based 
                                payments under this paragraph.
                            ``(iv) 30-day mortality measures excluded 
                        from initial performance-based payments.--
                                    ``(I) In general.--In measuring 
                                quality performance under clause (i), 
                                except as provided in subclause (II), 
                                the Secretary may not include specified 
                                quality measures with respect to 
                                mortality.
                                    ``(II) Use in subsequent years.--
                                Subject to subparagraph (D)(ii), the 
                                Secretary may include specified quality 
                                measures with respect to 30-day 
                                mortality rates for use in measuring 
                                performance for fiscal years after 
                                fiscal year 2011 for performance-based 
                                payments under this paragraph insofar 
                                as the Secretary establishes a 
                                mechanism for hospitals to receive 
                                timely information from the Secretary 
                                to enable hospitals to evaluate 
                                performance on such measures.
                    ``(D) Measured clinical conditions and performance 
                areas for fiscal years after fiscal year 2011.--
                            ``(i) In general.--Subject to clause (ii), 
                        with respect to performance-based payments made 
                        to a hospital under this paragraph during a 
                        fiscal year after fiscal year 2011, the 
                        Secretary may expand the specified quality 
                        measures used in measuring performance under 
                        subparagraph (C) for performance-based payments 
                        under this paragraph for fiscal year 2011.
                            ``(ii) Requirement for notice and comment 
                        rulemaking.--The Secretary may only exercise 
                        the authority under clause (i) by regulation, 
                        after notice of the proposed regulation in the 
                        Federal Register and a period of not less than 
                        60 days for public comment thereon.
                    ``(E) Advance publication of full-incentive 
                benchmarks.--The Secretary shall provide for the 
                publication of full-incentive quality benchmarks 
                (determined under paragraph (4)(C)) sufficiently in 
                advance of a fiscal year so that hospitals may make 
                such changes as are required to meet full-incentive 
                quality benchmarks applicable during the fiscal year 
                involved, and in no case shall the publication of the 
                full-incentive quality benchmark be later than two 
                years before the start of the fiscal year involved.
            ``(3) Determination of hospital performance.--
                    ``(A) Methodology for scores.--The Secretary shall 
                evaluate the performance of each hospital for the 
                purpose of determining performance-based payments under 
                paragraph (2). Subject to subparagraph (B), the 
                Secretary shall determine a set of performance scores 
                for each such hospital based on the performance scoring 
                methodology described in the report referred to in 
                paragraph (2)(A)(ii).
                    ``(B) Calculation of separate scores by clinical 
                condition or performance area.--The Secretary shall 
                calculate composite performance scores separately for 
                each specified clinical condition or performance area. 
                The Secretary may not calculate a single overall 
                performance score for each hospital.
                    ``(C) Consideration of results and improvement.--In 
                calculating performance scores for each specified 
                quality measure for each specified clinical condition 
                or performance area, the Secretary shall determine a 
                score for both the performance level attained by the 
                hospital and the degree of improvement of the 
                performance of the hospital. The final score for each 
                such measure shall be equal to the greater of such 
                attainment or such degree of improvement on the 
                measure.
                    ``(D) Equal weight for individual measures.--In 
                calculating a composite performance score for each 
                specified clinical condition or performance area, the 
                Secretary shall weight equally the individual specified 
                quality measures involved in assessing performance for 
                such clinical condition or area.
                    ``(E) Requirement for notice and comment 
                rulemaking.--The Secretary shall describe in detail the 
                methodology to be used to calculate performance scores 
                under this subparagraph by regulation, after notice of 
                the proposed regulation in the Federal Register and a 
                period of not less than 60 days for public comment 
                thereon.
            ``(4) Calculation of performance-based payment amount.--
                    ``(A) Methodology.--
                            ``(i) Report proposal.--Subject to the 
                        succeeding provisions of this subsection, the 
                        Secretary shall calculate the amount of 
                        performance-based payment under paragraph (2) 
                        for a hospital by converting performance scores 
                        of a hospital to a payment amount for that 
                        hospital using the methodology contained in the 
                        report referred to in paragraph (2)(A)(ii).
