I 

108TH CONGRESS 

2D SESSION H. R. 5393 

To amend title XVIII of the Social Security Act to provide incentives linking 

quality to payment for skilled nursing facilities and to establish a LongTerm Care Financing Commission. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 19, 2004 

Mr. ENGLISH (for himself and Mrs. WILSON of New Mexico) introduced the 

following bill; which was referred to the Committee on Ways and Means, 

and in addition to the Committee on Energy and Commerce, for a period 

to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee 

concerned 

A BILL 

To amend title XVIII of the Social Security Act to provide 

incentives linking quality to payment for skilled nursing 

facilities and to establish a Long-Term Care Financing 

Commission. 

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 Nursing Fa5 cility Pay-for-Performance Act of 2004’’. 
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1 SEC. 2. ADDITIONAL MEDICARE PAYMENT FOR FACILITIES 

2 THAT REPORT ADDITIONAL QUALITY DATA. 

3 (a) VOLUNTARY REPORTING OF QUALITY MEASURES

4 AND ADJUSTMENT IN PAYMENT.— 

5 (1) IN GENERAL.—Section 1888 of the Social 

6 Security Act (42 U.S.C. 1395yy) is amended by add7 ing at the end the following new subsection: 

8 ‘‘(f) VOLUNTARY REPORTING OF QUALITY MEAS9 URES; CHANGE IN PAYMENT BASED ON REPORTED

10 QUALITY MEASURES.— 

11 ‘‘(1) ESTABLISHMENT OF ADDITIONAL QUALITY

12 MEASURES.— 

13 ‘‘(A) IN GENERAL.—Not later than 6 

14 months after the date of the enactment of this 

15 subsection, the Secretary, through a contract 

16 with a qualified independent party (such as the 

17 National Quality Forum) identified by the Sec18 retary, shall provide for the identification of— 

19 ‘‘(i) at least 10, and not more than 

20 15, quality measures for the performance 

21 of skilled nursing facilities under this title; 

22 and 

23 ‘‘(ii) the data to be reported, including 

24 their collection and formatting, on a cal25 endar quarter basis for each such quality 
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1 measure to measure the performance of a 

2 skilled nursing facility. 

3 Such measures may be outcome or process 

4 measures. Such measures shall be in addition to 

5 the 14 enhanced measures published by the 

6 Secretary for such facilities for use as of Sep7 tember 1, 2004. 

8 ‘‘(B) MEASURE OF STAFFING LEVEL.— 

9 The quality measures identified under subpara10 graph (A) shall include a measure of the level 

11 of facility staffing and the mix of licensed staff 

12 at a facility. 

13 ‘‘(C) RISK ADJUSTMENT.—The values ob14 tained for quality measures identified under 

15 subparagraph (A), including the existing 14 en16 hanced measures, shall be appropriately risk 

17 adjusted as applied to individual skilled nursing 

18 facilities in order to increase the likelihood that 

19 any differences in such values reflect differences 

20 in the care provided by the skilled nursing fa21 cilities and not differences in the characteristics 

22 of the residents in such facilities. Such risk ad23 justment shall take into account resident char24 acteristics that are related to triggering a value 

25 for a quality measure but are not reflective of 
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1 facility care processes. Risk adjustment ap2 proaches may include, as appropriate— 

3 ‘‘(i) excluding certain types of resi4 dents; 

5 ‘‘(ii) stratifying residents into high6 risk and low-risk groups; or 

7 ‘‘(iii) statistical adjustment (such as 

8 regression analysis) that takes into consid9 eration multiple characteristics (covariates) 

10 for each resident simultaneously and ad11 justs the nursing facilities’ quality measure 

12 values for different resident characteristics. 

13 ‘‘(D) SMALL FACILITIES.— 

14 ‘‘(i) IN GENERAL.—In selecting and 

15 applying quality measures, there shall be 

16 taken into account the circumstances of 

17 small skilled nursing facilities. 

18 ‘‘(ii) DEFINITION.—For purposes of 

19 clause (i), the term ‘small skilled nursing 

20 facility’ means a skilled nursing facility 

21 which had, in most recent preceding cost 

22 reporting period, fewer than 1,500 patient 

23 days with respect to which payments were 

24 made under this title. 
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1 ‘‘(E) ANNUAL EVALUATION.—The Sec2 retary shall provide for an annual process 

3 whereby the use of particular quality measures 

4 are evaluated and, as appropriate, adjusted in 

5 consultation with the National Quality Forum. 

