I 
109TH CONGRESS 
1ST SESSION H. R. 1381 
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. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 17, 2005 
Mr. ENGLISH of Pennsylvania (for himself, Mr. TANNER, 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 En-
ergy 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. 
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 ‘‘Medicare Nursing Fa-
cility Pay-for-Performance Act of 2005’’.
SEC. 2. ADDITIONAL MEDICARE PAYMENT FOR FACILITIES 
THAT REPORT ADDITIONAL QUALITY DATA. 
(a) VOLUNTARY REPORTING OF QUALITY MEASURES 
AND ADJUSTMENT IN PAYMENT.— 
(1) IN GENERAL.—Section 1888 of the Social 
Security Act (42 U.S.C. 1395yy) is amended by add-
ing at the end the following new subsection: 
‘‘(f) VOLUNTARY REPORTING OF QUALITY MEAS-
URES; CHANGE
IN PAYMENT BASED
ON REPORTED 
QUALITY MEASURES.— 
‘‘(1) ESTABLISHMENT OF ADDITIONAL QUALITY 
MEASURES.— 
‘‘(A) IN
GENERAL.—Not later than 6 
months after the date of the enactment of this 
subsection, the Secretary, through a contract 
with a qualified independent party (such as the 
National Quality Forum) identified by the Sec-
retary, shall provide for the identification of— 
‘‘(i) at least 10, and not more than 
15, quality measures for the performance 
of skilled nursing facilities under this title; 
and 
‘‘(ii) the data to be reported, including 
their collection and formatting, on a cal-
endar quarter basis for each such quality
measure to measure the performance of a 
skilled nursing facility. 
Such measures may be outcome or process 
measures. Such measures shall be in addition to 
the 14 enhanced measures published by the 
Secretary for such facilities for use as of Sep-
tember 1, 2005. 
‘‘(B) MEASURE
OF
STAFFING
LEVEL.— 
The quality measures identified under subpara-
graph (A) shall include a measure of the level 
of facility staffing and the mix of licensed staff 
at a facility. 
‘‘(C) RISK ADJUSTMENT.—The values ob-
tained for quality measures identified under 
subparagraph (A), including the existing 14 en-
hanced measures, shall be appropriately risk 
adjusted as applied to individual skilled nursing 
facilities in order to increase the likelihood that 
any differences in such values reflect differences 
in the care provided by the skilled nursing fa-
cilities and not differences in the characteristics 
of the residents in such facilities. Such risk ad-
justment shall take into account resident char-
acteristics that are related to triggering a value 
for a quality measure but are not reflective of
facility care processes. Risk adjustment ap-
proaches may include, as appropriate— 
‘‘(i) excluding certain types of resi-
dents; 
‘‘(ii) stratifying residents into high- 
risk and low-risk groups; 
‘‘(iii) statistical adjustment (such as 
regression analysis) that takes into consid-
eration multiple characteristics (covariates) 
for each resident simultaneously and ad-
justs the nursing facilities’ quality measure 
values for different resident characteristics; 
or 
‘‘(iv) payer mix. 
‘‘(D) LOW-UTILIZATION FACILITIES.— 
‘‘(i) IN GENERAL.—In selecting and 
applying quality measures, there shall be 
taken into account the circumstances of 
low-utilization skilled nursing facilities. 
‘‘(ii) DEFINITION.—For purposes of 
clause (i) and paragraph (2)(B), the term 
‘low-utilization 
skilled 
nursing 
facility’ 
means a skilled nursing facility which had, 
in most recent preceding cost reporting pe-
riod, fewer than 1,500 patient days with
respect to which payments were made 
under this title. 
‘‘(E) ANNUAL
EVALUATION.—The Sec-
retary shall provide for an annual process 
whereby the use of particular quality measures 
are evaluated and, as appropriate, adjusted in 
consultation with a qualified independent orga-
nization 
‘‘(F) POSTING
ON
WEBSITE.—The Sec-
retary shall provide for the posting on its 
website, and the publication at least annually, 
of the quality performance of skilled nursing fa-
cilities as measured through values reported 
under this subsection by such facilities. 