                            ``(ii) Requirement for notice and comment 
                        rulemaking.--The Secretary shall describe in 
                        detail the methodology to be used to calculate 
                        the amount of performance-based payment under 
                        paragraph (2) by regulation, after notice of 
                        the proposed regulation in the Federal Register 
                        and a period of not less than 60 days for 
                        public comment thereon.
                    ``(B) Minimum threshold.--
                            ``(i) In general.--The Secretary shall 
                        establish a performance threshold for a fiscal 
                        year of zero for all specified clinical 
                        conditions or performance areas.
                            ``(ii) Performance threshold.--No amount of 
                        performance-based payment under paragraph (2) 
                        for a fiscal year may be made to a hospital 
                        unless the performance score of that hospital 
                        with respect a specified clinical condition or 
                        performance area during the preceding fiscal 
                        year exceeds the performance threshold 
                        established under clause (i).
                    ``(C) Full-incentive quality benchmark.--
                            ``(i) In general.--The Secretary shall 
                        determine for each fiscal year a performance 
                        level for each clinical condition or 
                        performance area under a quality benchmark 
                        which, if met by a hospital, would qualify the 
                        hospital to receive 100 percent of the 
                        performance-based payment amount available 
                        under paragraph (2) for the associated 
                        diagnosis-related groups.
                            ``(ii) Determination of levels.--
                                    ``(I) Initial level.--The 
                                performance level referred to in clause 
                                (i) shall be initially set at a level 
                                that the Secretary determines that all 
                                hospitals can reasonably achieve.
                                    ``(II) Modification of levels.--The 
                                Secretary may revise the performance 
                                level set under subclause (I) to a 
                                higher level from time to time as 
                                hospital performance improves.
                            ``(iii) Considerations in setting levels.--
                        In determining such performance level, the 
                        Secretary shall take into account practical 
                        experience with specified quality measures 
                        involved, historical performance levels, 
                        improvement rates, the opportunity for 
                        continued improvement, and the results of the 
                        review of benchmarks conducted under paragraph 
                        (5).
            ``(5) Review and modification of benchmarks.--
                    ``(A) In general.--The Secretary shall reevaluate a 
                quality benchmark established under this subsection if 
                the Secretary determines with respect to a fiscal year 
                that a significant proportion of hospitals failed to 
                meet the benchmark. The Secretary shall determine 
                whether extenuating circumstances, such as measure 
                definition changes, prevented hospitals from meeting 
                the benchmark.
                    ``(B) Modification for performance-based 
                payments.--The Secretary may make modifications to a 
                benchmark described in subparagraph (A), as applied to 
                measure hospital performance in a fiscal year, and 
                reassess such hospital performance in that fiscal year 
                using such modified benchmark for purposes of 
                calculating the amount of performance-based payment 
                under paragraph (2).
            ``(6) Budget neutrality for payments.--
                    ``(A) Requirement for budget neutrality.--The 
                aggregate amount of performance-based payments made to 
                hospitals under paragraphs (2) and (7) for a fiscal 
                year shall be equal to the aggregate amount of 
                reductions under section 1886(d)(1)(F)(i) for that 
                fiscal year.
                    ``(B) Method and timing.--Performance-based 
                payments to hospitals under this subsection shall be 
                made from the Federal Hospital Insurance Trust Fund 
                under section 1817. Performance-based payments shall be 
                made to a hospital under this subsection with respect 
                to a fiscal year based on quality performance for the 
                12-month period ending June 30th of the prior fiscal 
                year.
            ``(7) Performance-based bonus payment for highest 
        performing hospitals.--
                    ``(A) In general.--The Secretary shall establish a 
                program to reward those hospitals with high performance 
                scores, as determined by the Secretary, in a fiscal 
                year through the making of performance-based bonus 
                payments.
                    ``(B) Additional payment.--Performance-based bonus 
                payments made under the program established in 
                subparagraph (A) in a fiscal year shall be in addition 
                to performance-based payments made under paragraph (2) 
                in that fiscal year.
                    ``(C) Determination of payment amount.--
                Performance-based bonus payments under the program 
                established in subparagraph (A) shall be made in such 
                amount as the Secretary determines to be appropriate.
