being provided evidence-based care by hospitals, 
expressed as the percentage of occasions on 
which a hospital provides the individual with all 
of the appropriate actions identified under qual-
ity measures during a fiscal year. 
‘‘(C) PUBLIC
AVAILABILITY.—The Sec-
retary shall measure the performance of hos-
pitals using the alternative method under sub-
paragraph (A), and shall make the results of 
such performance measurement available to the 
public. 
‘‘(D) USE FOR EVALUATION OF FUTURE 
MEASURES.—The Secretary shall evaluate the 
appropriateness of using the alternative meas-
ure under subparagraph (A) for the purpose of 
making performance-based payments under this 
subsection. 
‘‘(g) FINANCING.— 
‘‘(1) REDUCTION IN DRG PAYMENT AMOUNT.— 
The Secretary shall make performance-based pay-
ments under paragraphs (2) and (7) of subsection 
(f) from amounts credited to the Federal Hospital 
Insurance Trust Fund under section 1817 in the fis-
cal year by reason of the application of the reduction 
under section 1886(d)(1)(F)(i). 
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‘‘(2) NO
EFFECT
ON
ADJUSTMENTS
FOR 
OUTLIER, IME, DSH, OR CAPITAL-RELATED COSTS.— 
The adjustments under paragraphs (5)(A), (5)(B), 
and (5)(F) of section 1886(d), and payments for 
capital-related costs under section 1886(g), shall be 
computed without regard to the adjustments made 
by reason of section 1886(d)(1)(F). 
‘‘(h) PROVISIONS
RELATING
TO
DATA
SUBMIS-
SION.— 
‘‘(1) IN GENERAL.—Subject to the succeeding 
provisions of this subsection, each hospital shall sub-
mit data on measures selected under this section to 
the Secretary in a form and manner, and at a time, 
specified by the Secretary for purposes of subsection 
(a). 
‘‘(2) DATA SUBMISSION AND RESUBMISSION.— 
‘‘(A) PERIOD FOR SUBMISSION AND VALI-
DATION.—The Secretary shall provide a 135- 
day period after the close of a calendar quarter 
for hospitals to submit data required under sub-
section (a) for such quarter. 
‘‘(B) RESUBMISSION PERIOD.— 
‘‘(i) IN GENERAL.—Subject to clause 
(ii), insofar as an additional period of time 
is required after the end of the 135-day 
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period referred to in subparagraph (A) to 
correct errors with respect to the data sub-
mitted by hospitals, the Secretary shall 
provide for an additional 30-day period, 
beginning on the day after the date of the 
end of such 135-day period, for the correc-
tion of such errors and resubmission of the 
revised data. 
‘‘(ii) 
EXCEPTION.—The 
Secretary 
may not provide for an additional 30-day 
period under clause (i) if the data sub-
mitted by the hospital have been used to 
determine an amount performance-based 
payments under subsection (f) for that 
hospital. 
‘‘(C) REPORT ON SHORTER TIMEFRAME.— 
The Secretary shall submit to Congress a report 
on the feasibility and advisability of reducing 
the length of the 135-day period under subpara-
graph (A) to 60 days for the submission and 
validation of data. 
‘‘(3) VALIDATION OF DATA.— 
‘‘(A) IMPLEMENTATION OF PROCESS.—The 
Secretary shall implement a process for the val-
idation of data submitted by hospitals under 
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subsection (a). Such process shall provide for 
the selection of hospitals with respect to data 
submitted by such hospitals on both a random 
basis and on the basis of specific criteria, and 
shall include standards for the validation of 
data at the level of specified quality measures. 
‘‘(B) VALIDATION
FOR
NEW
QUALITY 
MEASURES.—With respect to proposed new 
quality measures, the Secretary shall not estab-
lish standards for the validation of data for the 
period of time that the Secretary determines 
hospitals require to gain experience with the 
new quality measures to properly report data 
with respect to such measure. The Secretary 
may use processes such as re-abstraction and 
validation as a learning tool for hospitals in-
stead of establishing such standards. 
‘‘(4) OPPORTUNITY
TO
REVIEW
DATA.—The 
Secretary shall provide a hospital the opportunity to 
review data reported by the hospital before such 
data is made available to the public under subsection 
(e) or used for purposes of the performance-based 
payment program under subsection (f). 