‘‘(2) ADJUSTMENT
IN
PAYMENT
BASED
ON 
QUALITY PERFORMANCE.— 
‘‘(A) IN GENERAL.—For each fiscal year 
beginning with fiscal year 2007, in the case of 
a skilled nursing facility that reports data 
under paragraph (1) for the data reporting pe-
riod with respect to that fiscal year (as defined 
in subparagraph (C)), the aggregate amount of 
payment under this subsection shall be adjusted 
as follows:
‘‘(i) INCREASE OF 2 PERCENT FOR FA-
CILITIES
IN
TOP
PERCENT
IN
QUAL-
ITY.—In the case of a facility that, based 
on such data, has a composite score for 
quality that is equal to or exceeds such 
score for the baseline period (as defined in 
subparagraph (D)) for the top 10 percent 
of skilled nursing facilities that have re-
ported such data for such baseline period, 
such aggregate payment shall be increased 
by such amount as reflects an increase in 
the market basket percentage increase ap-
plied for the fiscal year involved under sub-
section (e)(4)(E)(ii)(V) by 2 percentage 
points. 
‘‘(ii) INCREASE
OF
PERCENT
FOR 
FACILITIES IN NEXT 10 PERCENT IN QUAL-
ITY.—In the case of a facility that is not 
described in clause (i) and that, based on 
such data, has a composite score for qual-
ity that is equal to or exceeds such score 
for the baseline period (as defined in sub-
paragraph (D)) for the top 20 percent of 
such skilled nursing facilities that have re-
ported such data for such baseline period,
such aggregate payment shall be increased 
by such amount as reflects an increase in 
the market basket percentage increase ap-
plied for the fiscal year involved under sub-
section (e)(4)(E)(ii)(V) by 1 percentage 
point. 
‘‘(iii) QUALITY THRESHOLD COVERING 
PERCENT
OF
FACILITIES.—For the 
baseline period (as defined in subpara-
graph (D)), the Secretary shall establish a 
quality threshold score that covers 80 per-
cent of the skilled nursing facilities that 
have reported such data for such baseline 
period. 
‘‘(iv) DECREASE OF 1 PERCENT FOR 
FACILITIES
BELOW
QUALITY
THRESH-
OLD.—In the case of a fiscal year begin-
ning with fiscal year 2007, in the case of 
a facility that, based on such data, has a 
composite score on quality measures that 
is below the quality threshold score estab-
lished under clause (iii) for the baseline pe-
riod, the aggregate payment for the fiscal 
year involved shall be decreased by such 
amount as reflects a decrease in the mar-
ket basket percentage increase applied 
under subsection (e)(4)(E)(ii)(V) by 1 per-
centage point. 
‘‘(v) YEAR
BY
YEAR
DETERMINA-
TION.—Any increase or decrease in pay-
ments to a skilled nursing facility under 
the preceding provisions of this subpara-
graph for a fiscal year shall not affect or 
apply to payments to such facility in any 
subsequent fiscal year. 
‘‘(B) TREATMENT
OF
LOW-UTILIZATION 
FACILITIES.—In the case of a low-utilization 
skilled nursing facility that is unable to submit 
data on one or more quality measures— 
‘‘(i) the facility shall not be penalized 
under this paragraph due to its non-report-
ing of such data; and 
‘‘(ii) the composite rank or score shall 
be based on the data so reported, with ap-
propriate adjustments so as to be com-
parable to other facilities. 
‘‘(C) DATA REPORTING PERIOD.—For pur-
poses of subparagraph (A), the term ‘data re-
porting period’ means, with respect to—
‘‘(i) fiscal year 2007, such period of 
calendar quarters in fiscal year 2006 as 
the Secretary shall specify, which, to the 
extent feasible, shall be a period of at least 
2 calendar quarters; or 
‘‘(ii) a subsequent fiscal year, the pe-
riod of 4 consecutive calendar quarters 
ending on the June 30 preceding the fiscal 
year. 
