SEC. 2. EXPANSION OF REPORTING AND DEVELOPMENT OF 
QUALITY MEASURES FOR INPATIENT HOS-
PITAL SERVICES; IMPLEMENTATION OF PER-
FORMANCE-BASED 
PAYMENT 
UNDER 
THE 
PROSPECTIVE PAYMENT SYSTEM FOR SUCH 
SERVICES. 
(a) IN GENERAL.—Title XVIII of the Social Security 
Act (42 U.S.C. 1395 et seq.) is amended by inserting after 
section 1886 the following new section: 
‘‘PERFORMANCE-BASED PAYMENT SYSTEM FOR 
INPATIENT HOSPITAL SERVICES 
‘‘SEC. 1886A. (a) EXPANSION OF REPORTING AND 
DEVELOPMENT OF QUALITY MEASURES.— 
‘‘(1) REQUIREMENT
TO
REPORT
DATA
ON 
QUALITY
MEASURES.—For purposes of section 
1886(b)(3)(B)(i) for fiscal year 2010 and each sub-
sequent fiscal year, in the case of a hospital that 
does not submit, to the Secretary in accordance with 
this section, data required to be submitted on speci-
fied quality measures (as defined in paragraph 
(4)(A)) with respect to such fiscal year, the applica-
ble 
percentage 
increase 
under 
section 
1886(b)(3)(B)(i) for such fiscal year shall be re-
duced by 2.0 percentage points. 
‘‘(2) APPLICATION
OF
REDUCTION
ONLY
TO 
FISCAL
YEAR
INVOLVED.—Any reduction under 
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paragraph (1) shall apply only with respect to the 
fiscal year involved. The Secretary shall not take 
into account such reduction in computing the appli-
cable 
percentage 
increase 
under 
section 
1886(b)(3)(B)(i) for a subsequent fiscal year. 
‘‘(3) DATA SUBMISSION.—Each hospital shall 
submit to the Secretary the required data on speci-
fied quality measures under this section in the form 
and manner provided under subsection (h). 
‘‘(4) DEFINITIONS.—In this section: 
‘‘(A) The term ‘specified quality measures’ 
means quality measures— 
‘‘(i) specified under clause (vii)(II) of 
section 1886(b)(3)(B); 
‘‘(ii) selected under clause (viii) of 
such section; and 
‘‘(iii) selected under subsection (b). 
‘‘(B) The term ‘hospital’ means a sub-
section (d) hospital (as defined in section 
1886(d)(1)(B)). 
‘‘(b) ADDITION OF NEW QUALITY MEASURES.— 
‘‘(1) IN GENERAL.—In addition to the specified 
quality measures described in clauses (i) and (ii) of 
subsection (a)(4)(A), the Secretary shall select under 
this subsection such quality measures as the Sec-
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retary determines to be appropriate for the measure-
ment of the quality of care furnished by hospitals in 
inpatient settings. 
‘‘(2) EXPANSION
AND
REFINEMENT
OF
PER-
FORMANCE MEASURES.—Effective for payments be-
ginning with fiscal year 2009, in selecting additional 
quality measures under paragraph (1), the Secretary 
shall expand and revise the baseline set of perform-
ance 
measures 
adopted 
under 
section 
1886(b)(3)(B)(viii)(IV). Subject to the succeeding 
provisions of this subsection, the Secretary shall add 
such additional measures that reflect consensus 
among affected parties and, to the extent feasible 
and practicable, shall include measures set forth by 
one or more national consensus-building organiza-
tions (as defined in paragraph (4)(B)). 
‘‘(3) 
REQUIREMENT
FOR
EVIDENCE-BASED 
MEASURES.— 
‘‘(A) IN GENERAL.—With respect to fiscal 
year 2009 and each subsequent fiscal year, the 
Secretary may not add any quality measure 
under this subsection unless that quality meas-
ure— 
‘‘(i) is evidence-based and statistically 
valid; 
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‘‘(ii) subject to paragraph (7)(C), is 
endorsed by the National Quality Forum 
or such other similar consensus-building 
organization as the Secretary may des-
ignate; 
‘‘(iii) is recommended for use by the 
Hospital Quality Alliance; and 
‘‘(iv) has been sufficiently tested to 
ensure the measure is accurate and effica-
cious and to determine the resources re-
quired of a hospital to collect and report 
data on the measure. 
