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[From the U.S. Government Publishing Office]


114th Congress      }                               {    Rept. 114-40
                        HOUSE OF REPRESENTATIVES
 1st Session        }                               {    Part 1
======================================================================
 
                 ELECTRONIC HEALTH FAIRNESS ACT OF 2015

                                _______
                                

                 March 13, 2015.--Ordered to be printed

                                _______
                                

Mr. Ryan of Wisconsin, from the Committee on Ways and Means, submitted 
                             the following

                              R E P O R T

                        [To accompany H.R. 887]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 887) to amend title XVIII of the Social Security Act 
with respect to the treatment of patient encounters in 
ambulatory surgical centers in determining meaningful EHR use, 
and for other purposes, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
 I. SUMMARY AND BACKGROUND............................................2
        A. Purpose and Summary...................................     2
        B. Background and Need for Legislation...................     2
        C. Legislative History...................................     3
II. EXPLANATION OF THE BILL...........................................3
III.VOTES OF THE COMMITTEE............................................5

IV. BUDGET EFFECTS OF THE BILL........................................5
        A. Committee Estimate of Budgetary Effects...............     5
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures Budget Authority........................     5
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................     5
 V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE........7
        A. Committee Oversight Findings and Recommendations......     7
        B. Statement of General Performance Goals and Objectives.     7
        C. Duplication of Federal Programs Information Relating 
            to Unfunded Mandates.................................     7
        D. Disclosure of Directed Rule Makings...................     8
        E. Information Relating to Unfunded Mandates.............     8
        F. Congressional Earmarks, Limited Tax Benefits, and 
            Limited Tariff Benefits..............................     8
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED.............8
    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SEC. 1. SHORT TITLE.

  This Act may be cited as the ``Electronic Health Fairness Act of 
2015''.

SEC. 2. TREATMENT OF PATIENT ENCOUNTERS IN AMBULATORY SURGICAL CENTERS 
                    IN DETERMINING MEANINGFUL EHR USE.

  Section 1848(o)(2) of the Social Security Act (42 U.S.C. 1395w-
4(o)(2)) is amended by adding at the end of the following new 
subparagraph:
                  ``(D) Treatment of patient encounters at ambulatory 
                surgical centers.--
                          ``(i) In general.--Subject to clause (ii), 
                        for a payment year after 2015 any patient 
                        encounter of an eligible professional occurring 
                        at an ambulatory surgical center (described in 
                        section 1833(i)(1)(A)) shall not be treated as 
                        a patient encounter in determining whether an 
                        eligible professional qualifies as a meaningful 
                        EHR user. Notwithstanding any other provision 
                        of law, the Secretary may implement this clause 
                        by program instruction or otherwise.
                          ``(ii) Sunset.--Clause (i) shall no longer 
                        apply as of the first payment year that begins 
                        more than 3 years after the date the Secretary 
                        determines, through notice and comment 
                        rulemaking, that certified EHR technology is 
                        applicable to the ambulatory surgical center 
                        setting.''.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 887, the Electronic Health Fairness Act of 
2015, as reported, would exclude the services that physicians 
perform in an Ambulatory Surgical Center (ASC) from being 
counted toward the 50 percent eligibility threshold for the 
Medicare Electronic Health Record (EHR) incentive payment 
program. The exclusion of ASC encounters would sunset three 
years after the Secretary of the Department of Health and Human 
Services (HHS) determines that certified EHR systems applicable 
to the ASC setting are available.

                 B. Background and Need for Legislation

    The 2009 Health Information Technology for Economic and 
Clinical Health (HITECH) Act established incentives for 
adopting electronic health record (EHR) technology in physician 
offices and hospital settings that meet certain certification 
standards. The HITECH Act provided incentive payments over 
several years to encourage and assist providers as they adopted 
certified EHR technology. The incentive payments are phased out 
over time and replaced with penalties, in the form of payment 
reductions, for those who have not adopted certified systems.
    Physicians and other professionals who furnish at least 50 
percent of their patient encounters during the reporting period 
in locations with certified EHR technology are eligible for the 
Medicare EHR ``meaningful use'' incentive program. Physicians 
who practice in multiple settings are eligible and required to 
meet the 50 percent threshold in most scenarios.
    The HITECH Act did not provide incentives specific to ASCs, 
which are a distinct entities that furnish outpatient surgical 
services to patients and serve as an alternative to a hospital 
outpatient department. While ASC facilities do not receive 
incentive payments or payment reductions, the procedures that 
physicians furnish in ASCs are included in total number of 
patient encounters of which at least 50 percent have to be 
furnished in a setting with certified EHR technology. This puts 
these physicians at a disadvantage by holding them accountable 
for using certified EHR technology despite the fact that there 
are a limited number and type of EHR systems suitable for ASCs. 
Physicians who practice in an ASC without certified EHR 
technology can take steps to avoid a payment reduction, though 
the options are less than ideal. They can apply for a time-
limited, hardship exception or treat patients in the more 
expensive hospital outpatient department setting.
    On February 11, 2015, Representative Diane Black and 
Representative Linda Saanchez introduced H.R. 887, the 
Electronic Health Fairness Act of 2015, to address the 
challenges faced by physicians who practice in an ASC. H.R. 887 
excludes ASC services from being counted toward the 50 percent 
meaningful use eligibility threshold until certified EHR 
systems applicable to the ASC setting are available. The 
exclusion ends three years after the Secretary makes the 
determination, in consultation with stakeholders, that such 
systems are available. This legislation resolves a burden faced 
by physicians practicing in ASCs without slowing the adopting 
of EHR technology.