‘‘(D) BASELINE PERIOD.—For purposes of 
subparagraph (A), the term ‘baseline period’ 
means, with respect to— 
‘‘(i) fiscal year 2007, the period of 
calendar quarters specified under subpara-
graph (C)(i); or 
‘‘(ii) a subsequent fiscal year, the pe-
riod of 4-calendar-quarters ending on June 
30, 2007.’’. 
(2) LIMITING MARKET BASKET INCREASES TO 
FACILITIES THAT VOLUNTARILY REPORT INFORMA-
TION.—Subsection (e)(4)(E)(ii) of such section is 
amended— 
(A) in subclause (III), by striking ‘‘and’’ at 
the end;
(B) in subclause (IV), by inserting ‘‘before 
the first fiscal year in which the reporting of 
quality measures is in effect under subsection 
(f)(1)’’ after ‘‘each subsequent fiscal year’’ and 
by striking the period at the end and inserting 
‘‘; and’’; and 
(C) by adding at the end the following new 
subclause: 
‘‘(V) for each subsequent year, 
the rate computed for the previous fis-
cal year increased, in the case of a 
skilled nursing facility that reports 
data under subsection (f)(1) for the 
fiscal year, by the skilled nursing fa-
cility market basket percentage for 
the fiscal year involved.’’. 
(b) USING FISCAL YEAR 2005 PAYMENT RATES AS 
A FLOOR FOR SUBSEQUENT UPDATES.— 
(1) IN GENERAL.—Subsection (e)(4)(E)(ii)(IV) 
and subsection (e)(4)(E)(ii)(V), as added by sub-
section (a)(2), of such section is amended by insert-
ing ‘‘(taking into account, with respect to a previous 
fiscal year that was fiscal year 2005, all add-ons to 
such rate that were applicable in such fiscal year as 
well as market basket adjustments made in subse-
quent fiscal years)’’ after ‘‘the rate computed for the 
previous fiscal year’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to the computation of 
rates for fiscal years beginning with fiscal year 
2006. 
SEC. 3. LONG-TERM CARE FINANCING COMMISSION. 
(a) ESTABLISHMENT.—There is hereby established a 
commission to be known as the ‘‘Long-Term Care Financ-
ing Commission’’ (in this section referred to as the ‘‘Com-
mission’’). 
(b) COMPOSITION.—The Commission shall be com-
posed of 10 members appointed by the Secretary of Health 
and Human Services. 
(c) DUTIES.— 
(1) ANALYSES.—The Commission shall conduct 
analyses of the financing of long-term care, includ-
ing the financing of nursing facilities. Such analyses 
shall include an analysis of each of the following: 
(A) The adequacy of Medicaid program fi-
nancing of the long term care system. 
(B) Medicare’s cross-subsidization of long- 
term care for Medicaid patients. 
(C) Total industry margins in long-term 
care.
(D) Long-term demographic challenges. 
(E) The impact of current trends, includ-
ing staffing shortages and litigation costs, on 
long-term care spending. 
(F) Different approaches to refinements in 
the per diem RUG payment amounts and re-
lated payment methodologies under section 
1888(e) of the Social Security Act (42 U.S.C. 
1395yy(e)) . 
(2) REPORT.—The Commission shall submit to 
Congress an annual report on its analyses. Each 
such report shall include recommendations for such 
changes in financing of long-term care as the Com-
mission deems appropriate. 
(d) TERMS, COMPENSATION, CHAIRMAN, MEETINGS, 
STAFF, AND POWERS.—The provisions of subsections 
(c)(3), (c)(4), (c)(5), (c)(6), (d), and (e) of section 1805 
of the Social Security Act (42 U.S.C. 1395b–6) (relating 
to provisions for the Medicare Payment Advisory Commis-
sion) shall apply to the Commission in the same manner 
as they apply to the Medicare Payment Advisory Commis-
sion. 
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