‘‘(B) PROHIBITION ON USE OF QUALITY 
MEASURE
FOR
PUBLIC
REPORTING
OR
PER-
FORMANCE-BASED
PAYMENT
UNLESS
EN-
DORSED AND RECOMMENDED.—A quality meas-
ure proposed to be added under this subsection 
may not be made available to the public under 
subsection (e) or otherwise, or used in the per-
formance-based payment program under sub-
section (f), before the date on which the meas-
ure has been endorsed as provided in subpara-
graph (A)(ii) and recommended as provided in 
subparagraph (A)(iii). 
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‘‘(4) REQUIREMENT FOR COLLABORATION WITH 
CONSENSUS ORGANIZATIONS.— 
‘‘(A) IN GENERAL.—With respect to fiscal 
year 2010 and each subsequent fiscal year, the 
Secretary shall collaborate with consensus- 
building organizations to develop new quality 
measures in each of the following areas of inpa-
tient hospital services: 
‘‘(i) Efficiency. 
‘‘(ii) Clinical effectiveness. 
‘‘(iii) Patient-centeredness. 
‘‘(iv) Care coordination. 
‘‘(v) Patient safety. 
‘‘(vi) Performance in areas where the 
Secretary identifies a need for an appro-
priate quality measure. 
‘‘(B) 
CONSENSUS-BUILDING
ORGANIZA-
TION.—For purposes of this subsection, the 
term ‘consensus-building organization’ means 
an organization, such as the National Quality 
Forum, that the Secretary identifies as— 
‘‘(i) having experience in using a 
transparent process for reaching a group 
consensus with respect to measures relat-
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ing to performance of hospitals providing 
inpatient hospital services; and 
‘‘(ii) including in such process rep-
resentatives of the Secretary, hospitals, 
physicians’ organizations, individuals enti-
tled to benefits under part A, experts in 
health care quality, experts in measure de-
velopment, organizations with experience in 
measure implementation, and individuals 
with experience in the delivery of health 
care in urban, rural, and frontier areas 
and to underserved populations and those 
who serve a disproportionate share of mi-
nority patients. 
‘‘(5) ALTERNATIVE
MEASURES
FOR
PATIENT 
OUTCOMES AND EXPERIENCE.— 
‘‘(A) IN
GENERAL.—In addition to the 
quality measures for clinical process selected by 
the Secretary under section 1886(b)(3)(B)(viii), 
the Secretary shall consider alternative meth-
odologies to measure quality that reflect patient 
outcomes and patient experience of care meas-
ures. Of the alternative methodologies available 
for the consideration of the Secretary, quality 
measures under this paragraph shall be based 
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on a set of criteria that include importance, fea-
sibility, scientific acceptability, improvability, 
usability, controllability, potential for unin-
tended consequences, and contribution to com-
prehensiveness. 
‘‘(B) RISK-ADJUSTMENT.—With respect to 
quality measures for outcomes of care, the Sec-
retary shall provide for an appropriate adjust-
ment for such risk factors as age, disability sta-
tus, gender, institutional status, and such other 
factors as the Secretary determines to be appro-
priate to maintain incentives for hospitals to 
treat patients with severe illnesses or condi-
tions. 
‘‘(6) SUBMISSION OF DATA ON PROPOSED NEW 
QUALITY MEASURES.— 
‘‘(A) PRELIMINARY DATA SUBMISSION PE-
RIOD.—With respect to any proposed new qual-
ity measure identified by the Secretary as a 
possible addition to specified quality measures 
in effect, data that are required to be submitted 
by hospitals for that new quality measure shall 
be submitted for a preliminary period of such 
length as the Secretary may specify. 
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‘‘(B) 
CONFIDENTIALITY
OF
INFORMA-
TION.—Any data submitted under subpara-
graph (A) during the preliminary data submis-
sion period shall be treated as a confidential 
submission of information and may not be made 
available to the public. 
‘‘(C) APPLICATION
TO
PERFORMANCE- 
BASED
PAYMENTS.—A new quality measure 
may not be incorporated in the performance- 
based payment program established under sub-
section (f) unless— 
‘‘(i) the preliminary data submission 
period under subparagraph (A) is com-
pleted; 
‘‘(ii) the Secretary ensures that data 
have been made available to the public 
under subsection (e) for such period as the 
Secretary determines to be appropriate to 
provide adequate notice to the parties con-
cerned; and 
‘‘(iii) the requirements of paragraph 
(3) have been met. 
