I 
112TH CONGRESS 
2D SESSION 
H. R. 6176 
To amend the Social Security Act to permit hospitals to make incentive 
payments to physicians to promote quality and efficiency. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 24, 2012 
Mr. BOUSTANY (for himself and Mr. PRICE of Georgia) introduced the fol-
lowing bill; which was referred to the Committee on Energy and Com-
merce, and in addition to the Committees on Ways and Means and the 
Judiciary, for a period to be subsequently determined by the Speaker, in 
each case for consideration of such provisions as fall within the jurisdic-
tion of the committee concerned 
A BILL 
To amend the Social Security Act to permit hospitals to 
make incentive payments to physicians to promote qual-
ity and efficiency. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Aligning Incentives 
for Better Patient Care Act of 2011’’. 
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SEC. 2. PERMITTING CERTAIN INCENTIVE PAYMENTS THAT 
PROMOTE QUALITY AND EFFICIENCY. 
(a) IN GENERAL.—Section 1877(e) of the Social Se-
curity Act (42 U.S.C. 1395nn(e)) is amended by adding 
at the end the following new paragraph: 
‘‘(9) INCENTIVE
PAYMENTS
THAT
PROMOTE 
QUALITY
AND
EFFICIENCY.—Any 
remuneration 
made, directly or indirectly, to a physician by a 
qualified hospital (as such term is defined in sub-
section (j)(2)) under the terms of a quality incentive 
agreement that meets the requirements of subsection 
(j)(1), for purposes of sharing cost savings gen-
erated for the hospital through the physician’s vol-
untary participation in quality improvement activi-
ties under such agreement.’’. 
(b) REQUIREMENTS FOR INCENTIVE PAYMENTS.— 
Section 1877 of the Social Security Act (42 U.S.C. 
1395nn) is amended by adding at the end the following 
new subsection: 
‘‘(j) REQUIREMENTS FOR EXCEPTION FOR INCEN-
TIVE PAYMENTS THAT PROMOTE QUALITY AND EFFI-
CIENCY.— 
‘‘(1) QUALITY INCENTIVE AGREEMENT.— 
‘‘(A) IN
GENERAL.—A quality incentive 
agreement that meets the requirements of this 
paragraph is an agreement between a physician 
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and a qualified hospital that meets the fol-
lowing requirements: 
‘‘(i) QUALITY IMPROVEMENT ACTIVI-
TIES.—The agreement lists the quality im-
provement activities under the hospital’s 
quality improvement program that the phy-
sician agrees to participate in under the 
agreement. 
‘‘(ii) DETERMINATION OF REMUNERA-
TION.—The agreement specifies that remu-
neration will be made to the physician by 
the hospital for cost savings achieved 
through the physician’s participation in the 
quality improvement activities under clause 
(i), and includes the methodology that will 
be used to determine— 
‘‘(I) the cost savings achieved 
through the physician’s participation 
in such activities; and 
‘‘(II) subject to any limitation 
under paragraph (3)(A), the amount 
of any remuneration made to the phy-
sician under such agreement. 
‘‘(iii) RECORDS.—The agreement con-
tains a requirement that the physician and 
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the hospital retain records related to the 
agreement, including records related to any 
remuneration made under the agreement, 
for a period determined by the Secretary. 
At the request of the Secretary, the physi-
cian and the hospital shall make such 
records available to the Secretary for pur-
poses of an audit conducted by the Sec-
retary under paragraph (3)(B). 
‘‘(B) LIMITATION
ON
BASIS
OF
PAY-
MENT.—The quality incentive agreement under 
subparagraph (A) may not allow remuneration 
to be made on the basis of— 
‘‘(i) the volume of referrals made by 
the physician to the hospital; 
‘‘(ii) the value of referrals made by 
the physician to the hospital; 
‘‘(iii) cost savings achieved through 
limiting or denying a beneficiary’s access 
to items or services solely on the basis that 
such services are new or improved; or 
‘‘(iv) cost savings achieved through di-
rectly or indirectly reducing or restricting 
the provision of items and services which 
the physician involved determines to be 
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medically necessary or medically appro-
priate. 
‘‘(2) QUALIFIED HOSPITAL.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the term ‘qualified hospital’ means 
a hospital that— 
‘‘(i) has established and maintains a 
quality improvement program that contains 
a list of quality improvement activities that 
meet the requirements of subparagraph 
(B) that the hospital seeks to encourage 
physicians to participate in; 
‘‘(ii) makes payments to the Secretary 
under subparagraph (C); 
‘‘(iii) provides notice to beneficiaries 
that meet the requirements under subpara-
graph (D); 
‘‘(iv) complies with the requirements 
of subparagraph (E), related to physician 
independence; and 
‘‘(v) submits the annual report re-
quired under subparagraph (F). 