‘‘(i) RULE OF CONSTRUCTION WITH RESPECT TO 
APPEAL RIGHTS.—Nothing in this section shall be con-
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strued as effecting the right of a subsection (d) hospital 
to seek reconsideration or judicial review under section 
1869, 1878, or otherwise of a determination of the Sec-
retary with respect to the provisions of this section, includ-
ing the application of the performance-based payment pro-
gram. 
‘‘(j) REPORTS TO CONGRESS.— 
‘‘(1) QUALITY
ASSESSMENTS.—The Secretary 
shall conduct assessments of the quality measure-
ment and performance-based payment program 
under this section, which shall be used in developing 
the reports under paragraph (2). 
‘‘(2) REPORTS BASED ON ASSESSMENTS.—The 
Secretary shall submit to Congress by not later than 
March 31, 2012, and every 18 months thereafter, a 
report that— 
‘‘(A) identifies the accomplishments of the 
program under this section; 
‘‘(B) 
identifies 
any 
unintended 
con-
sequences of such program for hospitals and 
patients; 
‘‘(C) provides recommendations for legisla-
tive and other modifications to the program; 
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‘‘(D) includes evidence indicating changes 
in access to, quality of, and efficiency and out-
comes in care related to the program; 
‘‘(E) assesses the program’s impact on dis-
parities in care by race and ethnicity; and 
‘‘(F) identifies the impact of the program 
on hospitals of differing size and patient acuity 
levels, including safety net hospitals and hos-
pitals with a substantial medical education com-
mitment. 
‘‘(3) GAO EVALUATION.—Not later than Sep-
tember 30, 2012, the Comptroller General shall con-
duct an independent evaluation of the impact of the 
program under this section on hospitals and pa-
tients. Such evaluation shall include the items de-
scribed in paragraph (2) as well as barriers to the 
program achieving its full potential.’’. 
(b) CONFORMING AMENDMENTS TO QUALITY RE-
PORTING AND PAYMENT UNDER INPATIENT HOSPITAL 
PROSPECTIVE PAYMENT SYSTEM.— 
(1) REPORTING
OF
QUALITY
DATA.—Section 
1886(b)(3)(B) of the Social Security Act (42 U.S.C. 
1395ww(b)(3)(B)) is amended— 
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(A) in clause (i), by inserting ‘‘and subject 
to section 1886A(a)(1),’’ after ‘‘during a fiscal 
year,’’; and 
(B) in the first sentence of clause 
(viii)(I)— 
(i) by inserting after ‘‘each subse-
quent fiscal year’’ the following ‘‘before 
2014’’; and 
(ii) by inserting before the period at 
the end the following: ‘‘(or 1.5, 1.0, and 
0.5 percentage points in the case of fiscal 
years 2011, 2012, and 2013, respec-
tively)’’. 
(2) ADJUSTMENT
TO
PAYMENTS
FOR
OPER-
ATING COSTS OF INPATIENT HOSPITAL SERVICES.— 
Section 1886(d)(1) of such Act (42 U.S.C. 
1395ww(d)(1)) is amended by adding at the end the 
following new subparagraph: 
‘‘(F) ADJUSTMENT
FOR
PERFORMANCE- 
BASED PAYMENT PROGRAM.— 
‘‘(i) TARGETED REDUCTIONS.— 
‘‘(I) IN
GENERAL.—Subject to 
subclause (II), in the case of a sub-
section (d) hospital that complies with 
the data submission requirements 
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under section 1886A(a)(1) for a fiscal 
year, beginning with fiscal year 2011, 
the Secretary shall reduce the amount 
of the payment with respect to the op-
erating costs of inpatient hospital 
services determined under subpara-
graph (A) for specified diagnosis-re-
lated groups (as defined in clause (ii)) 
for that fiscal year by the perform-
ance-based payment offset percent (as 
defined in clause (iii)). 
‘‘(II) EXCEPTION.—There shall 
be no reduction under subclause (I) 
by reason of clause (ii)(II) before fis-
cal year 2012. 
