I 

111TH CONGRESS 

1ST SESSION H. R. 3074 

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

mechanism for the physician work component of the Medicare physician 

hospital service and for inpatient hospital services. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 26, 2009 

Mr. ELLISON introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on 

Ways and Means, 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 create 

a value indexing mechanism for the physician work component of the Medicare physician hospital service and 

for inpatient hospital services. 

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 

5 Fairness Act of 2009’’. 


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1 SEC. 2. VALUE INDEX UNDER THE MEDICARE PHYSICIAN 

2 HOSPITAL SERVICE. 

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 fee schedule 

9 area. The value index shall be the ratio of the 

10 quality component under subparagraph (B) to 

11 the cost component under subparagraph (C) for 

12 that fee schedule area. 

13 ‘‘(B) QUALITY COMPONENT.— 

14 ‘‘(i) IN GENERAL.—The quality com15 ponent shall be based on a composite score 

16 that reflects quality measures available on 

17 a State or fee schedule area basis. The 

18 measures shall reflect health outcomes and 

19 health status for the Medicare population, 

20 patient safety, and patient satisfaction. 

21 The Secretary shall use the best data 

22 available, after consultation with the Agen23 cy for Healthcare Research and Quality 

24 and with private entities that compile qual25 ity data. 


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1 ‘‘(ii) REQUIREMENT.—In establishing 

2 the quality component under this subpara3 graph, the Secretary shall take into ac4 count the following: 

5 ‘‘(I) Hospital readmission rates. 

6 ‘‘(II) Hospital emergency depart7 ment utilization for ambulatory care8 sensitive conditions. 

9 ‘‘(III) Hospital admissions for 

10 ambulatory care-sensitive conditions. 

11 ‘‘(IV) Mortality amenable to 

12 health care. 

13 ‘‘(V) Other items determined ap14 propriate by the Secretary. 

15 ‘‘(iii) ESTABLISHMENT.—The quality 

16 component for each fee schedule area shall 

17 be the ratio of the quality score for such 

18 area to the national average quality score. 

19 ‘‘(iv) APPLICATION.—In the case of a 

20 fee schedule area that is less than an en21 tire State, if available quality data is not 

22 sufficient to measure quality at the sub23 State level, the quality component for a 

24 sub-State fee schedule area shall be the 

25 quality component for the entire State. 


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1 ‘‘(C) COST COMPONENT.— 

2 ‘‘(i) IN GENERAL.—The cost compo3 nent shall be total annual per beneficiary 

4 Medicare expenditures under part A and 

5 this part for the fee schedule area. The 

6 Secretary may use total per beneficiary ex7 penditures under such parts in the last two 

8 years of life as an alternative measure if 

9 the Secretary determines that such meas10 ure better takes into account severity dif11 ferences among fee schedule areas. 

12 ‘‘(ii) ESTABLISHMENT.—The cost 

13 component for a fee schedule area shall be 

14 the ratio of the cost per beneficiary for 

15 such area to the national average cost per 

16 beneficiary.’’. 

17 (b) CONFORMING AMENDMENTS.—Section 1848 of 

18 the Social Security Act (42 U.S.C. 1395w–4) is amend19 ed— 

20 (1) in subparagraph (b)(1)(C), by striking ‘‘ge21 ographic’’ and inserting ‘‘geographic and value’’; and 

22 (2) in subsection (e)— 

23 (A) in paragraph (1)— 

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

25 VALUE’’ after ‘‘GEOGRAPHIC’’; 


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

2 clause (iii) and inserting the following new 

3 clause: 

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

5 paragraph (6)) applicable to physician 

6 work.’’; 

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

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

9 sentence; 

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

11 ‘‘physician work effort’’ and inserting 

12 ‘‘value’’; 

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

14 (vi) by striking subparagraph (G); 

15 (B) by striking paragraph (2) and insert16 ing the following new paragraph: 

17 ‘‘(2) COMPUTATION OF GEOGRAPHIC AND

18 VALUE ADJUSTMENT FACTOR.—For purposes of sub19 section (b)(1)(C), for all physicians’ services for each 

20 fee schedule area the Secretary shall establish a geo21 graphic and value adjustment factor equal to the 

22 sum of the geographic cost-of-practice adjustment 

23 factor (specified in paragraph (3)), the geographic 

24 malpractice adjustment factor (specified in para25 graph (4)), and the value adjustment factor (speciVerDate Nov 24 2008 06:09 Jun 29, 2009 Jkt 079200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3074.IH H3074

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1 fied in paragraph (5)) for the service and the area.’’; 

2 and 

3 (C) by striking paragraph (5) and insert4 ing the following new paragraph: 

5 ‘‘(5) PHYSICIAN WORK VALUE ADJUSTMENT

6 FACTOR.—For purposes of paragraph (2), the ‘phy7 sician work value adjustment factor’ for a service for 

8 a fee schedule area, is the product of— 

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

10 value for the service that reflects the relative 

11 value units for the work component; and 

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

13 based on the value index established under 

14 paragraph (6).’’. 

