I 
109TH CONGRESS 
1ST SESSION H. R. 3617 
To amend part B of title XVIII of the Social Security Act to provide 
for value-based purchasing in the payment for physicians’ services under 
the Medicare Program, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 29, 2005 
Mrs. JOHNSON of Connecticut (for herself, Mr. BEAUPREZ, Mr. BOUSTANY, 
Mr. BURGESS, Mr. CAMP, Mr. ENGLISH of Pennsylvania, Mr. GINGREY, 
Mr. SAM JOHNSON of Texas, Mr. LEWIS of Kentucky, Mr. NEY, Mr. 
RAMSTAD, Mr. SHAW, Mr. SHAYS, Mr. UPTON, Mr. WELDON of Florida, 
and Mrs. KELLY) introduced the following bill; which was referred to the 
Committee on Energy and Commerce, and in addition to the Committee 
on Ways and Means, 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 part B of title XVIII of the Social Security 
Act to provide for value-based purchasing in the payment 
for physicians’ services under the Medicare Program, 
and for other purposes. 
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 Value-Based 
Purchasing for Physicians’ Services Act of 2005’’.
SEC. 2. VALUE-BASED PURCHASING FOR MEDICARE PHYSI-
CIANS’ SERVICES. 
(a) LINK OF VALUE-BASED PURCHASING TO PAY-
MENT FOR SERVICES.—Subsection (d) of section 1848 of 
the Social Security Act (42 U.S.C. 1395w–4) is amend-
ed— 
(1) in paragraph (1)(A), by inserting ‘‘and be-
fore 2006’’ after ‘‘beginning with 2001’’; 
(2) in paragraph (1)(A), by inserting before the 
period at the end the following: ‘‘, and for years be-
ginning with 2006, multiplied by the update estab-
lished under paragraph (6) or a succeeding para-
graph, as is applicable to the year involved’’; 
(3) by adding at the end the following new 
paragraphs: 
‘‘(6) UPDATE
FOR
2006.—The update to the 
single conversion factor established in paragraph 
(1)(C) for 2006 shall be 1.5 percent. 
‘‘(7) UPDATE FOR 2007 AND 2008.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), the update to the single 
conversion factor established in paragraph 
(1)(C) for 2007 and 2008 shall be the percent-
age increase in the MEI (as defined in section 
1842(i)(3)) for the year involved minus 1 per-
centage point.
‘‘(B) INCREASE FOR SUBMITTING INFOR-
MATION.—In the case of physicians’ services 
furnished by a billing unit under this part that 
is a new billing unit (as defined by the Sec-
retary) or that complies with the requirement of 
subsection (k)(4) for the submission of informa-
tion for 2007 or 2008, the update to the single 
conversion factor established in paragraph 
(1)(C) for the year shall be the percentage in-
crease in the MEI (as defined in section 
1842(i)(3)) for the year involved. 
‘‘(C) TREATMENT.—In computing the sin-
gle conversion factor under paragraph (1)(C)— 
‘‘(i) for 2008, the update for 2007 
shall be treated as the update described in 
subparagraph (B); or 
‘‘(ii) for 2009 or a succeeding year, 
the updates for 2007 and 2008 shall be 
treated as the updates described in sub-
paragraph (B). 
‘‘(8) UPDATE
FOR
2009
AND
SUCCEEDING 
YEARS.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), the update to the single 
conversion factor established in paragraph
(1)(C) for 2009 and each succeeding year shall 
be the percentage increase in the MEI (as de-
fined in section 1842(i)(3)) for the year in-
volved minus 1 percentage point. 
‘‘(B) INCREASE FOR SUBMITTING INFOR-
MATION
AND
MEETING
QUALITY
AND
EFFI-
CIENCY STANDARDS.—In the case of physicians’ 
services furnished by a billing unit under this 
part that is a new billing unit (as defined for 
purposes of paragraph (7)(B)) or that both 
complies with the requirement of subsection 
(k)(4) for the submission of information for a 
year (beginning with 2009) and meets (or is 
deemed to meet) performance objectives appli-
cable to the billing unit for the year under sub-
section (k)(5), the update to the single conver-
sion factor established in paragraph (1)(C) for 
the year shall be the percentage increase in the 
MEI (as defined in section 1842(i)(3)) for the 
year involved. 