‘‘(B) 
QUALITY
IMPROVEMENT
ACTIVI-
TIES.— 
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‘‘(i) IN GENERAL.—With respect to a 
quality improvement program of a hospital 
under subparagraph (A)(i), a quality im-
provement activity is an activity— 
‘‘(I) that is designed by the hos-
pital to— 
‘‘(aa) improve the quality of 
inpatient hospital care (including 
improvements in patient safety); 
and 
‘‘(bb) generate cost savings 
for the hospital; and 
‘‘(II) does not jeopardize patient 
health or safety. 
‘‘(ii) FLEXIBILITY.—A quality im-
provement activity may be designed to— 
‘‘(I) be clinical or non-clinical in 
nature; 
‘‘(II) 
increase 
communication 
and coordination between physicians 
and other providers; 
‘‘(III) improve admission plan-
ning, discharge planning, operating 
room utilization, timely documentation 
of the medical record, or appropriate 
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transfer of patients within depart-
ments of a hospital; 
‘‘(IV) reduce the rate of avoid-
able re-operations; 
‘‘(V) reduce avoidable readmis-
sions; 
‘‘(VI) appropriately reduce the 
average length of stay for patients in 
a hospital; or 
‘‘(VII) make other appropriate 
quality improvements, based on qual-
ity 
improvement 
measures 
rec-
ommended by physician specialty soci-
eties, the National Quality Forum, the 
National Committee for Quality As-
surance, and the Physician Consor-
tium for Performance Improvement. 
‘‘(iii) OTHER REQUIREMENTS.— 
‘‘(I) QUALITY AND COST BENCH-
MARKS.—The hospital shall include 
the quality and cost benchmarks that 
the hospital uses to determine if an 
activity is a quality improvement ac-
tivity in the quality improvement pro-
gram under subparagraph (A)(i). 
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‘‘(II) 
LIMITATION.—A 
quality 
improvement program may not in-
clude incentives to encourage the hos-
pital or a physician to avoid taking on 
difficult or complex cases, which, but 
for the remuneration permitted under 
subsection (e)(9), the hospital or pro-
vider would have taken on. 
‘‘(C) SHARED SAVINGS WITH MEDICARE.— 
For each year (except for the first such year) 
that a hospital makes remuneration under sub-
section (e)(9), the hospital shall make, at such 
time and in such manner as the Secretary may 
require, a payment to the Secretary in an 
amount that is determined by the Secretary, 
but exceeds one percent of cost savings gen-
erated in such year as a result of physician par-
ticipation in quality improvement activities 
through a quality incentive agreement under 
paragraph (1). Any payments made by a hos-
pital to the Secretary under this subparagraph 
shall be deposited in the Federal hospital insur-
ance trust fund. 
‘‘(D) NOTICE REQUIREMENTS.— 
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‘‘(i) IN GENERAL.—A hospital that is 
a party to a quality incentive agreement 
under paragraph (1) shall, during the pe-
riod of such agreement— 
‘‘(I) provide notice to each bene-
ficiary who receives inpatient hospital 
services in such hospital that the hos-
pital provides remuneration to physi-
cians who voluntarily participate in 
such agreement; and 
‘‘(II) disclose and prominently 
display on the public Internet website 
of the hospital information about the 
hospital’s participation in such agree-
ment and the remuneration made 
under such agreement. 
‘‘(ii) TIMING.—To the extent that is 
feasible, without compromising patient 
safety, the notice under clause (i)(I) shall 
be provided to a beneficiary before such 
beneficiary receives inpatient hospital serv-
ices through the hospital. 
‘‘(E) PROTECTION
OF
PHYSICIAN
INDE-
PENDENCE.—A qualified hospital may not— 
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‘‘(i) require that any physician who 
works for the hospital (as an employee, an 
independent contractor, or in any other 
status) to enter into a quality incentive 
agreement under paragraph (1); or 
‘‘(ii) penalize such physician (except 
through a denial of remuneration under 
subsection (e)(9), subject to the terms of 
the agreement under paragraph (1)) for 
the failure of such physician to participate 
in the quality improvement activities under 
the hospital’s quality improvement pro-
gram. 
‘‘(F) ANNUAL REPORT.—A hospital shall 
submit to the Secretary an annual report that 
includes— 
‘‘(i) a copy of the hospital’s quality 
improvement program; 
‘‘(ii) a list of the major quality im-
provement activities for which remunera-
tion was made under any quality incentive 
agreement to which the hospital is a party 
during the previous year; 
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‘‘(iii) the amount of cost savings gen-
erated for the hospital by such quality im-
provement activities during such year; and 
‘‘(iv) the quality improvement activi-
ties that generated the most cost savings 
for the hospital. 