‘‘(7) ALIGNMENT
OF
INPATIENT
HOSPITAL 
QUALITY MEASURES WITH QUALITY MEASURES OF 
OTHER PROVIDERS AND SUPPLIERS.— 
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‘‘(A) IN
GENERAL.—The Secretary shall 
ensure that the specified quality measures ap-
plicable to hospitals are coordinated with qual-
ity measures applicable to physicians under sec-
tion 1848(k) and with quality measures applica-
ble to other providers of services and suppliers 
under this title. 
‘‘(B) USE OF QUALITY MEASUREMENT DE-
VELOPMENT ORGANIZATIONS.—If the Secretary 
determines that there is evidence that a com-
plementary quality measure in a particular cir-
cumstance would improve the quality of patient 
care, the Secretary shall enter into arrange-
ments with quality measurement development 
organizations for the development of com-
plementary quality measures for hospitals, phy-
sicians, and other providers of services and sup-
pliers. 
‘‘(C) CONDITION
FOR
SELECTION.—For 
purposes of paragraph (3), the Secretary may 
not accept the endorsement of a quality meas-
ure by the National Quality Forum or such 
other similar organization designated by the 
Secretary under paragraph (3)(A)(ii) unless the 
National Quality Forum or other organization 
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has ensured the alignment of the quality meas-
ure for inpatient hospital services with one or 
more related quality measures for physicians’ 
services (if any). 
‘‘(c) DISCONTINUED USE OF MEASURES.— 
‘‘(1) AUTHORITY
TO
DISCONTINUE
USE
OF 
MEASURE.—The Secretary may terminate the use of 
a specified quality measure under this section if the 
Secretary determines that the continued use of the 
measure is inappropriate or unnecessary by reason 
of one or more of the following rationale: 
‘‘(A) A change in science, technology, or 
practice patterns. 
‘‘(B) Subject to paragraph (2), a deter-
mination by the Secretary that hospitals have 
achieved uniformly high performance with re-
spect to that measure (commonly referred to as 
a ‘topped out measure’). 
‘‘(C) A determination by the Secretary 
that the measure has been subsequently shown 
not to represent the best clinical practice. 
‘‘(D) Such other considerations as the Sec-
retary determines to be appropriate. 
‘‘(2) PROVISIONS RELATING TO TOPPED OUT 
MEASURES.— 
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‘‘(A) CONTINUED
REPORTING.—In the 
case of a specified quality measure referred to 
in paragraph (1)(B), the Secretary shall require 
the submission of data from hospitals on such 
a measure notwithstanding that such measures 
shall not be used for purposes of the perform-
ance-based payment program under subsection 
(f). 
‘‘(B) REVIEW
OF
HOSPITAL
PERFORM-
ANCE.—In the case of a specified quality meas-
ure referred to in paragraph (1)(B), the Sec-
retary shall monitor performance of hospitals 
on such measure to ensure that hospitals main-
tain high levels of performance. 
‘‘(C) AUTHORITY TO REINSTATE.— 
‘‘(i) IN GENERAL.—Subject to clause 
(ii), for purposes of the performance-based 
payment program under subsection (f), the 
Secretary may reinstate the use of a speci-
fied quality measure referred to in para-
graph (1)(B) that has been terminated 
under paragraph (1) if the Secretary deter-
mines that a significant percentage of hos-
pitals fails to meet the performance thresh-
old for that quality measure. 
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‘‘(ii) NOTICE.—The authority under 
clause (i) shall not apply before the conclu-
sion of a period, of not less than one year, 
of notice to the public indicating the intent 
of the Secretary to reinstate such specified 
quality measure. 
‘‘(3) REGULAR
REVIEW
OF
MEASURES.—The 
Secretary shall periodically reassess specified quality 
measures to determine whether the continued use of 
such measures is appropriate and necessary for pur-
poses of public reporting under subsection (e) and 
performance-based payment under subsection (f). 
‘‘(d) DEVELOPMENT OF COMPOSITE MEASURES.— 
‘‘(1) IN GENERAL.—The Secretary shall com-
bine individual specified quality measures into com-
posite measures that assess the overall quality of 
care for a clinical condition or in a performance 
area. 
‘‘(2) CONSIDERATIONS.—In carrying out para-
graph (1), the Secretary shall— 
‘‘(A) evaluate the adequacy of individual 
specified quality measures in each significant 
clinical condition or performance area, including 
the validity of such measures for the creation of 
a composite measure; and 
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