‘‘(C) TREATMENT.—In computing the sin-
gle conversion factor under paragraph (1)(C) 
for 2010 or a succeeding year, the updates for 
each preceding year (beginning with 2009) shall
be treated as the update described in subpara-
graph (B).’’. 
(b) ESTABLISHMENT OF VALUE-BASED PURCHASING 
PROGRAM.—Section 1848 of such Act is further amended 
by adding at the end the following new subsection: 
‘‘(k) VALUE-BASED PURCHASING PROGRAM.— 
‘‘(1) SELECTION OF QUALITY AND EFFICIENCY 
MEASURES (Q & E MEASURES).— 
‘‘(A) IN GENERAL.—As part of the rule-
making process for payments under this section 
for 2007, the Secretary shall provide for the se-
lection of quality measures and efficiency meas-
ures (in this subsection referred to as ‘Q-meas-
ures’ and ‘E-measures’, respectively, or as ‘Q & 
E measures’ collectively) consistent with and in 
accordance with this paragraph and paragraph 
(2). 
‘‘(B) LEVEL OF MEASUREMENT.—Q-meas-
ures and E-measures shall be measures that 
provide for assessment of quality and efficiency, 
respectively, in the provision of services to indi-
viduals enrolled under this part at the level of 
a billing unit under this part.
‘‘(C) CHARACTERISTICS OF MEASURES.— 
To the extent feasible and practicable, Q & E 
measures shall— 
‘‘(i) include a mixture of outcome 
measures, process measures (such as fur-
nishing a service), and structural measures 
(such as the use of health information 
technology for submission of measures); 
‘‘(ii) include efficiency measures re-
lated to clinical care (such as overuse, mis-
use, or underuse); 
‘‘(iii) include measures of care fur-
nished to frail individuals over the age of 
75 and to individuals with multiple com-
plex chronic conditions; 
‘‘(iv) be evidence-based, if pertaining 
to clinical care; 
‘‘(v) be consistent, valid, practicable, 
and not overly burdensome to collect; 
‘‘(vi) be relevant to physicians and 
other practitioners, individuals enrolled 
under this part, and the Federal Supple-
mentary Medical Insurance Trust Fund; 
‘‘(vii) include measures that, taken as 
a whole, provide a balanced measure of
performance of a billing unit under this 
part; 
‘‘(viii) include measures that capture 
individuals’ assessment of clinical care pro-
vided; and 
‘‘(ix) include measures that assess the 
relative use of resources, services, or ex-
penditures. 
‘‘(D) FAIRNESS.—To the extent feasible 
and practicable, this subsection shall be imple-
mented in a manner that— 
‘‘(i) takes into account differences in 
individual health status; 
‘‘(ii) takes into account individual’s 
compliance with orders; 
‘‘(iii) does not directly or indirectly 
encourage patient selection or de-selection 
by billing units under this part; 
‘‘(iv) reduces health disparities across 
groups and areas; and 
‘‘(v) uses appropriate statistical tech-
niques to ensure valid results. 
‘‘(E) APPLICATION
TO
NON-PHYSICIAN 
PRACTITIONERS
AND
OTHER
SUPPLIERS
FOR 
WHICH PAYMENT IS MADE UNDER OR IN RELA-
TION TO PHYSICIAN FEE SCHEDULE.—Insofar 
as physicians’ services under this section are 
furnished by non-physician practitioner or a 
supplier other than a physician— 
‘‘(i) any reference in this subsection to 
a physician shall be a reference to such 
practitioner or supplier; and 
‘‘(ii) any reference to a physician spe-
cialty organization is deemed a reference to 
a specialty organization representing the 
speciality of such practitioners or sup-
pliers. 
‘‘(2) SELECTION PROCESS FOR MEASURES.— 
‘‘(A) SUBMISSION
OF
PROPOSED
MEAS-
URES
TO
CONSENSUS-BUILDING
ORGANIZA-
TION.— 
‘‘(i) BY PHYSICIAN SPECIALTY ORGA-
NIZATIONS.—The Secretary shall request 
each physician specialty organization to 
submit to the consensus-building organiza-
tion by March 1, 2006, proposed Q & E 
measures described in clauses (i) through 
(vii) of paragraph (1)(C) that would be ap-
plicable to clinical care that billing units 
under this part practicing in the specialty
provide to individuals enrolled under this 
part. 