                         C. Legislative History


Background

    H.R. 887 was introduced on February 11, 2015, and was 
referred to the Committee on Energy and Commerce, in addition 
to the Committee on Ways and Means.
    The Chairman's Amendment in the Nature of a Substitute 
(AINS) to H.R. 887, the Electronic Health Fairness Act of 2015, 
was made publicly available through the Committee's website on 
February 25, 2015.

Committee Action

    The Committee marked up H.R. 887 on February 26, 2015 and 
ordered the bill favorably reported to the House of 
Representatives as amended by a voice vote (with a quorum 
present).

Committee Hearings

    Concern was raised regarding the inclusion of ASC 
encounters in the determination of physician eligibility for 
the Medicare EHR incentive program during the December 12, 2013 
markup of the Medicare Patient Access and Quality Improvement 
Act of 2013. Interest in a solution that is fair to physicians 
who practice in the ASC setting while not slowing the adoption 
of certified EHR technology was expressed, though no amendment 
was offered.

                      II. EXPLANATION OF THE BILL


                              PRESENT LAW

    The HITECH Act established incentives for physicians and 
other professionals, collectively referred to as ``eligible 
professionals'', and for hospitals to adopt EHR technology that 
meet certain certification standards. The HITECH Act provided 
Medicare incentive payments over several years to encourage and 
assist providers as they adopted certified EHR technology. 
Physicians can receive up to a total of $44,000. The incentive 
payments are phased out over time and replaced with penalties, 
in the form of payment reductions, for those who have not 
adopted certified systems. Physicians who fail to use certified 
systems face payment reductions that range from 1 percent to 5 
percent.
    The Secretary determined that physicians must furnish at 
least 50 percent of their patient encounters during the 
reporting period in locations with certified EHR technology to 
be eligible for the Medicare incentive program. HITECH excluded 
the services of physicians who furnish ``substantially all'' of 
their services in an inpatient hospital or hospital emergency 
department using the facilities' EHR system. The Secretary has 
implemented this provision, in part, by offering all physicians 
in certain ``hospital-based'' specialties, such as 
anesthesiology and pathology, a long-term hardship exception. 
The Secretary has determined that physician encounters 
furnished in an ASC are included in the total number of 
encounters of which at least 50 percent have to be furnished in 
a setting with certified EHR technology. Many physicians who 
practice in an ASC can apply for a hardship exception annually 
based on the notion that these circumstances that are beyond 
their control.
    HITECH requires physicians (and hospitals) to use certified 
EHR technology to receive incentive payments and avoid payment 
reductions. The Secretary maintains a voluntary process by 
which vendors of EHR technology seek certification for their 
products. As HITECH did not include ASC facilities in the 
Medicare EHR incentive program, development of EHR products for 
the ASC setting has not been a priority.

                           REASONS FOR CHANGE

    Including ASC patient encounters in the total number of 
patient encounters of which at least 50 percent have to be 
furnished in a setting with certified EHR technology puts 
physicians who practice in the ASC setting at a disadvantage. 
It holds them accountable for using certified EHR technology 
despite the fact that there are a limited number and type of 
EHR systems suitable for ASCs. Physicians who practice in an 
ASC without certified EHR technology have less-than-ideal 
options for avoiding a payment reduction. They can apply for a 
time-limited, hardship exception, which takes away an incentive 
for them to have a certified EHR in their office practice. They 
can move ASC services to the hospital outpatient department 
setting, which has higher cost for beneficiaries and the 
Medicare program.

                        EXPLANATION OF PROVISION

    The Electronic Health Fairness Act of 2015 would exclude 
ASC services from being counted toward the 50 percent 
meaningful use eligibility threshold until certified EHR 
systems applicable to the ASC setting are available. The 
exclusion ends three years after the Secretary makes the 
determination, in consultation with stakeholders, that such 
systems are available.

                             EFFECTIVE DATE

    The bill would take effect beginning January 1, 2016.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statements are made 
concerning the votes of the Committee on its consideration of 
H.R. 887.
    H.R. 887 was ordered favorably reported with an amendment 
in the nature of a substitute to the House of Representatives 
by voice vote (with a quorum present).

                          Votes on Amendments

    The amendment in the nature of a substitute was passed 
favorably by voice vote (with a quorum present).

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the revenue provisions 
of the bill, H.R. 887 as reported: The Committee agrees with 
the estimates prepared by the Congressional Budget Office 
(CBO), which are included below.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    The bill as reported is in compliance with clause 3(c)(2) 
of rule XIII of the Rules of the House of Representatives. 
Further, the bill involves no new or increased tax expenditures 
and no new budget authority.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 12, 2015.
Hon. Paul Ryan,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 887, the 
Electronic Health Fairness Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Zoee 
Williams.
            Sincerely,
                                        Robert A. Sunshine,
                              (For Douglas W. Elmendorf, Director).
    Enclosure.

