A bill to amend title XVIII of the Social Security Act to create a value indexing mechanism for the physician work component of the Medicare physician fee schedule.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Payment Improvement Act of 
2009''.

SEC. 2. VALUE INDEX UNDER THE MEDICARE PHYSICIAN FEE SCHEDULE.

    (a) In General.--Section 1848(e)(5) of the Social Security Act (42 
U.S.C. 1395w-4(e)) is amended by adding at the end the following new 
paragraph:
            ``(6) Value index.--
                    ``(A) In general.--The Secretary shall determine a 
                value index for each hospital referral area (as defined 
                by the Secretary). The value index shall be the ratio 
                of the quality component under subparagraph (B) to the 
                cost component under subparagraph (C) for that hospital 
                referral area.
                    ``(B) Quality component.--
                            ``(i) In general.--The quality component 
                        shall be based on a composite score that 
                        reflects quality measures available on a State 
                        or hospital referral area (as so defined) 
                        basis. The measures shall reflect health 
                        outcomes and health status for the Medicare 
                        population, patient safety, and patient 
                        satisfaction. The Secretary shall use the best 
                        data available, after consultation with the 
                        Agency for Healthcare Research and Quality and 
                        with private entities that compile quality 
                        data.
                            ``(ii) Advisory group.--
                                    ``(I) In general.--Not later than 
                                60 days after the date of enactment of 
                                the Medicare Payment Improvement Act of 
                                2009, the Secretary shall establish a 
                                group of experts and stakeholders to 
                                make consensus recommendations to the 
                                Secretary regarding development of the 
                                quality component. The membership of 
                                the advisory group shall at least 
                                reflect providers, purchasers, health 
                                plans, researchers, relevant Federal 
                                agencies, and individuals with 
                                technical expertise on health care 
                                quality.
                                    ``(II) Duties.--In the development 
                                of recommendations with respect to the 
                                quality component, the group 
                                established under subclause (I) shall 
                                consider at least the following areas:
                                            ``(aa) High variation and 
                                        high cost per capita 
                                        utilization of resources, 
                                        including rates of 
                                        hospitalizations, number of 
                                        visits and subspecialty 
                                        referrals, and number of 
                                        procedures (as determined by 
                                        data under this title).
                                            ``(bb) Health outcomes and 
                                        functional status of patients.
                                            ``(cc) The continuity, 
                                        management, and coordination of 
                                        health care and care 
                                        transitions, including episodes 
                                        of care, for patients across 
                                        the continuum of providers, 
                                        health care settings, and 
                                        health plans.
                                            ``(dd) Patient, caregiver, 
                                        and authorized representative 
                                        experience, quality and 
                                        relevance of information 
                                        provided to patients, 
                                        caregivers, and authorized 
                                        representatives, and use of 
                                        information by patients, 
                                        caregivers, and authorized 
                                        representatives to inform 
                                        decision making.
                                            ``(ee) The safety, 
                                        effectiveness, and timeliness 
                                        of care.
                                            ``(ff) The appropriate use 
                                        of health care resources and 
                                        services.
                                            ``(gg) Other items 
                                        determined appropriate by the 
                                        Secretary.
                            ``(iii) Requirement.--In establishing the 
                        quality component under this subparagraph, the 
                        Secretary shall--
                                    ``(I) take into account the 
                                recommendations of the group 
                                established under clause (ii)(I); and
                                    ``(II) provide for an open and 
                                transparent process for the activities 
                                conducted pursuant to the convening of 
                                such group with respect to the 
                                development of the quality component.
                            ``(iv) Establishment.--The quality 
                        component for each hospital referral area (as 
                        so defined) shall be the ratio of the quality 
                        score for such area to the national average 
                        quality score.
                            ``(v) Quality baseline.--If the quality 
                        component for a hospital referral area (as so 
                        defined) does not rank in the top 25th 
