(1) Healthcare delivery organizations are faced 
with an unmanageable array of quality measures 
and methods of risk adjustment that are overly proc-
ess oriented, may not relate to health outcomes, and 
create a significant administrative burden. 
(2) Existing quality measures and methods of 
risk adjustment used to adjust Medicare payments 
should be replaced with a comprehensive and clini-
cally credible quality measurement system based on 
the rate of occurrence of potentially preventable out-
comes. 
(3) Payment adjustment for quality outcomes 
should be applied to all types of healthcare delivery 
organizations including hospitals, health systems, 
Medicare Advantage plans, health homes, and ac-
countable care organizations as well as healthcare 
professionals. 
SEC. 2. INCENTIVIZING HEALTHCARE QUALITY OUTCOMES. 
(a) IN GENERAL.—Title XVIII of the Social Security 
Act (42 U.S.C. 1395 et seq.) is amended by adding at 
the end the following new section: 
‘‘INCENTIVIZING HEALTHCARE QUALITY OUTCOMES 
‘‘SEC. 1899B. (a) ADJUSTMENT OF PAYMENTS TO 
HEALTH-CARE DELIVERY ORGANIZATION FOR POTEN-
TIALLY PREVENTABLE OUTCOMES.— 
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‘‘(1) IN GENERAL.—In order to provide an in-
centive for each applicable healthcare delivery orga-
nization (as defined in subsection (k)) to reduce po-
tentially preventable outcomes, the amount of pay-
ments to the organization under this title for an ap-
plicable prospective period (as defined in such sub-
section) shall be the amount otherwise determined 
multiplied by the healthcare delivery organization- 
specific adjustment factor determined under para-
graph (2) for such period. 
‘‘(2) HEALTHCARE
DELIVERY
ORGANIZATION 
SPECIFIC PAYMENT ADJUSTMENT FACTOR.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), subject to subparagraph (B), the 
healthcare delivery organization-specific pay-
ment adjustment factor described in this para-
graph for an applicable healthcare delivery or-
ganization for an applicable prospective period 
is equal to 1 minus the ratio (expressed as a 
percentage), as determined by the Secretary, 
of— 
‘‘(i) the composite aggregate pay-
ments for excess potentially preventable 
outcomes (described in subsection (c)(1)) 
for the organization and period; to 
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‘‘(ii) the aggregate payments under 
this title to the organization for such pe-
riod. 
‘‘(B) PHASE-IN
OF
HEALTHCARE
DELIV-
ERY
ORGANIZATION-SPECIFIC
ADJUSTMENT 
FACTOR.—In no case shall the healthcare deliv-
ery organization-specific payment adjustment 
factor under subparagraph (A) be— 
‘‘(i) less than 97 percent or more than 
103 percent for fiscal year 2016; 
‘‘(ii) be less than 94 percent or more 
than 106 percent for fiscal year 2017; or 
‘‘(iii) be less than 90 percent or more 
than 110 percent for fiscal year 2018 and 
each subsequent fiscal year. 
‘‘(b) ADJUSTMENT TO THE ANNUAL UPDATE FAC-
TOR FOR PAYMENTS TO HEALTHCARE PROFESSIONALS IN 
A GEOGRAPHIC REGION FOR POTENTIALLY PREVENT-
ABLE OUTCOMES.— 
‘‘(1) IN GENERAL.—In order to provide an in-
centive for healthcare professionals (that are not 
part of an applicable healthcare delivery organiza-
tion) in a geographic region to coordinate care and 
reduce potentially preventable outcomes, the annual 
update factor for traditional Medicare fee-for-service 
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payments to all such professionals in a geographic 
region established under paragraph (3) for an appli-
cable prospective period (beginning on or after Octo-
ber 1, 2015) shall be equal to the annual update fac-
tor that would otherwise apply multiplied by the geo-
graphic-specific potentially preventable outcomes ad-
justment factor (as described in paragraph (2)) for 
the geographic region and period. 