                    ``(D) Required aggregate amount of payments.--The 
                Secretary shall make aggregate payments in a fiscal 
                year under the performance-based bonus payment program 
                established in subparagraph (A) in an amount equal to 
                the difference between the aggregate amount of 
                reductions under section 1886(d)(1)(F)(i) for the 
                fiscal year involved and the aggregate amount of 
                performance-based payments made under paragraph (2) for 
                such fiscal year.
            ``(8) Additional performance-based incentive payments.--
                    ``(A) Independent actuarial estimate of savings.--
                With respect to each fiscal year beginning after fiscal 
                year 2009, the Secretary shall enter into arrangements 
                for the analysis by a qualified independent entity or 
                organization of the actuarial value of cost savings 
                under part A attributable to the improvement in the 
                delivery of inpatient hospital services by hospitals by 
                reason of this section.
                    ``(B) Performance-based incentive payment fund.--
                            ``(i) In general.--Amounts identified as 
                        savings under subparagraph (A) for a fiscal 
                        year shall be available to the Secretary to 
                        make performance-based payments in addition to 
                        those available under paragraphs (2) and (7) as 
                        incentives to hospitals to continue to improve 
                        the quality of inpatient hospital services 
                        provided to patients.
                            ``(ii) Incentive payments.--Additional 
                        payments under clause (i) shall be made in such 
                        form, manner, and periodicity as the Secretary 
                        may specify.
            ``(9) Alternative performance measure.--
                    ``(A) In general.--The Secretary shall evaluate the 
                appropriateness of applying an alternative method for 
                the measurement of the quality of care provided by 
                hospitals to individuals who are entitled to benefits 
                under part A and who are inpatients of the hospitals.
                    ``(B) Methodology.--The alternative method under 
                subparagraph (A) shall measure the extent to which such 
                individuals are reliably being provided evidence-based 
                care by hospitals, expressed as the percentage of 
                occasions on which a hospital provides the individual 
                with all of the appropriate actions identified under 
                quality measures during a fiscal year.
                    ``(C) Public availability.--The Secretary shall 
                measure the performance of hospitals using the 
                alternative method under subparagraph (A), and shall 
                make the results of such performance measurement 
                available to the public.
                    ``(D) Use for evaluation of future measures.--The 
                Secretary shall evaluate the appropriateness of using 
                the alternative measure under subparagraph (A) for the 
                purpose of making performance-based payments under this 
                subsection.
    ``(g) Financing.--
            ``(1) Reduction in drg payment amount.--The Secretary shall 
        make performance-based payments under paragraphs (2) and (7) of 
        subsection (f) from amounts credited to the Federal Hospital 
        Insurance Trust Fund under section 1817 in the fiscal year by 
        reason of the application of the reduction under section 
        1886(d)(1)(F)(i).
            ``(2) No effect on adjustments for outlier, ime, dsh, or 
        capital-related costs.--The adjustments under paragraphs 
        (5)(A), (5)(B), and (5)(F) of section 1886(d), and payments for 
        capital-related costs under section 1886(g), shall be computed 
        without regard to the adjustments made by reason of section 
        1886(d)(1)(F).
    ``(h) Provisions Relating to Data Submission.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, each hospital shall submit data on measures 
        selected under this section to the Secretary in a form and 
        manner, and at a time, specified by the Secretary for purposes 
        of subsection (a).
            ``(2) Data submission and resubmission.--
                    ``(A) Period for submission and validation.--The 
                Secretary shall provide a 135-day period after the 
                close of a calendar quarter for hospitals to submit 
                data required under subsection (a) for such quarter.
                    ``(B) Resubmission period.--
                            ``(i) In general.--Subject to clause (ii), 
                        insofar as an additional period of time is 
                        required after the end of the 135-day period 
                        referred to in subparagraph (A) to correct 
                        errors with respect to the data submitted by 
                        hospitals, the Secretary shall provide for an 
                        additional 30-day period, beginning on the day 
                        after the date of the end of such 135-day 
                        period, for the correction of such errors and 
                        resubmission of the revised data.
                            ``(ii) Exception.--The Secretary may not 
                        provide for an additional 30-day period under 
                        clause (i) if the data submitted by the 
                        hospital have been used to determine an amount 
                        performance-based payments under subsection (f) 
                        for that hospital.