‘‘(ii) BY
SECRETARY.—If the physi-
cian specialty organization for a physician 
specialty has not submitted proposed Q & 
E measures under clause (i) by March 1, 
2006, the Secretary shall submit, as soon 
as possible but not later than April 1, 
2006, proposed Q & E measures described 
in clauses (i) through (vii) of paragraph 
(1)(C) for such specialty to the consensus- 
building organization. 
‘‘(iii) CONSENSUS-BUILDING
ORGANI-
ZATION
DEFINED.—For purposes of this 
paragraph, 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 
process (such as the process described 
in OMB circular A–119 published in 
the Federal Register on February 10, 
1998) for reaching a group consensus 
with respect to measures, such as Q & 
E measures, relating to performance
of those providing health care serv-
ices; and 
‘‘(II) including in such process 
representatives of the Secretary, prac-
ticing physicians (and, as provided 
under paragraph (1)(E), practicing 
non-physician practitioners and other 
suppliers), practitioners with experi-
ence in the care of the frail elderly 
and individuals with multiple complex 
chronic conditions, organizations and 
individuals representative of the spe-
cialty involved, individuals enrolled 
under this part, experts in health care 
quality and efficiency, and individuals 
with experience in the delivery of 
health care in urban, rural, and fron-
tier areas and to underserved popu-
lations. 
‘‘(B) RECOMMENDATIONS BY CONSENSUS- 
BUILDING
ORGANIZATION.—The 
consensus- 
building organization that receives proposed 
measures under subparagraph (A) is requested 
to submit to the Secretary by July 1, 2006, rec-
ommendations respecting the Q & E measures
described in clauses (i) through (vii) of para-
graph (1)(C) to be implemented under this sub-
section. 
‘‘(C) SECRETARIAL SELECTION.—The Sec-
retary shall select Q & E measures described in 
paragraph (1)(C) for purposes of this sub-
section consistent with the following: 
‘‘(i) USE OF RECOMMENDATIONS FOR 
CLINICAL CARE MEASURES SUBMITTED BY 
CERTAIN ORGANIZATIONS.—Except as pro-
vided in clause (ii), the Secretary shall not 
select a Q & E measure described in 
clauses (i) through (vii) of paragraph 
(1)(C) and relating to clinical care unless 
that measure has been submitted by a phy-
sician specialty organization (or through a 
physician-consensus building process, such 
as the Physician Consortium for Perform-
ance Improvement) and recommended by 
the consensus-building organization under 
subparagraph (B). 
‘‘(ii) PROVISION
BY
REGULATION.— 
The Secretary may by regulation select— 
‘‘(I) Q & E measures described in 
clauses (i) through (vii) of paragraph
(1)(C) and relating to clinical care 
that do not meet the requirements of 
clause (i) only if the Secretary deter-
mines that there were no, or insuffi-
cient, 
recommendations 
regarding 
such Q & E measures under such 
clause; and 
‘‘(II) Q & E measures described 
in clause (viii) or (ix) of paragraph 
(1)(C) and Q & E measures described 
in clause (i) through (vii) of such 
paragraph that do not relate to clin-
ical care. 
‘‘(D) PERIODIC
REVISION
OF
SELEC-
TION.—The Secretary shall provide for the peri-
odic revision and selection of Q & E measures 
consistent with the provisions of this paragraph 
and paragraph (1) and the application of such 
revised Q & E measures on a prospective basis 
for a following year. 
‘‘(3) RATINGS OF PHYSICIANS BASED ON MEAS-
URES.— 
‘‘(A) RATINGS
AND
IDENTIFICATION
OF 
QUALITY PERFORMANCE.—
‘‘(i) IN
GENERAL.—The Secretary 
shall determine a single rating of each bill-
ing unit under this part based on Q & E 
measures selected under paragraph (2) and 
information reported under paragraph (4). 
Such a rating shall be determined for a 
billing unit based on its performance on Q 
& E measures relative to the performance 
of its peers. 
‘‘(ii) NO DIRECT DISCLOSURE OF RAT-
ING.—Subject to subparagraph (B), the 
Secretary shall not make such ratings of 
identifiable billing units under this part 
available other than to the respective unit. 
‘‘(iii) IMPROVEMENT
AND
PERFORM-
ANCE THRESHOLDS.—For specification of 
improvement and performance thresholds, 
see paragraph (5)(D). 