‘‘(3) RESPONSIBILITIES OF THE SECRETARY.— 
‘‘(A) AUTHORITY TO SET LIMITS TO PRE-
VENT MISUSE OF INCENTIVE PAYMENTS.—The 
Secretary may set a limit to the amount of re-
muneration that a hospital may make to a phy-
sician under an agreement under paragraph (1) 
for the purpose of the types of remuneration 
prohibited under clauses (i) or (ii) of paragraph 
(1)(B). 
‘‘(B) AUDITS.—The Secretary, may, in 
such time and manner as the Secretary may 
specify, audit a hospital or physician with re-
spect to remuneration made pursuant to a qual-
ity incentive agreement under paragraph (1). 
‘‘(C) PUBLIC
DISCLOSURE
OF
PARTICI-
PATING
HOSPITALS
ON
WEBSITE.—The Sec-
retary shall maintain and publish a list of hos-
pitals that have quality incentive agreements 
under paragraph (1) on the Medicare.gov Inter-
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net website of the Centers for Medicare & Med-
icaid Services.’’. 
(c) QUALITY
INCENTIVE
OMBUDSMAN.—Section 
1808(c) of such Act (42 U.S.C. 1395b–9(c)) is amended 
by adding at the end the following new paragraph: 
‘‘(4) QUALITY INCENTIVE OMBUDSMAN.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
provide a quality incentive ombudsman with 
Centers for Medicare & Medicaid Services, who 
shall respond to complaints and inquiries made 
by individuals 
described 
under 
paragraph 
(2)(A), hospitals, and physicians relating to the 
remuneration 
permitted 
under 
section 
1877(e)(9). 
‘‘(B) OFFICE AND REPORT.—The quality 
incentive ombudsman may be within the office 
of the Medicare Beneficiary Ombudsman ap-
pointed under paragraph (1), and the activities 
of the quality incentive ombudsman shall be in-
cluded in the report under paragraph (2)(C).’’. 
(d) REGULATIONS.— 
(1) IN GENERAL.—Not later than January 1, 
2014, the Secretary of Health and Human Services 
shall promulgate regulations to implement sub-
sections (e)(9) and (j) of section 1887 of the Social 
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Security Act, as added by subsection (a). Such regu-
lations may include model quality incentive agree-
ments and quality improvement programs. 
(2) CONSULTATION.—In developing the regula-
tions under paragraph (1), the Secretary of Health 
and Human Services shall consult with physician 
specialty societies, hospitals, and individuals entitled 
to benefits under part A or enrolled under part B 
of title XVIII of the Social Security Act. 
(3) FEDERAL
TRADE
COMMISSION
AND
DE-
PARTMENT OF JUSTICE.—Not later than January 1, 
2014, to the extent that quality incentive agreements 
under section 1877(j) of the Social Security Act may 
implicate anti-trust laws and regulations, the Fed-
eral Trade Commission and the Attorney General 
shall review such laws and regulations and shall 
issue regulations or guidance that includes examples 
of quality incentive agreements (as such term is 
used in section 1877(j) of the Social Security Act) 
that are permitted under such laws and regulations, 
and examples of such agreements that are not per-
mitted under such laws and regulations. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to remuneration made on or after 
January 1, 2014. 
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SEC. 3. EXCEPTION TO CIVIL MONETARY PENALTIES FOR 
CERTAIN INCENTIVE PAYMENTS. 
Section 1128A(b)(1) of the Social Security Act (42 
U.S.C. 1320a–7a(b)(1)) is amended, in the matter pre-
ceding subparagraph (A), by inserting ‘‘(except for remu-
neration made pursuant to section 1877(e)(9))’’ after 
‘‘makes a payment’’. 
SEC. 4. ESTABLISHMENT OF A SAFE HARBOR FROM CER-
TAIN CRIMINAL PENALTIES TO PROVIDE FOR 
USE OF INCENTIVE PAYMENT PROGRAMS BE-
TWEEN PHYSICIANS AND HOSPITALS. 
Section 1128B(b)(3) of the Social Security Act (42 
U.S.C. 1320a–7b(b)(3)) is amended— 
(1) in subparagraph (I), by striking ‘‘and’’ at 
the end; 
(2) in subparagraph (J), by striking the period 
at the end and inserting ‘‘; and’’; and 
(3) by adding at the end the following: 
‘‘(K) any remuneration between a hospital 
and a physician made pursuant to section 
1877(e)(9).’’. 
Æ 
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