                    ``(C) Report on shorter timeframe.--The Secretary 
                shall submit to Congress a report on the feasibility 
                and advisability of reducing the length of the 135-day 
                period under subparagraph (A) to 60 days for the 
                submission and validation of data.
            ``(3) Validation of data.--
                    ``(A) Implementation of process.--The Secretary 
                shall implement a process for the validation of data 
                submitted by hospitals under subsection (a). Such 
                process shall provide for the selection of hospitals 
                with respect to data submitted by such hospitals on 
                both a random basis and on the basis of specific 
                criteria, and shall include standards for the 
                validation of data at the level of specified quality 
                measures.
                    ``(B) Validation for new quality measures.--With 
                respect to proposed new quality measures, the Secretary 
                shall not establish standards for the validation of 
                data for the period of time that the Secretary 
                determines hospitals require to gain experience with 
                the new quality measures to properly report data with 
                respect to such measure. The Secretary may use 
                processes such as re-abstraction and validation as a 
                learning tool for hospitals instead of establishing 
                such standards.
            ``(4) Opportunity to review data.--The Secretary shall 
        provide a hospital the opportunity to review data reported by 
        the hospital before such data is made available to the public 
        under subsection (e) or used for purposes of the performance-
        based payment program under subsection (f).
    ``(i) Rule of Construction With Respect to Appeal Rights.--Nothing 
in this section shall be construed as effecting the right of a 
subsection (d) hospital to seek reconsideration or judicial review 
under section 1869, 1878, or otherwise of a determination of the 
Secretary with respect to the provisions of this section, including the 
application of the performance-based payment program.
    ``(j) Reports to Congress.--
            ``(1) Quality assessments.--The Secretary shall conduct 
        assessments of the quality measurement and performance-based 
        payment program under this section, which shall be used in 
        developing the reports under paragraph (2).
            ``(2) Reports based on assessments.--The Secretary shall 
        submit to Congress by not later than March 31, 2012, and every 
        18 months thereafter, a report that--
                    ``(A) identifies the accomplishments of the program 
                under this section;
                    ``(B) identifies any unintended consequences of 
                such program for hospitals and patients;
                    ``(C) provides recommendations for legislative and 
                other modifications to the program;
                    ``(D) includes evidence indicating changes in 
                access to, quality of, and efficiency and outcomes in 
                care related to the program;
                    ``(E) assesses the program's impact on disparities 
                in care by race and ethnicity; and
                    ``(F) identifies the impact of the program on 
                hospitals of differing size and patient acuity levels, 
                including safety net hospitals and hospitals with a 
                substantial medical education commitment.
            ``(3) GAO evaluation.--Not later than September 30, 2012, 
        the Comptroller General shall conduct an independent evaluation 
        of the impact of the program under this section on hospitals 
        and patients. Such evaluation shall include the items described 
        in paragraph (2) as well as barriers to the program achieving 
        its full potential.''.
    (b) Conforming Amendments to Quality Reporting and Payment Under 
Inpatient Hospital Prospective Payment System.--
            (1) Reporting of quality data.--Section 1886(b)(3)(B) of 
        the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)) is 
        amended--
                    (A) in clause (i), by inserting ``and subject to 
                section 1886A(a)(1),'' after ``during a fiscal year,''; 
                and
                    (B) in clause (viii)(I), by striking ``fiscal year 
                2007 and each subsequent fiscal year'' and inserting 
                ``fiscal years 2007, 2008, and 2009''.
            (2) Adjustment to payments for operating costs of inpatient 
        hospital services.--Section 1886(d)(1) of such Act (42 U.S.C. 
        1395ww(d)(1)) is amended by adding at the end the following new 
        subparagraph:
                    ``(F) Adjustment for performance-based payment 
                program.--
                            ``(i) Targeted reductions.--
                                    ``(I) In general.--Subject to 
                                subclause (II), in the case of a 
                                subsection (d) hospital that complies 
                                with the data submission requirements 
                                under section 1886A(a)(1) for a fiscal 
                                year, beginning with fiscal year 2011, 
                                the Secretary shall reduce the amount 
                                of the payment with respect to the 
                                operating costs of inpatient hospital 
                                services determined under subparagraph 
                                (A) for specified diagnosis-related 
                                groups (as defined in clause (ii)) for 
                                that fiscal year by the performance-
                                based payment offset percent (as 
                                defined in clause (iii)).