H.R. 887--Electronic Health Fairness Act of 2015

    Summary: Under current law, a physician or other 
professional may be subject to payment reductions for services 
furnished to Medicare beneficiaries if the provider fails to 
achieve ``meaningful use'' of electronic health record (EHR) 
technology. The meaningful use standard requires that at least 
half of a provider's encounters with patients occur in a 
setting that uses certified EHR technology. H.R. 887 would 
temporarily exclude services furnished in an ambulatory 
surgical center (ASC) from counting as patient encounters for 
the purpose of determining whether a provider achieves 
meaningful use of EHR technology.
    CBO estimates that enacting H.R. 887 would increase direct 
spending by $17 million over the fiscal year 2016-2020 period, 
but would have no further budgetary effect after 2020. Pay-as-
you-go procedures apply because enacting the legislation would 
affect direct spending.
    H.R. 887 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary effect of H.R. 887 is shown in the following table. 
The costs of this legislation fall within budget function 570 
(Medicare).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  By fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2016    2017    2018    2019    2020    2021    2022    2023    2024    2025   2016-2020  2016-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING
 
Estimated Budget Authority........................       0       4       5       6       2       0       0       0       0       0        17         17
Estimated Outlays.................................       0       4       5       6       2       0       0       0       0       0        17         17
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Basis of estimate: H.R. 887 would amend the criteria used 
to determine whether an eligible professional achieves 
meaningful use of EHR technology. To qualify as a meaningful 
EHR user under current law, an eligible professional must 
conduct 50 percent of patient encounters at a place of service 
that is equipped with certified EHR technology. Beginning in 
2015, Medicare's payment rates will be reduced by between 1 
percent and 5 percent for providers who fail to meet the 
meaningful-use criteria.
    H.R. 887 would exclude services furnished at an ASC from 
being counted as patient encounters for the purpose of 
determining whether a provider satisfies the 50 percent 
threshold. Very few ASCs currently have certified EHR 
technology. The legislation would make it easier for 
professionals who conduct a significant number of patient 
encounters in the ASC setting to qualify as meaningful users of 
EHR technology. CBO estimates that enacting H.R. 887 would 
enable almost 2,000 providers to avoid payment reductions that 
otherwise would average about $3,000 a year.
    For this estimate, CBO assumes that H.R. 887 will be 
enacted in the spring of 2015. As a result, the bill would 
affect determinations of meaningful use beginning in 2016 and 
its provisions would no longer apply three years after the 
Secretary of the Department of Health and Human Services 
determines, through notice and comment rulemaking, that 
certified EHR technology is applicable to ASCs. For this 
estimate, CBO assumes that, during the rulemaking process for 
2016, the Secretary will determine that EHR technology is 
applicable to the ASC setting. Therefore, we expect that 
enacting H.R. 887 would affect the determination of meaningful 
use for services performed during calendar years 2016 through 
2018.
    The reduction in Medicare payment rates for providers who 
fail to achieve meaningful use is applied to services furnished 
during the calendar year following the year in which the 
services are provided. By affecting meaningful use 
determinations for services performed in calendar years 2016 
through 2018, enacting H.R. 887 would prevent some payment 
reductions and thus increase spending during fiscal years 2017 
through 2020.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays that are subject to those 
pay-as-you-go procedures are shown in the following table.

          CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 887, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON FEBRUARY 26, 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                             2015    2016    2017    2018    2019    2020    2021    2022    2023    2024    2025   2015-2020  2015-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact............       0       0       4       5       6       2       0       0       0       0       0        17         17
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: H.R. 887 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal Costs: Zoee Williams; Impact 
on State, Local, and Tribal Governments: J'Nell Blanco Suchy; 
Impact on the Private Sector: Amy Petz.
    Estimate approved by: Holly Harvey, Deputy Assistant 
Director for Budget Analysis.

   V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE OF 
                            REPRESENTATIVES


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee concluded that it was appropriate and timely to 
enact the sections included in the bill, as reported.

        B. Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the performance goals and 
objectives of the Committee are reflected in the descriptive 
portions of this report.

                   C. Duplication of Federal Programs

    In compliance with Sec. 3(g)(2) of H. Res. 5 (114th 
Congress), the Committee states that no provision of the bill 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169).

                 D. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

              E. Information Related to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Act of 1995 (Pub. L. No. 104-4). The 
bill does not impose a Federal mandate on the private sector. 
The bill does not impose a Federal intergovernmental mandate on 
State, local, or tribal governments.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee states that the 
provisions of the bill do not contain any congressional 
earmarks, limited tax benefits, or limited tariff benefits 
within the meaning of the rule.

          VI. CHANGES IN EXISTING LAW BY THE BILL, AS REPORTED

    With respect to clause 3(e) of rule XIII of the Rules of 
the House of Representatives, H.R. 887 makes the following 
changes to current law.

       Changes in Existing Law Proposed by the Bill, as Reported

  In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
proposed by the bill, as reported, are shown as follows (new 
matter is printed in italic and existing law in which no change 
is proposed is shown in roman):