15 (c) AVAILABILITY OF QUALITY COMPONENT PRIOR

16 TO IMPLEMENTATION.—The Secretary of Health and 

17 Human Services shall make the quality component de18 scribed in section 1848(c)(6)(B) of the Social Security 

19 Act, as added by subsection (a), for each fee schedule area 

20 available to the public by not later than January 1, 2011. 

21 (d) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to the Medicare physician hospital 

23 service for 2012 and each subsequent year. 


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1 SEC. 3. VALUE INDEX UNDER THE INPATIENT HOSPITAL 

2 PROSPECTIVE PAYMENT SYSTEM. 

3 (a) IN GENERAL.—Section 1886(d) of the Social Se4 curity Act (42 U.S.C. 1395ww(d)) is amended by adding 

5 at the end the following new paragraph: 

6 ‘‘(14) VALUE INDEX.— 

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

8 determine a value index for each hospital serv9 ice area. The value index shall be the ratio of 

10 the quality component under subparagraph (C) 

11 to the cost component under subparagraph (D) 

12 for that hospital service area. 

13 ‘‘(B) PAYMENT ADJUSTMENT.—Notwith14 standing any other provision of this title, the 

15 payment amount made to a subsection (d) hos16 pital under this subsection or section 

17 1814(b)(3) for discharges during a fiscal year, 

18 after all other adjustments and add-ons effected 

19 under this title, shall be adjusted by multiplying 

20 such amount by the value index determined 

21 under subparagraph (A) for the hospital service 

22 area in which the discharges occur. 

23 ‘‘(C) QUALITY COMPONENT.— 

24 ‘‘(i) IN GENERAL.—The quality com25 ponent shall be based on a composite score 

26 that reflects quality measures available on 


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1 a State or hospital service area basis. The 

2 measures shall reflect health outcomes and 

3 health status for the Medicare population, 

4 patient safety, and patient satisfaction. 

5 The Secretary shall use the best data 

6 available, after consultation with the Agen7 cy for Healthcare Research and Quality 

8 and with private entities that compile qual9 ity data. 

10 ‘‘(ii) REQUIREMENT.—In establishing 

11 the quality component under this subpara12 graph, the Secretary shall take into ac13 count quality measures reported by hos14 pitals under subsection (b)(3)(B)(viii)(III) 

15 and shall, to the extent feasible, add addi16 tional measures relating to outcomes in 

17 hospitals. 

18 ‘‘(iii) ESTABLISHMENT.—The quality 

19 component for each hospital service area 

20 shall be the ratio of the quality score for 

21 such area to the national average quality 

22 score. 

23 ‘‘(iv) APPLICATION.—In the case of a 

24 hospital service area that is less than an 

25 entire State, if available quality data is not 


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1 sufficient to measure quality at the sub2 State level, the quality component for a 

3 sub-State hospital service area shall be the 

4 quality component for the entire State. 

5 ‘‘(D) COST COMPONENT.— 

6 ‘‘(i) IN GENERAL.—The cost compo7 nent shall be total annual per beneficiary 

8 Medicare expenditures under parts A and 

9 B for the hospital service area. The Sec10 retary may use total per beneficiary ex11 penditures under such parts in the last two 

12 years of life as an alternative measure if 

13 the Secretary determines that such meas14 ure better takes into account severity dif15 ferences among hospital service areas. 

16 ‘‘(ii) ESTABLISHMENT.—The cost 

17 component for a hospital service area shall 

18 be the ratio of the cost per beneficiary for 

19 such area to the national average cost per 

20 beneficiary. 

21 ‘‘(E) HOSPITAL SERVICE AREA.—In this 

22 paragraph, the term ‘hospital service area’ 

23 means such an area as the Secretary shall de24 fine. In defining such areas, the Secretary shall 

25 use a methodology similar to that used in the 


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1 establishment of the Dartmouth Atlas of Health 

2 Care.’’. 

3 (b) AVAILABILITY OF QUALITY COMPONENT PRIOR

4 TO IMPLEMENTATION.—The Secretary of Health and 

5 Human Services shall make the quality component de6 scribed in section 1886(d)(14)(B) of the Social Security 

7 Act, as added by subsection (a), for each hospital service 

8 area available to the public by not later than January 1, 

9 2011. 

10 (c) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to the discharges occurring on or 

12 after October 1, 2012. 

Æ 


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