6 ‘‘(F) POSTING ON WEBSITE.—The Sec7 retary shall provide for the posting on its 

8 website, and the publication at least annually, 

9 of the quality performance of skilled nursing fa10 cilities as measured through values reported 

11 under this subsection by such facilities. 

12 ‘‘(2) ADJUSTMENT IN PAYMENT BASED ON

13 QUALITY PERFORMANCE.— 

14 ‘‘(A) IN GENERAL.—For each fiscal year 

15 beginning with fiscal year 2006, in the case of 

16 a skilled nursing facility that reports data 

17 under paragraph (1) for the data reporting pe18 riod with respect to that fiscal year (as defined 

19 in subparagraph (C)), the aggregate amount of 

20 payment under this subsection shall be adjusted 

21 as follows: 

22 ‘‘(i) INCREASE OF 2 PERCENT FOR FA23 CILITIES IN TOP 10 PERCENT IN QUAL24 ITY.—In the case of a facility that, based 

25 on such data, has a composite score for 
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1 quality that is equal to or exceeds such 

2 score for the baseline period (as defined in 

3 subparagraph (D)) for the top 10 percent 

4 of skilled nursing facilities that have re5 ported such data for such baseline period, 

6 such aggregate payment shall be increased 

7 by such amount as reflects an increase in 

8 the market basket percentage increase ap9 plied for the fiscal year involved under sub10 section (e)(4)(E)(ii)(V) by 2 percentage 

11 points. 

12 ‘‘(ii) INCREASE OF 1 PERCENT FOR

13 FACILITIES IN NEXT 10 PERCENT IN QUAL14 ITY.—In the case of a facility that, based 

15 on such data, has a composite score for 

16 quality that exceeds such score for the 

17 baseline period for the top 10 percent of 

18 skilled nursing facilities that have reported 

19 such data for such baseline period, but is 

20 equal to or exceeds such score for the base21 line period for the top 20 percent of such 

22 skilled nursing facilities, such aggregate 

23 payment shall be increased by such amount 

24 as reflects an increase in the market bas25 ket percentage increase applied for the fis-
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1 cal year involved under subsection 

2 (e)(4)(E)(ii)(V) by 1 percentage point. 

3 ‘‘(iii) QUALITY THRESHOLD COVERING

4 80 PERCENT OF FACILITIES.—For a base5 line period, the Secretary shall establish a 

6 quality threshold score that covers 80 per7 cent of the skilled nursing facilities that 

8 have reported such data for such baseline 

9 period. 

10 ‘‘(iv) DECREASE OF 1 PERCENT FOR

11 FACILITIES BELOW QUALITY THRESH12 OLD.—In the case of a fiscal year begin13 ning with fiscal year 2007, in the case of 

14 a facility that, based on such data, has a 

15 composite score on quality measures that 

16 is below the quality threshold score estab17 lished under clause (iii) for the baseline pe18 riod, the aggregate payment for the fiscal 

19 year involved shall be decreased by such 

20 amount as reflects a decrease in the mar21 ket basket percentage increase applied 

22 under subsection (e)(4)(E)(ii)(V) by 1 per23 centage point. 

24 ‘‘(v) YEAR BY YEAR DETERMINA25 TION.—Any increase or decrease in pay-
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1 ments to a skilled nursing facility under 

2 the preceding provisions of this subpara3 graph for a fiscal year shall not affect or 

4 apply to payments to such facility in any 

5 subsequent fiscal year. 

6 ‘‘(B) TREATMENT OF SMALL FACILI7 TIES.—In the case of a skilled nursing facility 

8 which because of its small size is unable to sub9 mit data on one or more quality measures— 

10 ‘‘(i) the facility shall not be penalized 

11 under this paragraph due to its non-report12 ing of such data; and 

13 ‘‘(ii) the composite rank or score shall 

14 be based on the data so reported, with ap15 propriate adjustments so as to be com16 parable to other facilities. 

17 ‘‘(C) DATA REPORTING PERIOD.—For pur18 poses of subparagraph (A), the term ‘data re19 porting period’ means, with respect to— 

20 ‘‘(i) fiscal year 2006, such period of 

21 calendar quarters in fiscal year 2005 as 

22 the Secretary shall specify, which, to the 

23 extent feasible, shall be a period of at least 

24 2 calendar quarters; or 
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1 ‘‘(ii) a subsequent fiscal year, the pe2 riod of 4 consecutive calendar quarters 

3 ending on the June 30 preceding the fiscal 

4 year. 