‘‘(B) DISCLOSURE
OF
PERFORMANCE
IN 
RELATION TO PERFORMANCE THRESHOLDS.— 
‘‘(i) IN
GENERAL.—Subject to the 
succeeding provisions of this subparagraph, 
each year the Secretary shall make widely 
available to the public the following infor-
mation regarding a billing unit’s perform-
ance on the Q & E measures: 
‘‘(I) Whether the unit was a new 
billing unit or otherwise had insuffi-
cient data to provide for a measure-
ment of whether it met the perform-
ance 
objectives 
under 
paragraph 
(5)(C). 
‘‘(II) For any other unit, whether 
the unit met the performance objec-
tives under such paragraph. 
‘‘(ii) LIMITATION
DURING
FIRST
YEARS.—During 2007 and 2008, the Sec-
retary shall not make the information 
under clause (i) with respect to an identifi-
able billing unit available other than to the 
respective unit. 
‘‘(iii) PHYSICIAN
NOTIFICATION
AND 
OPPORTUNITY
FOR
COMMENT
OR
AP-
PEAL.—Before making information under 
clause (i) available with respect to a billing 
unit under this part for years beginning 
with 2009, the Secretary shall notify the 
unit of the performance on Q & E meas-
ures (including information on the unit’s
performance in relation to performance ob-
jectives and aggregate information regard-
ing the performance of peers) and provide 
the opportunity for the unit to provide 
written comments regarding the unit’s per-
formance. The Secretary shall respond in 
writing to the comments and seek to reach 
agreement on the unit’s performance and 
shall establish a formal appeals process in 
the event of continued disagreement con-
cerning such performance. Upon conclusion 
of the appeals process, if the unit provides 
comments relating directly to the final de-
termination under clause (i) respecting 
such performance, the Secretary shall dis-
close such comments with the disclosure of 
the information under such clause. 
‘‘(iv) APPLICATION OF HIPAA PRIVACY 
RULES.—Nothing in this subparagraph 
shall be construed as changing or affecting 
the application of rules promulgated under 
section 264(c) of the Health Insurance 
Portability and Accountability Act of 1996. 
‘‘(C) PEERS DEFINED.—For purposes of 
this subsection, the term ‘peers’ means, with re-
spect to a billing unit under this part that prac-
tices in a specialty in an MA region (as estab-
lished under section 1858(a)(2)), other billing 
units under this part that practice in the same 
specialty in the same region, or, beginning with 
the update for 2012, or in the United States. 
‘‘(4) REPORTING ON PERFORMANCE BEGINNING 
WITH 2007.—For purposes of, and in order to be 
provided a higher update under, subsection (d)(7) 
beginning with 2007, each billing unit under this 
part may submit information on performance on the 
Q & E measures selected under this subsection with 
respect to individuals enrolled under this part. Such 
information shall be submitted in a form and man-
ner and time specified by the Secretary, which may 
include submission as part of claims data under this 
part. The Secretary shall provide a process for au-
diting the accuracy of the information submitted 
under this paragraph. 
‘‘(5) INCENTIVES BASED ON PERFORMANCE BE-
GINNING WITH 2009.— 
‘‘(A) IN GENERAL.—For purposes of, and 
in order to be provided an increased update 
under, subsection (d)(7) for 2009 and each sub-
sequent year and for purposes of disclosure
under paragraph (3)(B), the Secretary shall es-
tablish quality and efficiency performance ob-
jectives for billing units under this part. 
‘‘(B) INCREASED UPDATE.—For purposes 
of subsection (d)(7), such a billing unit is con-
sidered to meet performance objectives for a 
year if, based on ratings under paragraph (3)— 
‘‘(i) the unit has demonstrated clear 
improvement (as determined in accordance 
with improvement standards specified by 
the Secretary under subparagraph (D)) in 
performance from its performance in the 
previous year; or 
‘‘(ii) the unit’s performance meets or 
exceeds the performance thresholds speci-
fied by the Secretary under subparagraph 
(D). 
‘‘(C) DISCLOSURE.—For purposes of para-
graph (3)(B), such a billing unit is considered 
to meet performance objectives for a year if, 
based on the unit’s rating under paragraph 
(3)(A), the unit’s performance meets or exceeds 
the performance thresholds specified by the 
Secretary under subparagraph (D).
‘‘(D) IMPROVEMENT STANDARDS AND PER-
FORMANCE THRESHOLDS.—The Secretary shall 
specify improvement standards under subpara-
graph (B)(i) and the performance thresholds 
under subparagraphs (B)(ii) and (C) before the 
beginning of the year involved. 