SOCIAL SECURITY ACT

           *       *       *       *       *       *       *



TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *



   Part B--Supplementary Medical Insurance Benefits for the Aged and 
Disabled

           *       *       *       *       *       *       *



                    PAYMENT FOR PHYSICIANS' SERVICES

  Sec. 1848. (a) Payment Based on Fee Schedule.--
          (1) In general.--Effective for all physicians' 
        services (as defined in subsection (j)(3)) furnished 
        under this part during a year (beginning with 1992) for 
        which payment is otherwise made on the basis of a 
        reasonable charge or on the basis of a fee schedule 
        under section 1834(b), payment under this part shall 
        instead be based on the lesser of--
                  (A) the actual charge for the service, or
                  (B) subject to the succeeding provisions of 
                this subsection, the amount determined under 
                the fee schedule established under subsection 
                (b) for services furnished during that year (in 
                this subsection referred to as the ``fee 
                schedule amount'').
          (2) Transition to full fee schedule.--
                  (A) Limiting reductions and increases to 15 
                percent in 1992.--
                          (i) Limit on increase.--In the case 
                        of a service in a fee schedule area (as 
                        defined in subsection (j)(2)) for which 
                        the adjusted historical payment basis 
                        (as defined in subparagraph (D)) is 
                        less than 85 percent of the fee 
                        schedule amount for services furnished 
                        in 1992, there shall be substituted for 
                        the fee schedule amount an amount equal 
                        to the adjusted historical payment 
                        basis plus 15 percent of the fee 
                        schedule amount otherwise established 
                        (without regard to this paragraph).
                          (ii) Limit in reduction.--In the case 
                        of a service in a fee schedule area for 
                        which the adjusted historical payment 
                        basis exceeds 115 percent of the fee 
                        schedule amount for services furnished 
                        in 1992, there shall be substituted for 
                        the fee schedule amount an amount equal 
                        to the adjusted historical payment 
                        basis minus 15 percent of the fee 
                        schedule amount otherwise established 
                        (without regard to this paragraph).
                  (B) Special rule for 1993, 1994, and 1995.--
                If a physicians' service in a fee schedule area 
                is subject to the provisions of subparagraph 
                (A) in 1992, for physicians' services furnished 
                in the area--
                          (i) during 1993, there shall be 
                        substituted for the fee schedule amount 
                        an amount equal to the sum of--
                                  (I) 75 percent of the fee 
                                schedule amount determined 
                                under subparagraph (A), 
                                adjusted by the update 
                                established under subsection 
                                (d)(3) for 1993, and
                                  (II) 25 percent of the fee 
                                schedule amount determined 
                                under paragraph (1) for 1993 
                                without regard to this 
                                paragraph;
                          (ii) during 1994, there shall be 
                        substituted for the fee schedule amount 
                        an amount equal to the sum of--
                                  (I) 67 percent of the fee 
                                schedule amount determined 
                                under clause (i), adjusted by 
                                the update established under 
                                subsection (d)(3) for 1994 and 
                                as adjusted under subsection 
                                (c)(2)(F)(ii) and under section 
                                13515(b) of the Omnibus Budget 
                                Reconciliation Act of 1993, and
                                  (II) 33 percent of the fee 
                                schedule amount determined 
                                under paragraph (1) for 1994 
                                without regard to this 
                                paragraph; and
                          (iii) during 1995, there shall be 
                        substituted for the fee schedule amount 
                        an amount equal to the sum of--
                                  (I) 50 percent of the fee 
                                schedule amount determined 
                                under clause (ii) adjusted by 
                                the update established under 
                                subsection (d)(3) for 1995, and
                                  (II) 50 percent of the fee 
                                schedule amount determined 
                                under paragraph (1) for 1995 
                                without regard to this 
                                paragraph.
                  (C) Special rule for anesthesia and radiology 
                services.--With respect to physicians' services 
                which are anesthesia services, the Secretary 
                shall provide for a transition in the same 
                manner as a transition is provided for other 
                services under subparagraph (B). With respect 
                to radiology services, ``109 percent'' and ``9 
                percent'' shall be substituted for ``115 
                percent'' and ``15 percent'', respectively, in 
                subparagraph (A)(ii).
                  (D) Adjusted historical payment basis 
                defined.--
                          (i) In general.--In this paragraph, 
                        the term ``adjusted historical payment 
                        basis'' means, with respect to a 
                        physicians' service furnished in a fee 
                        schedule area, the weighted average 
                        prevailing charge applied in the area 
                        for the service in 1991 (as determined 
                        by the Secretary without regard to 
                        physician specialty and as adjusted to 
                        reflect payments for services with 
                        customary charges below the prevailing 
                        charge or other payment limitations 
                        imposed by law or regulation) adjusted 
                        by the update established under 
                        subsection (d)(3) for 1992.
                          (ii) Application to radiology 
                        services.--In applying clause (i) in 
                        the case of physicians' services which 
                        are radiology services (including 
                        radiologist services, as defined in 
                        section 1834(b)(6)), but excluding 
                        nuclear medicine services that are 
                        subject to section 6105(b) of the 
                        Omnibus Budget Reconciliation Act of 
                        1989, there shall be substituted for 
                        the weighted average prevailing charge 
                        the amount provided under the fee 
                        schedule established for the service 
                        for the fee schedule area under section 
                        1834(b).
                          (iii) Nuclear medicine services.--In 
                        applying clause (i) in the case of 
                        physicians' services which are nuclear 
                        medicine services, there shall be 
                        substituted for the weighted average 
                        prevailing charge the amount provided 
                        under section 6105(b) of the Omnibus 
                        Budget Reconciliation Act of 1989.
          (3) Incentives for participating physicians and 
        suppliers.--In applying paragraph (1)(B) in the case of 
        a nonparticipating physician or a nonparticipating 
        supplier or other person, the fee schedule amount shall 
