II 

111TH CONGRESS 

1ST SESSION S. 1249 

To amend title XVIII of the Social Security Act to create a value indexing 

mechanism for the physician work component of the Medicare physician 

fee schedule. 

IN THE SENATE OF THE UNITED STATES 

JUNE 11, 2009 

Ms. KLOBUCHAR (for herself, Ms. CANTWELL, and Mr. GREGG) introduced the 

following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend title XVIII of the Social Security Act to create 

a value indexing mechanism for the physician work component of the Medicare physician fee schedule. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Medicare Payment Im5 provement Act of 2009’’. 


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1 SEC. 2. VALUE INDEX UNDER THE MEDICARE PHYSICIAN 

2 FEE SCHEDULE. 

3 (a) IN GENERAL.—Section 1848(e)(5) of the Social 

4 Security Act (42 U.S.C. 1395w–4(e)) is amended by add5 ing at the end the following new paragraph: 

6 ‘‘(6) VALUE INDEX.— 

7 ‘‘(A) IN GENERAL.—The Secretary shall 

8 determine a value index for each hospital refer9 ral area (as defined by the Secretary). The 

10 value index shall be the ratio of the quality 

11 component under subparagraph (B) to the cost 

12 component under subparagraph (C) for that 

13 hospital referral area. 

14 ‘‘(B) QUALITY COMPONENT.— 

15 ‘‘(i) IN GENERAL.—The quality com16 ponent shall be based on a composite score 

17 that reflects quality measures available on 

18 a State or hospital referral area (as so de19 fined) basis. The measures shall reflect 

20 health outcomes and health status for the 

21 Medicare population, patient safety, and 

22 patient satisfaction. The Secretary shall 

23 use the best data available, after consulta24 tion with the Agency for Healthcare Re25 search and Quality and with private enti26 ties that compile quality data. 


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1 ‘‘(ii) ADVISORY GROUP.— 

2 ‘‘(I) IN GENERAL.—Not later 

3 than 60 days after the date of enact4 ment of the Medicare Payment Im5 provement Act of 2009, the Secretary 

6 shall establish a group of experts and 

7 stakeholders to make consensus rec8 ommendations to the Secretary re9 garding development of the quality 

10 component. The membership of the 

11 advisory group shall at least reflect 

12 providers, purchasers, health plans, 

13 researchers, relevant Federal agencies, 

14 and individuals with technical exper15 tise on health care quality. 

16 ‘‘(II) DUTIES.—In the develop17 ment of recommendations with respect 

18 to the quality component, the group 

19 established under subclause (I) shall 

20 consider at least the following areas: 

21 ‘‘(aa) High variation and 

22 high cost per capita utilization of 

23 resources, including rates of hos24 pitalizations, number of visits 

25 and subspecialty referrals, and 


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1 number of procedures (as deter2 mined by data under this title). 

3 ‘‘(bb) Health outcomes and 

4 functional status of patients. 

5 ‘‘(cc) The continuity, man6 agement, and coordination of 

7 health care and care transitions, 

8 including episodes of care, for pa9 tients across the continuum of 

10 providers, health care settings, 

11 and health plans. 

12 ‘‘(dd) Patient, caregiver, and 

13 authorized representative experi14 ence, quality and relevance of in15 formation provided to patients, 

16 caregivers, and authorized rep17 resentatives, and use of informa18 tion by patients, caregivers, and 

19 authorized representatives to in20 form decision making. 

21 ‘‘(ee) The safety, effective22 ness, and timeliness of care. 

23 ‘‘(ff) The appropriate use of 

24 health care resources and serv25 ices. 


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1 ‘‘(gg) Other items deter2 mined appropriate by the Sec3 retary. 

4 ‘‘(iii) REQUIREMENT.—In establishing 

5 the quality component under this subpara6 graph, the Secretary shall— 

7 ‘‘(I) take into account the rec8 ommendations of the group estab9 lished under clause (ii)(I); and 

10 ‘‘(II) provide for an open and 

11 transparent process for the activities 

12 conducted pursuant to the convening 

13 of such group with respect to the de14 velopment of the quality component. 

15 ‘‘(iv) ESTABLISHMENT.—The quality 

16 component for each hospital referral area 

17 (as so defined) shall be the ratio of the 

18 quality score for such area to the national 

19 average quality score. 

20 ‘‘(v) QUALITY BASELINE.—If the 

21 quality component for a hospital referral 

22 area (as so defined) does not rank in the 

23 top 25th percentile as compared to the na24 tional average (as determined by the Sec25 retary) and the amount of reimbursement 


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1 for services under this section is greater 

2 than the amount of reimbursement for 

3 such services that would have applied 

4 under this section if the amendments made 

5 by section 2 of the Medicare Payment Im6 provement Act of 2009 had not been en7 acted, this section shall be applied as if 

8 such amendments had not been enacted. 

9 ‘‘(vi) APPLICATION.—In the case of a 

10 hospital referral area (as so defined) that 

11 is less than an entire State, if available 

12 quality data is not sufficient to measure 

13 quality at the sub-State level, the quality 

14 component for a sub-State hospital referral 

15 area shall be the quality component for the 

16 entire State. 