‘‘(2) GEOGRAPHIC-SPECIFIC POTENTIALLY PRE-
VENTABLE OUTCOMES ADJUSTMENT FACTOR.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), subject to subparagraph (B), the ge-
ographic-specific potentially preventable out-
comes adjustment factor described in this para-
graph for a geographic region for an applicable 
prospective period is equal to 1 minus the ratio 
(expressed as a percentage), as determined by 
the Secretary, of— 
‘‘(i) the sum of the composite aggre-
gate payments for excess potentially pre-
ventable outcomes (described in subsection 
(c)(1)) for Medicare beneficiaries enrolled 
in 
traditional 
Medicare 
fee-for-service 
across all applicable healthcare delivery or-
ganizations physically located in the geo-
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graphic region for the applicable historical 
period; to 
‘‘(ii) the aggregate payments for 
Medicare beneficiaries enrolled in tradi-
tional Medicare fee-for-service across all 
applicable healthcare delivery organizations 
physically located in the geographic region 
for such applicable historical period. 
‘‘(B) PHASE-IN.—In no case shall the geo-
graphic-specific potentially preventable out-
comes adjustment factor for a geographic re-
gion under this paragraph— 
‘‘(i) be less than 95 percent or more 
than 105 percent for fiscal year 2016; 
‘‘(ii) be less than 90 percent or more 
than 110 percent for fiscal year 2017; or 
‘‘(iii) be less than 80 percent or more 
than 120 percent for fiscal year 2018 and 
each subsequent fiscal year. 
‘‘(3) GEOGRAPHIC REGION.— 
‘‘(A) IN GENERAL.—For the purposes of 
this subsection and subject to subparagraph 
(B), the Secretary shall establish geographic re-
gions to which healthcare professionals shall be 
assigned. 
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‘‘(B) RESTRICTIONS.— 
‘‘(i) GEOGRAPHIC REGIONS.—To the 
extent practical, the Secretary shall define 
geographic regions based on core base sta-
tistical areas as defined by the Director of 
the Office of Management and Budget. 
‘‘(ii) ASSIGNMENT
OF
HEALTHCARE 
PROFESSIONALS
TO
GEOGRAPHIC
RE-
GIONS.—The geographic region to which a 
healthcare professional is assigned shall be 
the geographic region in which a plurality 
of Medicare beneficiaries treated by such 
professional for the applicable historical 
period reside, as determined by the Sec-
retary. 
‘‘(4) 
REPORT
ON
USING
INDIVIDUAL 
HEALTHCARE
PROFESSIONAL
PERFORMANCE.—No 
later than January 1, 2017, the Secretary shall sub-
mit to Congress a report proposing a method of 
combining the potentially preventable outcomes per-
formance of individual healthcare professionals with 
the geographic-specific potentially preventable out-
comes performance for a geographic region under 
paragraph (2) for the purpose of determining the 
potentially preventable outcomes adjustment factor 
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under paragraph (1) to the annual adjustment fac-
tor for payments to such individual healthcare pro-
fessionals. 
‘‘(c) COMPOSITE AGGREGATE PAYMENTS FOR EX-
CESS POTENTIALLY PREVENTABLE OUTCOMES.— 
‘‘(1) IN
GENERAL.—The composite aggregate 
payments for excess potentially preventable outcomes 
for an applicable healthcare delivery organization or 
geographic region for an applicable historical period 
described in this paragraph is equal to the sum of 
the following for the healthcare delivery organization 
or geographic region and period: 
‘‘(A) 
PREVENTABLE
COMPLICATIONS.— 
The aggregate payments for excess inpatient 
potentially preventable complications (as de-
fined in subsection (e)(1)(B)). 
‘‘(B) PREVENTABLE READMISSIONS.—The 
aggregate payments for excess potentially pre-
ventable readmissions (as defined in subsection 
(f)(1)(B)). 
‘‘(C) 
PREVENTABLE
ADMISSIONS.—The 
aggregate payments for excess potentially pre-
ventable admissions computed (as defined in 
subsection (g)(1)(B)). 
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