        be 95 percent of such amount otherwise applied under 
        this subsection (without regard to this paragraph). In 
        the case of physicians' services (including services 
        which the Secretary excludes pursuant to subsection 
        (j)(3)) of a nonparticipating physician, supplier, or 
        other person for which payment is made under this part 
        on a basis other than the fee schedule amount, the 
        payment shall be based on 95 percent of the payment 
        basis for such services furnished by a participating 
        physician, supplier, or other person.
          (4) Special rule for medical direction.--
                  (A) In general.--With respect to physicians' 
                services furnished on or after January 1, 1994, 
                and consisting of medical direction of two, 
                three, or four concurrent anesthesia cases, 
                except as provided in paragraph (5), the fee 
                schedule amount to be applied shall be equal to 
                one-half of the amount described in 
                subparagraph (B).
                  (B) Amount.--The amount described in this 
                subparagraph, for a physician's medical 
                direction of the performance of anesthesia 
                services, is the following percentage of the 
                fee schedule amount otherwise applicable under 
                this section if the anesthesia services were 
                personally performed by the physician alone:
                          (i) For services furnished during 
                        1994, 120 percent.
                          (ii) For services furnished during 
                        1995, 115 percent.
                          (iii) For services furnished during 
                        1996, 110 percent.
                          (iv) For services furnished during 
                        1997, 105 percent.
                          (v) For services furnished after 
                        1997, 100 percent.
          (5) Incentives for electronic prescribing.--
                  (A) Adjustment.--
                          (i) In general.--Subject to 
                        subparagraph (B) and subsection 
                        (m)(2)(B), with respect to covered 
                        professional services furnished by an 
                        eligible professional during 2012, 2013 
                        or 2014, if the eligible professional 
                        is not a successful electronic 
                        prescriber for the reporting period for 
                        the year (as determined under 
                        subsection (m)(3)(B)), the fee schedule 
                        amount for such services furnished by 
                        such professional during the year 
                        (including the fee schedule amount for 
                        purposes of determining a payment based 
                        on such amount) shall be equal to the 
                        applicable percent of the fee schedule 
                        amount that would otherwise apply to 
                        such services under this subsection 
                        (determined after application of 
                        paragraph (3) but without regard to 
                        this paragraph).
                          (ii) Applicable percent.--For 
                        purposes of clause (i), the term 
                        ``applicable percent'' means--
                                  (I) for 2012, 99 percent;
                                  (II) for 2013, 98.5 percent; 
                                and
                                  (III) for 2014, 98 percent.
                  (B) Significant hardship exception.--The 
                Secretary may, on a case-by-case basis, exempt 
                an eligible professional from the application 
                of the payment adjustment under subparagraph 
                (A) if the Secretary determines, subject to 
                annual renewal, that compliance with the 
                requirement for being a successful electronic 
                prescriber would result in a significant 
                hardship, such as in the case of an eligible 
                professional who practices in a rural area 
                without sufficient Internet access.
                  (C) Application.--
                          (i) Physician reporting system 
                        rules.--Paragraphs (5), (6), and (8) of 
                        subsection (k) shall apply for purposes 
                        of this paragraph in the same manner as 
                        they apply for purposes of such 
                        subsection.
                          (ii) Incentive payment validation 
                        rules.--Clauses (ii) and (iii) of 
                        subsection (m)(5)(D) shall apply for 
                        purposes of this paragraph in a similar 
                        manner as they apply for purposes of 
                        such subsection.
                  (D) Definitions.--For purposes of this 
                paragraph:
                          (i) Eligible professional; covered 
                        professional services.--The terms 
                        ``eligible professional'' and ``covered 
                        professional services'' have the 
                        meanings given such terms in subsection 
                        (k)(3).
                          (ii) Physician reporting system.--The 
                        term ``physician reporting system'' 
                        means the system established under 
                        subsection (k).
                          (iii) Reporting period.--The term 
                        ``reporting period'' means, with 
                        respect to a year, a period specified 
                        by the Secretary.
          (6) Special rule for teaching anesthesiologists.--
        With respect to physicians' services furnished on or 
        after January 1, 2010, in the case of teaching 
        anesthesiologists involved in the training of physician 
        residents in a single anesthesia case or two concurrent 
        anesthesia cases, the fee schedule amount to be applied 
        shall be 100 percent of the fee schedule amount 
        otherwise applicable under this section if the 
        anesthesia services were personally performed by the 
        teaching anesthesiologist alone and paragraph (4) shall 
        not apply if--
                  (A) the teaching anesthesiologist is present 
                during all critical or key portions of the 
                anesthesia service or procedure involved; and
                  (B) the teaching anesthesiologist (or another 
                anesthesiologist with whom the teaching 
                anesthesiologist has entered into an 
                arrangement) is immediately available to 
                furnish anesthesia services during the entire 
                procedure.
          (7) Incentives for meaningful use of certified ehr 
        technology.--
                  (A) Adjustment.--
                          (i) In general.--Subject to 
                        subparagraphs (B) and (D), with respect 
                        to covered professional services 
                        furnished by an eligible professional 
                        during 2015 or any subsequent payment 
                        year, if the eligible professional is 
                        not a meaningful EHR user (as 
                        determined under subsection (o)(2)) for 
                        an EHR reporting period for the year, 
                        the fee schedule amount for such 
                        services furnished by such professional 
                        during the year (including the fee 
                        schedule amount for purposes of 
                        determining a payment based on such 
                        amount) shall be equal to the 
                        applicable percent of the fee schedule 
                        amount that would otherwise apply to 
                        such services under this subsection 
                        (determined after application of 
                        paragraph (3) but without regard to 
                        this paragraph).
                          (ii) Applicable percent.--Subject to 
                        clause (iii), for purposes of clause 
                        (i), the term ``applicable percent'' 
                        means--
                                  (I) for 2015, 99 percent (or, 
                                in the case of an eligible 