                        percentile as compared to the national average 
                        (as determined by the Secretary) and the amount 
                        of reimbursement for services under this 
                        section is greater than the amount of 
                        reimbursement for such services that would have 
                        applied under this section if the amendments 
                        made by section 2 of the Medicare Payment 
                        Improvement Act of 2009 had not been enacted, 
                        this section shall be applied as if such 
                        amendments had not been enacted.
                            ``(vi) Application.--In the case of a 
                        hospital referral area (as so defined) that is 
                        less than an entire State, if available quality 
                        data is not sufficient to measure quality at 
                        the sub-State level, the quality component for 
                        a sub-State hospital referral area shall be the 
                        quality component for the entire State.
                    ``(C) Cost component.--
                            ``(i) In general.--The cost component shall 
                        be total annual per beneficiary Medicare 
                        expenditures under part A and this part for the 
                        hospital referral area (as so defined). The 
                        Secretary may use total per beneficiary 
                        expenditures under such parts in the last two 
                        years of life as an alternative measure if the 
                        Secretary determines that such measure better 
                        takes into account severity differences among 
                        hospital referral areas.
                            ``(ii) Establishment.--The cost component 
                        for a hospital referral area (as so defined) 
                        shall be the ratio of the cost per beneficiary 
                        for such area to the national average cost per 
                        beneficiary.''.
    (b) Conforming Amendments.--Section 1848 of the Social Security Act 
(42 U.S.C. 1395w-4) is amended--
            (1) in subsection (b)(1)(C), by striking ``geographic'' and 
        inserting ``geographic and value''; and
            (2) in subsection (e)--
                    (A) in paragraph (1)--
                            (i) in the heading, by inserting ``and 
                        value'' after ``geographic'';
                            (ii) in subparagraph (A), by striking 
                        clause (iii) and inserting the following new 
                        clause:
                            ``(iii) a value index (as defined in 
                        paragraph (6)) applicable to physician work.'';
                            (iii) in subparagraph (C), by inserting 
                        ``and value'' after ``geographic'' in the first 
                        sentence;
                            (iv) in subparagraph (D), by striking 
                        ``physician work effort'' and inserting 
                        ``value'';
                            (v) by striking subparagraph (E); and
                            (vi) by striking subparagraph (G);
                    (B) by striking paragraph (2) and inserting the 
                following new paragraph:
            ``(2) Computation of geographic and value adjustment 
        factor.--For purposes of subsection (b)(1)(C), for all 
        physicians' services for each hospital referral area (as 
        defined by the Secretary) the Secretary shall establish a 
        geographic and value adjustment factor equal to the sum of the 
        geographic cost-of-practice adjustment factor (specified in 
        paragraph (3)), the geographic malpractice adjustment factor 
        (specified in paragraph (4)), and the value adjustment factor 
        (specified in paragraph (5)) for the service and the area.''; 
        and
                    (C) by striking paragraph (5) and inserting the 
                following new paragraph:
            ``(5) Physician work value adjustment factor.--For purposes 
        of paragraph (2), the `physician work value adjustment factor' 
        for a service for a hospital referral area (as defined by the 
        Secretary), is the product of--
                    ``(A) the proportion of the total relative value 
                for the service that reflects the relative value units 
                for the work component; and
                    ``(B) the value index score for the area, based on 
                the value index established under paragraph (6).''.
    (c) Availability of Quality Component Prior to Implementation.--The 
Secretary of Health and Human Services shall make the quality component 
described in section 1848(c)(6)(B) of the Social Security Act, as added 
by subsection (a), for each hospital referral area (as defined by the 
Secretary) available to the public by not later than July 1, 2011.
    (d) Effective Date.--Subject to subsection (e), the amendments made 
by this section shall apply to the Medicare physician fee schedule for 
2012 and each subsequent year.
    (e) Transition.--Notwithstanding the amendments made by the 
preceding provisions of this section, the Secretary of Health and Human 
Services shall provide for an appropriate transition to the amendments 
made by this section. Under such transition, in the case of payments 
under such fee schedule for services furnished during--
            (1) 2012, 25 percent of such payments shall be based on the 
        amount of payment that would have applied to the services if 
        such amendments had not been enacted and 75 percent of such 
        payment shall be based on the amount of payment that would have 
        applied to the services if such amendments had been fully 
        implemented;
            (2) 2013, 50 percent of such payment shall be based on the 
        amount of payment that would have applied to the services if 
        such amendments had not been enacted and 50 percent of such 
        payment shall be based on the amount of payment that would have 
        applied to the services if such amendments had been fully 
        implemented; and
            (3) 2014 and subsequent years, 100 percent of such payment 
        shall be based on the amount of payment that is applicable 
        under such amendments.

Summary: Medicare Payment Improvement Act of 2009 - Amends title XVIII (Medicare) of the Social Security Act to require the Secretary of Health and Human Services (HHS) to determine a value index for the physician work component for each Medicare hospital referral area.