‘‘(ii) SPECIFIED DIAGNOSIS-RELATED 
GROUPS DEFINED.— 
‘‘(I) 
DIAGNOSIS-RELATED 
GROUPS
EVALUATED
UNDER
COM-
POSITE
PERFORMANCE
MEASURES.— 
For purposes of clause (i) and subject 
to subclause (II), the term ‘specified 
diagnosis-related groups’ means only 
those diagnosis-related groups that 
are evaluated through specified qual-
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ity measures (as defined in section 
1886A(a)(4)(A))— 
‘‘(aa) that are used for a fis-
cal year to measure the perform-
ance of a subsection (d) hospital 
under section 1886A(f) for pur-
poses of performance-based pay-
ments to that hospital under 
paragraph (2) or (7) of such sec-
tion; 
‘‘(bb) that have been rec-
ommended by the Hospital Qual-
ity Alliance; and 
‘‘(cc) data from which are 
made publicly available through 
the use of the Hospital Compare 
Internet website maintained by 
the Department of Health and 
Human Services (or such similar 
website of the Department) as 
meets the requirements of section 
1886A(e). 
‘‘(II) ACROSS THE BOARD APPLI-
CATION
FOR
HCAHPS.—With respect 
only to specified quality measures re-
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lating to the Hospital Consumer As-
sessment of Healthcare Providers and 
Systems Survey (HCAHPS) and for 
which a diagnosis-related group is eli-
gible to report, such term includes a 
group. Nothing in this subclause shall 
be construed as applying a reduction 
under this subparagraph to hospitals 
that are not subsection (d) hospitals. 
‘‘(iii) PERFORMANCE-BASED PAYMENT 
OFFSET PERCENT.— 
‘‘(I) IN GENERAL.—For purposes 
of clause (i) and subject to subclauses 
(II) and (III), the term ‘performance- 
based payment offset percent’ means 
the percent determined by the Sec-
retary for a fiscal year that results in 
aggregate reductions in payments 
under clause (i) in that fiscal year in 
an amount equal to the aggregate 
amount of performance-based pay-
ments that the Secretary elects to 
make under section 1886A(f)(2) for 
that fiscal year. 
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‘‘(II) INDIVIDUAL MAXIMUM OFF-
SETS.—Subject to subclause (III), in 
no case may the percent determined 
under subclause (I) for a fiscal year 
exceed— 
‘‘(aa) with respect to speci-
fied quality measures described 
in clause (ii)(I), 2.0 percent; and 
‘‘(bb) with respect to speci-
fied quality measures described 
in clause (ii)(II), 0.25 percent. 
‘‘(III) 
AGGREGATE
MAXIMUM 
OFFSET.—In no case may the percent 
determined under subclause (I) for a 
fiscal year exceed— 
‘‘(aa) 0.50 percent for fiscal 
year 2011; 
‘‘(bb) 1.0 percent for fiscal 
year 2012; 
‘‘(cc) 1.5 percent for fiscal 
year 2013; and 
‘‘(dd) 2.0 percent for fiscal 
year 2014 and succeeding years. 
‘‘(iv) INCREASE
IN
PPS
PAYMENT 
AMOUNT
FOR
PERFORMANCE-BASED
PAY-
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MENT.—In the case of a subsection (d) 
hospital that received a performance-based 
payment under paragraph (2) or (7), or 
both, of section 1886A(f) for a fiscal year 
for a specified diagnosis-related group, the 
amount of the payment with respect to the 
operating costs of inpatient hospital serv-
ices determined under subparagraph (A) 
for such specified diagnosis-related group 
shall be increased by the amount of such 
performance-based payment or payments 
for that fiscal year.’’. 
SEC. 3. CONSULTATION FOR APPROPRIATE APPLICATION 
OF 
PERFORMANCE-BASED 
PAYMENTS 
TO 
SMALL HOSPITALS. 
(a) CONSULTATION.—The Secretary of Health and 
Human Services shall consult with representatives of small 
hospitals, including critical access hospitals under section 
1820 of the Social Security Act (42 U.S.C. 1395i–4), to 
determine appropriate and effective methods for such hos-
pitals to participate in programs for performance-based 
payments for inpatient hospital services (or inpatient crit-
ical access hospital services) furnished to individuals who 
are entitled to benefits under part A of title XVIII of the 
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