                                professional who was subject to 
                                the application of the payment 
                                adjustment under section 
                                1848(a)(5) for 2014, 98 
                                percent);
                                  (II) for 2016, 98 percent; 
                                and
                                  (III) for 2017 and each 
                                subsequent year, 97 percent.
                          (iii) Authority to decrease 
                        applicable percentage for 2018 and 
                        subsequent years.--For 2018 and each 
                        subsequent year, if the Secretary finds 
                        that the proportion of eligible 
                        professionals who are meaningful EHR 
                        users (as determined under subsection 
                        (o)(2)) is less than 75 percent, the 
                        applicable percent shall be decreased 
                        by 1 percentage point from the 
                        applicable percent in the preceding 
                        year, but in no case shall the 
                        applicable percent be less than 95 
                        percent.
                  (B) Significant hardship exception.--The 
                Secretary may, on a case-by-case basis, exempt 
                an eligible professional from the application 
                of the payment adjustment under subparagraph 
                (A) if the Secretary determines, subject to 
                annual renewal, that compliance with the 
                requirement for being a meaningful EHR user 
                would result in a significant hardship, such as 
                in the case of an eligible professional who 
                practices in a rural area without sufficient 
                Internet access. In no case may an eligible 
                professional be granted an exemption under this 
                subparagraph for more than 5 years.
                  (C) Application of physician reporting system 
                rules.--Paragraphs (5), (6), and (8) of 
                subsection (k) shall apply for purposes of this 
                paragraph in the same manner as they apply for 
                purposes of such subsection.
                  (D) Non-application to hospital-based 
                eligible professionals.--No payment adjustment 
                may be made under subparagraph (A) in the case 
                of hospital-based eligible professionals (as 
                defined in subsection (o)(1)(C)(ii)).
                  (E) Definitions.--For purposes of this 
                paragraph:
                          (i) Covered professional services.--
                        The term ``covered professional 
                        services'' has the meaning given such 
                        term in subsection (k)(3).
                          (ii) EHR reporting period.--The term 
                        ``EHR reporting period'' means, with 
                        respect to a year, a period (or 
                        periods) specified by the Secretary.
                          (iii) Eligible professional.--The 
                        term ``eligible professional'' means a 
                        physician, as defined in section 
                        1861(r).
          (8) Incentives for quality reporting.--
                  (A) Adjustment.--
                          (i) In general.--With respect to 
                        covered professional services furnished 
                        by an eligible professional during 2015 
                        or any subsequent year, if the eligible 
                        professional does not satisfactorily 
                        submit data on quality measures for 
                        covered professional services for the 
                        quality reporting period for the year 
                        (as determined under subsection 
                        (m)(3)(A)), the fee schedule amount for 
                        such services furnished by such 
                        professional during the year (including 
                        the fee schedule amount for purposes of 
                        determining a payment based on such 
                        amount) shall be equal to the 
                        applicable percent of the fee schedule 
                        amount that would otherwise apply to 
                        such services under this subsection 
                        (determined after application of 
                        paragraphs (3), (5), and (7), but 
                        without regard to this paragraph).
                          (ii) Applicable percent.--For 
                        purposes of clause (i), the term 
                        ``applicable percent'' means--
                                  (I) for 2015, 98.5 percent; 
                                and
                                  (II) for 2016 and each 
                                subsequent year, 98 percent.
                  (B) Application.--
                          (i) Physician reporting system 
                        rules.--Paragraphs (5), (6), and (8) of 
                        subsection (k) shall apply for purposes 
                        of this paragraph in the same manner as 
                        they apply for purposes of such 
                        subsection.
                          (ii) Incentive payment validation 
                        rules.--Clauses (ii) and (iii) of 
                        subsection (m)(5)(D) shall apply for 
                        purposes of this paragraph in a similar 
                        manner as they apply for purposes of 
                        such subsection.
                  (C) Definitions.--For purposes of this 
                paragraph:
                          (i) Eligible professional; covered 
                        professional services.--The terms 
                        ``eligible professional'' and ``covered 
                        professional services'' have the 
                        meanings given such terms in subsection 
                        (k)(3).
                          (ii) Physician reporting system.--The 
                        term ``physician reporting system'' 
                        means the system established under 
                        subsection (k).
                          (iii) Quality reporting period.--The 
                        term ``quality reporting period'' 
                        means, with respect to a year, a period 
                        specified by the Secretary.
  (b) Establishment of Fee Schedules.--
          (1) In general.--Before November 1 of the preceding 
        year, for each year beginning with 1998, subject to 
        subsection (p), the Secretary shall establish, by 
        regulation, fee schedules that establish payment 
        amounts for all physicians' services furnished in all 
        fee schedule areas (as defined in subsection (j)(2)) 
        for the year. Except as provided in paragraph (2), each 
        such payment amount for a service shall be equal to the 
        product of--
                  (A) the relative value for the service (as 
                determined in subsection (c)(2)),
                  (B) the conversion factor (established under 
                subsection (d)) for the year, and
                  (C) the geographic adjustment factor 
                (established under subsection (e)(2)) for the 
                service for the fee schedule area.
          (2) Treatment of radiology services and anesthesia 
        services.--
                  (A) Radiology services.--With respect to 
                radiology services (including radiologist 
                services, as defined in section 1834(b)(6)), 
                the Secretary shall base the relative values on 
                the relative value scale developed under 
                section 1834(b)(1)(A), with appropriate 
                modifications of the relative values to assure 
                that the relative values established for 
                radiology services which are similar or related 
                to other physicians' services are consistent 
                with the relative values established for those 
                similar or related services.
                  (B) Anesthesia services.--In establishing the 
                fee schedule for anesthesia services for which 
                a relative value guide has been established 
                under section 4048(b) of the Omnibus Budget 
                Reconciliation Act of 1987, the Secretary shall 