17 ‘‘(C) COST COMPONENT.— 

18 ‘‘(i) IN GENERAL.—The cost compo19 nent shall be total annual per beneficiary 

20 Medicare expenditures under part A and 

21 this part for the hospital referral area (as 

22 so defined). The Secretary may use total 

23 per beneficiary expenditures under such 

24 parts in the last two years of life as an al25 ternative measure if the Secretary deterVerDate Nov 24 2008 03:36 Jun 12, 2009 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1249.IS S1249

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1 mines that such measure better takes into 

2 account severity differences among hospital 

3 referral areas. 

4 ‘‘(ii) ESTABLISHMENT.—The cost 

5 component for a hospital referral area (as 

6 so defined) shall be the ratio of the cost 

7 per beneficiary for such area to the na8 tional average cost per beneficiary.’’. 

9 (b) CONFORMING AMENDMENTS.—Section 1848 of 

10 the Social Security Act (42 U.S.C. 1395w–4) is amend11 ed— 

12 (1) in subsection (b)(1)(C), by striking ‘‘geo13 graphic’’ and inserting ‘‘geographic and value’’; and 

14 (2) in subsection (e)— 

15 (A) in paragraph (1)— 

16 (i) in the heading, by inserting ‘‘AND

17 VALUE’’ after ‘‘GEOGRAPHIC’’; 

18 (ii) in subparagraph (A), by striking 

19 clause (iii) and inserting the following new 

20 clause: 

21 ‘‘(iii) a value index (as defined in 

22 paragraph (6)) applicable to physician 

23 work.’’; 


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1 (iii) in subparagraph (C), by inserting 

2 ‘‘and value’’ after ‘‘geographic’’ in the first 

3 sentence; 

4 (iv) in subparagraph (D), by striking 

5 ‘‘physician work effort’’ and inserting 

6 ‘‘value’’; 

7 (v) by striking subparagraph (E); and 

8 (vi) by striking subparagraph (G); 

9 (B) by striking paragraph (2) and insert10 ing the following new paragraph: 

11 ‘‘(2) COMPUTATION OF GEOGRAPHIC AND

12 VALUE ADJUSTMENT FACTOR.—For purposes of sub13 section (b)(1)(C), for all physicians’ services for each 

14 hospital referral area (as defined by the Secretary) 

15 the Secretary shall establish a geographic and value 

16 adjustment factor equal to the sum of the geo17 graphic cost-of-practice adjustment factor (specified 

18 in paragraph (3)), the geographic malpractice ad19 justment factor (specified in paragraph (4)), and the 

20 value adjustment factor (specified in paragraph (5)) 

21 for the service and the area.’’; and 

22 (C) by striking paragraph (5) and insert23 ing the following new paragraph: 

24 ‘‘(5) PHYSICIAN WORK VALUE ADJUSTMENT

25 FACTOR.—For purposes of paragraph (2), the ‘phyVerDate Nov 24 2008 03:36 Jun 12, 2009 Jkt 079200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1249.IS S1249

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1 sician work value adjustment factor’ for a service for 

2 a hospital referral area (as defined by the Sec3 retary), is the product of— 

4 ‘‘(A) the proportion of the total relative 

5 value for the service that reflects the relative 

6 value units for the work component; and 

7 ‘‘(B) the value index score for the area, 

8 based on the value index established under 

9 paragraph (6).’’. 

10 (c) AVAILABILITY OF QUALITY COMPONENT PRIOR

11 TO IMPLEMENTATION.—The Secretary of Health and 

12 Human Services shall make the quality component de13 scribed in section 1848(c)(6)(B) of the Social Security 

14 Act, as added by subsection (a), for each hospital referral 

15 area (as defined by the Secretary) available to the public 

16 by not later than July 1, 2011. 

17 (d) EFFECTIVE DATE.—Subject to subsection (e), 

18 the amendments made by this section shall apply to the 

19 Medicare physician fee schedule for 2012 and each subse20 quent year. 

21 (e) TRANSITION.—Notwithstanding the amendments 

22 made by the preceding provisions of this section, the Sec23 retary of Health and Human Services shall provide for an 

24 appropriate transition to the amendments made by this 


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1 section. Under such transition, in the case of payments 

2 under such fee schedule for services furnished during— 

3 (1) 2012, 25 percent of such payments shall be 

4 based on the amount of payment that would have 

5 applied to the services if such amendments had not 

6 been enacted and 75 percent of such payment shall 

7 be based on the amount of payment that would have 

8 applied to the services if such amendments had been 

9 fully implemented; 

10 (2) 2013, 50 percent of such payment shall be 

11 based on the amount of payment that would have 

12 applied to the services if such amendments had not 

13 been enacted and 50 percent of such payment shall 

14 be based on the amount of payment that would have 

15 applied to the services if such amendments had been 

16 fully implemented; and 

17 (3) 2014 and subsequent years, 100 percent of 

18 such payment shall be based on the amount of pay19 ment that is applicable under such amendments. 

Æ 


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