5 ‘‘(D) BASELINE PERIOD.—For purposes of 

6 subparagraph (A), the term ‘baseline period’ 

7 means, with respect to— 

8 ‘‘(i) fiscal year 2006, the period of 

9 calendar quarters specified under subpara10 graph (C)(i); or 

11 ‘‘(ii) a subsequent fiscal year, the pe12 riod of 4-calendar-quarters ending on June 

13 30, 2006.’’. 

14 (2) LIMITING MARKET BASKET INCREASES TO

15 FACILITIES THAT VOLUNTARILY REPORT INFORMA16 TION.—Subsection (e)(4)(E)(ii) of such section is 

17 amended— 

18 (A) in subclause (III), by striking ‘‘and’’ at 

19 the end; 

20 (B) in subclause (IV), by inserting ‘‘before 

21 the first fiscal year in which the reporting of 

22 quality measures is in effect under subsection 

23 (f)(1)’’ after ‘‘each subsequent fiscal year’’ and 

24 by striking the period at the end and inserting 

25 ‘‘; and’’; and 
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1 (C) by adding at the end the following new 

2 subclause:by inserting before the period at the 

3 end the following: 

4 ‘‘(V) for each subsequent year, 

5 the rate computed for the previous fis6 cal year increased, in the case of a 

7 skilled nursing facility that reports 

8 data under subsection (f)(1) for the 

9 fiscal year, by the skilled nursing fa10 cility market basket percentage for 

11 the fiscal year involved.’’. 

12 (b) USING FISCAL YEAR 2005 PAYMENT RATES AS

13 A FLOOR FOR SUBSEQUENT UPDATES.— 

14 (1) IN GENERAL.—Subsection (e)(4)(E)(ii)(IV) 

15 and subsection (e)(4)(E)(ii)(V), as added by sub16 section (a)(2), of such section is amended by insert17 ing ‘‘(taking into account, with respect to a previous 

18 fiscal year that was fiscal year 2005, all add-ons to 

19 such rate that were applicable in such fiscal year as 

20 well as market basket adjustments made in subse21 quent fiscal years)’’ after ‘‘the rate computed for the 

22 previous fiscal year’’. 

23 (2) EFFECTIVE DATE.—The amendment made 

24 by paragraph (1) shall apply to the computation of 
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1 rates for fiscal years beginning with fiscal year 

2 2006. 

3 SEC. 3. LONG-TERM CARE FINANCING COMMISSION. 

4 (a) ESTABLISHMENT.—There is hereby established a 

5 commission to be known as the ‘‘Long-Term Care Financ6 ing Commission’’ (in this section referred to as the ‘‘Com7 mission’’). 

8 (b) COMPOSITION.—The Commission shall be com9 posed of 10 members appointed by the Secretary of Health 

10 and Human Services. 

11 (c) DUTIES.— 

12 (1) ANALYSES.—The Commission shall conduct 

13 analyses of the financing of long-term care, includ14 ing the financing of nursing facilities. Such analyses 

15 shall include an analysis of each of the following: 

16 (A) The adequacy of Medicaid program fi17 nancing of the long term care system. 

18 (B) Medicare’s cross-subsidization of long19 term care for Medicaid patients. 

20 (C) Total industry margins in long-term 

21 care. 

22 (D) Long-term demographic challenges. 

23 (E) The impact of current trends, includ24 ing staffing shortages and litigation costs, on 

25 long-term care spending. 
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1 (F) Different approaches to refinements in 

2 the per diem RUG payment amounts and re3 lated payment methodologies under section 

4 1888(e) of the Social Security Act (42 U.S.C. 

5 1395yy(e)) . 

6 (2) REPORT.—The Commission shall submit to 

7 Congress an annual report on its analyses. Each 

8 such report shall include recommendations for such 

9 changes in financing of long-term care as the Com10 mission deems appropriate. 

11 (d) TERMS, COMPENSATION, CHAIRMAN, MEETINGS, 

12 STAFF, AND POWERS.—The provisions of subsections 

13 (c)(3), (c)(4), (c)(5), (c)(6), (d), and (e) of section 1805 

14 of the Social Security Act (42 U.S.C. 1395b–6) (relating 

15 to provisions for the Medicare Payment Advisory Commis16 sion) shall apply to the Commission in the same manner 

17 as they apply to the Medicare Payment Advisory Commis18 sion. 

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