                                    ``(II) Exception.--There shall be 
                                no reduction under subclause (I) by 
                                reason of clause (ii)(II) before fiscal 
                                year 2012.
                            ``(ii) Specified diagnosis-related groups 
                        defined.--
                                    ``(I) Diagnosis-related groups 
                                evaluated under composite performance 
                                measures.--For purposes of clause (i) 
                                and subject to subclause (II), the term 
                                `specified diagnosis-related groups' 
                                means only those diagnosis-related 
                                groups that are evaluated through 
                                specified quality measures (as defined 
                                in section 1886A(a)(4)(A))--
                                            ``(aa) that are used for a 
                                        fiscal year to measure the 
                                        performance of a subsection (d) 
                                        hospital under section 1886A(f) 
                                        for purposes of performance-
                                        based payments to that hospital 
                                        under paragraph (2) or (7) of 
                                        such section;
                                            ``(bb) that have been 
                                        recommended by the Hospital 
                                        Quality Alliance; and
                                            ``(cc) data from which are 
                                        made publicly available through 
                                        the use of the Hospital Compare 
                                        Internet website maintained by 
                                        the Department of Health and 
                                        Human Services (or such similar 
                                        website of the Department) as 
                                        meets the requirements of 
                                        section 1886A(e).
                                    ``(II) Across the board application 
                                for hcahps.--With respect only to 
                                specified quality measures relating to 
                                the Hospital Consumer Assessment of 
                                Healthcare Providers and Systems Survey 
                                (HCAHPS) and for which a diagnosis-
                                related group is eligible to report, 
                                such term includes a group. Nothing in 
                                this subclause shall be construed as 
                                applying a reduction under this 
                                subparagraph to hospitals that are not 
                                subsection (d) hospitals.
                            ``(iii) Performance-based payment offset 
                        percent.--
                                    ``(I) In general.--For purposes of 
                                clause (i) and subject to subclauses 
                                (II) and (III), the term `performance-
                                based payment offset percent' means the 
                                percent determined by the Secretary for 
                                a fiscal year that results in aggregate 
                                reductions in payments under clause (i) 
                                in that fiscal year in an amount equal 
                                to the aggregate amount of performance-
                                based payments that the Secretary 
                                elects to make under section 
                                1886A(f)(2) for that fiscal year.
                                    ``(II) Individual maximum 
                                offsets.--Subject to subclause (III), 
                                in no case may the percent determined 
                                under subclause (I) for a fiscal year 
                                exceed--
                                            ``(aa) with respect to 
                                        specified quality measures 
                                        described in clause (ii)(I), 
                                        2.0 percent; and
                                            ``(bb) with respect to 
                                        specified quality measures 
                                        described in clause (ii)(II), 
                                        0.25 percent.
                                    ``(III) Aggregate maximum offset.--
                                In no case may the percent determined 
                                under subclause (I) for a fiscal year 
                                exceed--
                                            ``(aa) 0.50 percent for 
                                        fiscal year 2011;
                                            ``(bb) 1.0 percent for 
                                        fiscal year 2012;
                                            ``(cc) 1.5 percent for 
                                        fiscal year 2013; and
                                            ``(dd) 2.0 percent for 
                                        fiscal year 2014 and succeeding 
                                        years.
                            ``(iv) Increase in pps payment amount for 
                        performance-based payment.--In the case of a 
                        subsection (d) hospital that received a 
                        performance-based payment under paragraph (2) 
                        or (7), or both, of section 1886A(f) for a 
                        fiscal year for a specified diagnosis-related 
                        group, the amount of the payment with respect 
                        to the operating costs of inpatient hospital 
                        services determined under subparagraph (A) for 
                        such specified diagnosis-related group shall be 
                        increased by the amount of such performance-
                        based payment or payments for that fiscal 
                        year.''.

SEC. 3. CONSULTATION FOR APPROPRIATE APPLICATION OF PERFORMANCE-BASED 
              PAYMENTS TO SMALL HOSPITALS.