                use, to the extent practicable, such relative 
                value guide, with appropriate adjustment of the 
                conversion factor, in a manner to assure that 
                the fee schedule amounts for anesthesia 
                services are consistent with the fee schedule 
                amounts for other services determined by the 
                Secretary to be of comparable value. In 
                applying the previous sentence, the Secretary 
                shall adjust the conversion factor by 
                geographic adjustment factors in the same 
                manner as such adjustment is made under 
                paragraph (1)(C).
                  (C) Consultation.--The Secretary shall 
                consult with the Physician Payment Review 
                Commission and organizations representing 
                physicians or suppliers who furnish radiology 
                services and anesthesia services in applying 
                subparagraphs (A) and (B).
          (3) Treatment of interpretation of 
        electrocardiograms.--The Secretary--
                  (A) shall make separate payment under this 
                section for the interpretation of 
                electrocardiograms performed or ordered to be 
                performed as part of or in conjunction with a 
                visit to or a consultation with a physician, 
                and
                  (B) shall adjust the relative values 
                established for visits and consultations under 
                subsection (c) so as not to include relative 
                value units for interpretations of 
                electrocardiograms in the relative value for 
                visits and consultations.
          (4) Special rule for imaging services.--
                  (A) In general.--In the case of imaging 
                services described in subparagraph (B) 
                furnished on or after January 1, 2007, if--
                          (i) the technical component 
                        (including the technical component 
                        portion of a global fee) of the service 
                        established for a year under the fee 
                        schedule described in paragraph (1) 
                        without application of the geographic 
                        adjustment factor described in 
                        paragraph (1)(C), exceeds
                          (ii) the Medicare OPD fee schedule 
                        amount established under the 
                        prospective payment system for hospital 
                        outpatient department services under 
                        paragraph (3)(D) of section 1833(t) for 
                        such service for such year, determined 
                        without regard to geographic adjustment 
                        under paragraph (2)(D) of such section,
                the Secretary shall substitute the amount 
                described in clause (ii), adjusted by the 
                geographic adjustment factor described in 
                paragraph (1)(C), for the fee schedule amount 
                for such technical component for such year.
                  (B) Imaging services described.--For purposes 
                of this paragraph, imaging services described 
                in this subparagraph are imaging and computer-
                assisted imaging services, including X-ray, 
                ultrasound (including echocardiography), 
                nuclear medicine (including positron emission 
                tomography), magnetic resonance imaging, 
                computed tomography, and fluoroscopy, but 
                excluding diagnostic and screening mammography, 
                and for 2010, 2011, and the first 2 months of 
                2012, dual-energy x-ray absorptiometry services 
                (as described in paragraph (6)).
                  (C) Adjustment in imaging utilization rate.--
                With respect to fee schedules established for 
                2011, 2012, and 2013, in the methodology for 
                determining practice expense relative value 
                units for expensive diagnostic imaging 
                equipment under the final rule published by the 
                Secretary in the Federal Register on November 
                25, 2009 (42 CFR 410 et al.), the Secretary 
                shall use a 75 percent assumption instead of 
                the utilization rates otherwise established in 
                such final rule. With respect to fee schedules 
                established for 2014 and subsequent years, in 
                such methodology, the Secretary shall use a 90 
                percent utilization rate.
                  (D) Adjustment in technical component 
                discount on single-session imaging involving 
                consecutive body parts.--For services furnished 
                on or after July 1, 2010, the Secretary shall 
                increase the reduction in payments attributable 
                to the multiple procedure payment reduction 
                applicable to the technical component for 
                imaging under the final rule published by the 
                Secretary in the Federal Register on November 
                21, 2005 (part 405 of title 42, Code of Federal 
                Regulations) from 25 percent to 50 percent.
          (5) Treatment of intensive cardiac rehabilitation 
        program.--
                  (A) In general.--In the case of an intensive 
                cardiac rehabilitation program described in 
                section 1861(eee)(4), the Secretary shall 
                substitute the Medicare OPD fee schedule amount 
                established under the prospective payment 
                system for hospital outpatient department 
                service under paragraph (3)(D) of section 
                1833(t) for cardiac rehabilitation (under HCPCS 
                codes 93797 and 93798 for calendar year 2007, 
                or any succeeding HCPCS codes for cardiac 
                rehabilitation).
                  (B) Definition of session.--Each of the 
                services described in subparagraphs (A) through 
                (E) of section 1861(eee)(3), when furnished for 
                one hour, is a separate session of intensive 
                cardiac rehabilitation.
                  (C) Multiple sessions per day.--Payment may 
                be made for up to 6 sessions per day of the 
                series of 72 one-hour sessions of intensive 
                cardiac rehabilitation services described in 
                section 1861(eee)(4)(B).
          (6) Treatment of bone mass scans.--For dual-energy x-
        ray absorptiometry services (identified in 2006 by 
        HCPCS codes 76075 and 76077 (and any succeeding codes)) 
        furnished during 2010, 2011, and the first 2 months of 
        2012, instead of the payment amount that would 
        otherwise be determined under this section for such 
        years, the payment amount shall be equal to 70 percent 
        of the product of--
                  (A) the relative value for the service (as 
                determined in subsection (c)(2)) for 2006;
                  (B) the conversion factor (established under 
                subsection (d)) for 2006; and
                  (C) the geographic adjustment factor 
                (established under subsection (e)(2)) for the 
                service for the fee schedule area for 2010, 
                2011, and the first 2 months of 2012, 
                respectively.
          (7) Adjustment in discount for certain multiple 
        therapy services.--In the case of therapy services 
        furnished on or after January 1, 2011, and before April 
        1, 2013, and for which payment is made under fee 
        schedules established under this section, instead of 
        the 25 percent multiple procedure payment reduction 
        specified in the final rule published by the Secretary 
        in the Federal Register on November 29, 2010, the 
        reduction percentage shall be 20 percent. In the case 
        of such services furnished on or after April 1, 2013, 
        and for which payment is made under such fee schedules, 
        instead of the 25 percent multiple procedure payment 
        reduction specified in such final rule, the reduction 
        percentage shall be 50 percent.
  (c) Determination of Relative Values for Physicians' 
Services.--
          (1) Division of physicians' services into 
        components.--In this section, with respect to a 
        physicians' service:
                  (A) Work component defined.--The term ``work 
                component'' means the portion of the resources 