‘‘(E) TREATMENT OF CASES OF INSUFFI-
CIENT INFORMATION.—A billing unit is deemed 
to meet performance objectives under subpara-
graphs (B) and (C) if the unit complied with 
the reporting requirement under paragraph (4) 
but there was insufficient information, as deter-
mined by the Secretary, to provide a valid 
measure of performance. 
‘‘(6) REVIEW OF ADDITIONAL EXPENSES.—Not 
later than May 1, 2008, and after consultation with 
the medical community, the Secretary shall review, 
and report to Congress on, the extent to which bill-
ing unit compliance with the reporting provisions of 
paragraph (4) results in increased work and practice 
expenses to billing units. 
‘‘(7) 
PHYSICIAN
AND
BENEFICIARY
EDU-
CATION.—During 2006, the Secretary shall establish 
a program to educate billing units under this part 
and individuals enrolled under this part about the
value-based purchasing program under this sub-
section, including information regarding financial in-
centives for reporting information on Q & E meas-
ures and, beginning in 2009, financial incentives 
based on performance on such measures. 
‘‘(8) ANNUAL REPORT ON GROWTH IN VOLUME 
OF PHYSICIANS’ SERVICES.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
report to the Medicare Payment Advisory Com-
mission and Congress by April 1 of each year 
(beginning with 2006) information on the 
growth in volume of services per enrollee and 
growth in expenditures per enrollee, based upon 
services and expenditures for which payment is 
based, or related to, the fee schedule established 
under this section. 
‘‘(B) DETAILS.—The information under 
subparagraph (A) shall— 
‘‘(i) be disaggregated by type of serv-
ice, by geographic area, and by specialty of 
physicians (or, if applicable, of non-physi-
cian practitioners or suppliers); 
‘‘(ii) distinguish between growth in ex-
penditures due to price change versus vol-
ume change and intensity change; and
‘‘(iii) identify types of service or geo-
graphic areas where changes in volume or 
expenditures are inappropriate or unjusti-
fied, taking into account clinical outcomes. 
‘‘(C) RECOMMENDATIONS.—Each such re-
port shall include recommendations to respond 
to inappropriate growth in service volume. Such 
recommendations may include regulatory or leg-
islative changes, or both. 
‘‘(D) MEDPAC RESPONSE.—The Medicare 
Payment Advisory Committee shall review each 
report submitted under this paragraph, includ-
ing recommendations included under subpara-
graph (C). The Commission shall include in its 
report to Congress in June following such re-
port an analysis of the Secretary’s findings and 
recommendations. 
‘‘(9) EVALUATION; REPORT.— 
‘‘(A) EVALUATION.—The Secretary shall 
provide for an evaluation of the operation of 
this subsection during the 5-year period in 
which this subsection is first applied. Such eval-
uation shall review the impact of this subsection 
on improving the quality and efficiency of serv-
ices and on access to such services and on the 
fairness of its implementation. 
‘‘(B) REPORT.—The Secretary shall sub-
mit to Congress a report on such evaluation by 
not later than September 30, 2011. 
‘‘(10) WAIVER OF ADMINISTRATIVE AND JUDI-
CIAL REVIEW.—There shall be no administrative or 
judicial review under section 1869 or otherwise of— 
‘‘(A) the selection of Q & E measures 
under paragraphs (1) and (2); 
‘‘(B) the development and computation of 
ratings under paragraph (3)(A), standards and 
thresholds under paragraph (5)(D), and the ap-
plication of such standards and thresholds 
under paragraphs (3)(B), (5)(B), and (5)(C); 
and 
‘‘(C) the definition of peers and new billing 
units under this subsection.’’. 
(c) ENDING APPLICATION OF SUSTAINABLE GROWTH 
RATE (SGR).—Section 1848(f)(1)(B) of such Act (42 
U.S.C. 1395w–4(f)(1)(B)) is amended by inserting ‘‘(and 
before 2005)’’ after ‘‘each succeeding year’’. 
(d) 
CONFORMING
MEDPAC 
DUTIES.—Section 
1805(b)(2) of such Act (42 U.S.C. 1395b–6(b)(2)) is
amended by adding at the end the following new subpara-
graph: 
‘‘(D) REVIEW OF REPORT ON GROWTH IN 
PHYSICIAN SERVICES.—Specifically, under sec-
tion 1848(k)(8)(D), the Commission shall re-
view and make recommendations concerning the 
Secretary’s report on the growth of physicians’ 
services under section 1848.’’. 
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