    (a) Consultation.--The Secretary of Health and Human Services shall 
consult with representatives of small hospitals, including critical 
access hospitals under section 1820 of the Social Security Act (42 
U.S.C. 1395i-4), to determine appropriate and effective methods for 
such hospitals to participate in programs for performance-based 
payments for inpatient hospital services (or inpatient critical access 
hospital services) furnished to individuals who are entitled to 
benefits under part A of title XVIII of the Social Security Act (42 
U.S.C. 1395c et seq.) and who are inpatients of the hospitals.
    (b) Consideration.--The Secretary shall consider innovative methods 
of measuring and rewarding quality inpatient hospital services 
furnished by small hospitals, including critical access hospitals, 
which may be difficult to quantify due to the low volume of services 
provided by such hospitals for which quality measures have been 
developed.
    (c) Report to Congress.--Not later than two years after the date of 
enactment of this Act, the Secretary shall submit to Congress a report 
on the consultation required under this section. The report shall 
include recommendations of the Secretary with respect to the 
appropriate application of performance-based payment and payment 
incentive programs to small hospitals, including critical access 
hospitals, for the provision of quality inpatient hospital services.

SEC. 4. PRIORITY OF ASSISTANCE FROM QUALITY IMPROVEMENT ORGANIZATIONS 
              AND OTHER QUALITY ORGANIZATIONS FOR HOSPITALS WITH 
              RESULTS BELOW PERFORMANCE-BASED PAYMENT BENCHMARKS.

    (a) Priority of Assistance to Low-Performing Hospitals.--Section 
1154(a) of the Social Security Act (42 U.S.C. 1320c-3(a)) is amended by 
adding at the end the following new paragraph:
            ``(18)(A) The organization shall give priority in the 
        provision of quality improvement assistance to subsection (d) 
        hospitals that fail to meet quality benchmarks established 
        under section 1886A(f).
            ``(B) In this paragraph, the term `quality improvement 
        assistance' includes the following:
                    ``(i) Education on quality improvement initiatives, 
                strategies, and techniques.
                    ``(ii) Instruction on how to collect, submit, 
                aggregate, and interpret data on measures used for 
                quality improvement, public reporting, and payment 
                under section 1886A.
                    ``(iii) Technical assistance to support quality 
                improvement.
                    ``(iv) Technical assistance and instruction in the 
                conduct of root-cause analyses.
                    ``(v) Facilitating adoption of procedures that 
                encourage timely candid feedback from patients and 
                their families concerning perceived problems.
                    ``(vi) Guidance on redesigning clinical processes, 
                including the adoption and effective use of health 
                information technology, to improve the coordination, 
                effectiveness, and safety of care.''.
    (b) Evaluation of Quality Improvement Organizations.--Section 
1153(c)(2) of such Act (42 U.S.C. 1320c-2(c)(2)) is amended by 
inserting before the semicolon at the end the following: ``, including 
the effectiveness of the organization in improving the ability of a 
hospital referred to in section 1154(a)(18)(A) to meet quality 
benchmarks established under section 1886A(f)''.
    (c) Assistance From Alternative Quality Organizations.--Section 
1886A of the Social Security Act, as inserted by section 2(a), is 
amended--
            (1) by redesignating subsection (j) as subsection (k); and
            (2) by inserting after subsection (i) the following new 
        subsection (j):
    ``(j) Assistance From Alternative Quality Organizations.--
            ``(1) Private quality organizations.--The Secretary shall 
        establish a program under which a hospital seeking to improve 
        the quality of the provision of inpatient hospital services 
        based on the results of a performance evaluation under this 
        section may apply to the Secretary to receive quality 
        improvement assistance from a private quality organization with 
        expertise in supporting improvement in the quality of the 
        provision of inpatient hospital services.
            ``(2) Accreditation.--Before entering into arrangements 
        with a private quality organization for the provision of 
        assistance under paragraph (1), the Secretary shall ensure that 
        the organization has been accredited or certified by a 
        recognized accreditation or certification agency or body.
            ``(3) Payment.--The rate of payment for quality assistance 
        services provided by a private quality organization under 
        paragraph (1) shall be negotiated by the Secretary. Payment 
        shall be made by the Secretary from funds made available under 
        part B of title XI title for the payment of organizations with 
        contracts with the Secretary under such part.''.
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