text: 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.
target: 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.
feat_title: 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.