‘‘(D) PREVENTABLE
EMERGENCY
ROOM 
VISITS.—The aggregate payments for excess po-
tentially preventable emergency room visits (as 
defined in subsection (h)(1)(B)). 
‘‘(E) PREVENTABLE
OUTPATIENT
ANCIL-
LARY SERVICES.—The aggregate payments for 
excess potentially preventable outpatient ancil-
lary 
services 
(as 
defined 
in 
subsection 
(i)(1)(B)). 
‘‘(2) OFFSETTING POTENTIALLY PREVENTABLE 
OUTCOME VALUES BEING POSITIVE OR NEGATIVE.— 
The aggregate payments for individual excess poten-
tially 
preventable 
outcomes 
under 
subsections 
(e)(1)(B), (f)(1)(B), (g)(1)(B), (h)(1)(B), and 
(i)(1)(B) may have a positive value (indicating the 
healthcare delivery organization had more potentially 
preventable outcomes than expected) or a negative 
value (indicating the healthcare delivery organization 
had fewer potentially preventable outcomes than ex-
pected). The summing of the individual excess po-
tentially preventable outcomes in paragraph (1) for 
potentially preventable outcomes allows negative val-
ues for individual potentially preventable outcomes 
to offset in part or in whole positive values of other 
potentially preventable outcomes. 
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‘‘(3) EXCLUSIONS.—The Secretary shall deter-
mine the applicability of each type of potentially pre-
ventable outcome to different types of healthcare de-
livery organizations and may exclude potentially pre-
ventable outcomes from the calculation of aggregate 
payments referred to in paragraph (1) for types of 
healthcare delivery organizations if the Secretary de-
termines that such outcomes are not applicable for 
such types of organizations. 
‘‘(d) SUPERSEDING EXISTING PAYMENT ADJUST-
MENTS
FOR
QUALITY; BUDGET
NEUTRAL
ADJUST-
MENT.— 
‘‘(1) IN GENERAL.—For applicable prospective 
periods beginning on or after October 1, 2015, no 
payment adjustment for quality performance shall be 
made pursuant any of the following provisions: 
‘‘(A) Payment adjustments for hospital ac-
quired conditions under section 1886(d)(4)(D), 
as added by section 5001(c) of Deficit Reduc-
tion Act of 2005. 
‘‘(B) Payment adjustments for value based 
purchasing for inpatient hospital services under 
section 1886(o) and for physicians’ services 
under section 1848(p). 
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‘‘(C) Payment adjustments for hospital re-
admissions under section 1886(q), as added by 
section 3025 of the Patient Protection and Af-
fordable Care Act. 
‘‘(D) Payment adjustments for hospital ac-
quired conditions under section 1886(p), as 
added by section 3008 of the Patient Protection 
and Affordable Care Act. 
‘‘(E) Payment adjustments for Medicare 
Advantage Plans under Sections 1853(n) and 
1853(o). 
‘‘(F) Other payment adjustments for qual-
ity as determined by the Secretary. 
‘‘(2) PAYMENT ADJUSTMENTS FOR REPORTING 
QUALITY INFORMATION UNCHANGED.—Payment ad-
justments for reporting quality information that are 
unrelated to actual quality performance under sec-
tions 1833(t)(17), 1848(a), 1848(k), 1848(m) and 
1833(i)(2)(D) shall not be affected by this sub-
section. 
‘‘(3) MANDATED REDUCTIONS UNDER CURRENT 
LAW.—The Secretary shall determine the annual re-
ductions in payment mandated by the provisions de-
scribed in paragraph (1) for fiscal year 2016 and for 
each subsequent fiscal year. 
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‘‘(4) 
PAYMENT
REDUCTION
FACTOR
TO 
ACHIEVE
BUDGET
NEUTRALITY.—The Secretary 
shall determine a payment reduction factor for fiscal 
year 2016 and for each subsequent fiscal year, to be 
applied under subsections (e)(1)(A)(ii), (f)(1)(A)(ii), 
(g)(1)(A)(ii), (h)(1)(A)(ii), and (i)(1)(A)(ii), subject 
to the limitations in subsections (a)(2)(B) and 
(b)(2)(B), so that there is an aggregate payment re-
duction under this section for such fiscal year equiv-
alent to the aggregate reduction in payment deter-
mined under paragraph (3) for such fiscal year. 
‘‘(e) AGGREGATE PAYMENTS
FOR EXCESS INPA-
TIENT POTENTIALLY PREVENTABLE COMPLICATIONS.— 
‘‘(1) EXCESS
INPATIENT
POTENTIALLY
PRE-
VENTABLE COMPLICATIONS; AGGREGATE PAYMENTS 
FOR
EXCESS
INPATIENT
POTENTIALLY
PREVENT-
ABLE COMPLICATIONS DEFINED.—In this section: 
‘‘(A) EXCESS
INPATIENT
POTENTIALLY 
PREVENTABLE COMPLICATIONS.— 
‘‘(i) IN GENERAL.—The term ‘excess 
inpatient potentially preventable complica-
tions’ means, for an applicable hospital 
and other applicable healthcare delivery or-
ganizations determined appropriate by the 
Secretary for an applicable historical pe-
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riod for each type of inpatient hospital po-
tentially preventable complication identified 
under paragraph (2), the sum across all 
risk classes (as defined in clause (iii)) of 
the difference between— 
‘‘(I) the expected number of in-
patient hospital potentially prevent-
able complications for the type of 
complication for the applicable hos-
pital based on the standard complica-
tion rate computed under clause (ii) 
in each risk class; and 
‘‘(II) the applicable hospital’s ac-
tual number of inpatient hospital po-
tentially preventable complications for 
the type of inpatient potentially pre-
ventable complication in each risk 
class in the applicable historical pe-
riod. 
Such difference may be a positive or nega-
tive number. 
‘‘(ii) 
STANDARD
COMPLICATION 
RATE.—In carrying out clause (i)(I), the 
standard complication rate shall be based 
on the average rate of each type of inpa-
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tient hospital potentially preventable com-
plication in each risk class in the applica-
ble historical period, multiplied by the pay-
ment reduction factor established under 
subsection (d)(3) for the applicable pro-
spective period. 
‘‘(iii) RISK
CLASSES.—In this sub-
paragraph, the term ‘risk classes’ means 
such exhaustive and mutually exclusive 
risk classes as the Secretary shall establish 
in order to apply a risk-adjustment meth-
odology that meets the criteria in sub-
section (j)(2) and account for the age, rea-
son for admission, severity of illness, and 
other risk factors identified by the Sec-
retary of patients at the time of hospital 
admission. 
‘‘(B) AGGREGATE PAYMENTS FOR EXCESS 
INPATIENT HOSPITAL POTENTIALLY PREVENT-
ABLE COMPLICATIONS.— 
‘‘(i) IN GENERAL.—The term ‘aggre-
gate payments for excess inpatient hospital 
potentially 
preventable 
complications’ 
means, for an applicable hospital and other 
applicable healthcare delivery organizations 
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