                used in furnishing the service that reflects 
                physician time and intensity in furnishing the 
                service. Such portion shall--
                          (i) include activities before and 
                        after direct patient contact, and
                          (ii) be defined, with respect to 
                        surgical procedures, to reflect a 
                        global definition including pre-
                        operative and post-operative 
                        physicians' services.
                  (B) Practice expense component defined.--The 
                term ``practice expense component'' means the 
                portion of the resources used in furnishing the 
                service that reflects the general categories of 
                expenses (such as office rent and wages of 
                personnel, but excluding malpractice expenses) 
                comprising practice expenses.
                  (C) Malpractice component defined.--The term 
                ``malpractice component'' means the portion of 
                the resources used in furnishing the service 
                that reflects malpractice expenses in 
                furnishing the service.
          (2) Determination of relative values.--
                  (A) In general.--
                          (i) Combination of units for 
                        components.--The Secretary shall 
                        develop a methodology for combining the 
                        work, practice expense, and malpractice 
                        relative value units, determined under 
                        subparagraph (C), for each service in a 
                        manner to produce a single relative 
                        value for that service. Such relative 
                        values are subject to adjustment under 
                        subparagraph (F)(i) and section 
                        13515(b) of the Omnibus Budget 
                        Reconciliation Act of 1993.
                          (ii) Extrapolation.--The Secretary 
                        may use extrapolation and other 
                        techniques to determine the number of 
                        relative value units for physicians' 
                        services for which specific data are 
                        not available and shall take into 
                        account recommendations of the 
                        Physician Payment Review Commission and 
                        the results of consultations with 
                        organizations representing physicians 
                        who provide such services.
                  (B) Periodic review and adjustments in 
                relative values.--
                          (i) Periodic review.--The Secretary, 
                        not less often than every 5 years, 
                        shall review the relative values 
                        established under this paragraph for 
                        all physicians' services.
                          (ii) Adjustments.--
                                  (I) In general.--The 
                                Secretary shall, to the extent 
                                the Secretary determines to be 
                                necessary and subject to 
                                subclause (II) and paragraph 
                                (7), adjust the number of such 
                                units to take into account 
                                changes in medical practice, 
                                coding changes, new data on 
                                relative value components, or 
                                the addition of new procedures. 
                                The Secretary shall publish an 
                                explanation of the basis for 
                                such adjustments.
                                  (II) Limitation on annual 
                                adjustments.--Subject to 
                                clauses (iv) and (v), the 
                                adjustments under subclause (I) 
                                for a year may not cause the 
                                amount of expenditures under 
                                this part for the year to 
                                differ by more than $20,000,000 
                                from the amount of expenditures 
                                under this part that would have 
                                been made if such adjustments 
                                had not been made.
                          (iii) Consultation.--The Secretary, 
                        in making adjustments under clause 
                        (ii), shall consult with the Medicare 
                        Payment Advisory Commission and 
                        organizations representing physicians.
                          (iv) Exemption of certain additional 
                        expenditures from budget neutrality.--
                        The additional expenditures 
                        attributable to--
                                  (I) subparagraph (H) shall 
                                not be taken into account in 
                                applying clause (ii)(II) for 
                                2004;
                                  (II) subparagraph (I) insofar 
                                as it relates to a physician 
                                fee schedule for 2005 or 2006 
                                shall not be taken into account 
                                in applying clause (ii)(II) for 
                                drug administration services 
                                under the fee schedule for such 
                                year for a specialty described 
                                in subparagraph (I)(ii)(II);
                                  (III) subparagraph (J) 
                                insofar as it relates to a 
                                physician fee schedule for 2005 
                                or 2006 shall not be taken into 
                                account in applying clause 
                                (ii)(II) for drug 
                                administration services under 
                                the fee schedule for such year; 
                                and
                                  (IV) subsection (b)(6) shall 
                                not be taken into account in 
                                applying clause (ii)(II) for 
                                2010, 2011, or the first 2 
                                months of 2012.
                          (v) Exemption of certain reduced 
                        expenditures from budget-neutrality 
                        calculation.--The following reduced 
                        expenditures, as estimated by the 
                        Secretary, shall not be taken into 
                        account in applying clause (ii)(II):
                                  (I) Reduced payment for 
                                multiple imaging procedures.--
                                Effective for fee schedules 
                                established beginning with 
                                2007, reduced expenditures 
                                attributable to the multiple 
                                procedure payment reduction for 
                                imaging under the final rule 
                                published by the Secretary in 
                                the Federal Register on 
                                November 21, 2005 (42 CFR 405, 
                                et al.) insofar as it relates 
                                to the physician fee schedules 
                                for 2006 and 2007.
                                  (II) OPD payment cap for 
                                imaging services.--Effective 
                                for fee schedules established 
                                beginning with 2007, reduced 
                                expenditures attributable to 
                                subsection (b)(4).
                                  (III) Change in utilization 
                                rate for certain imaging 
                                services.--Effective for fee 
                                schedules established beginning 
                                with 2011, reduced expenditures 
                                attributable to the changes in 
                                the utilization rate applicable 
                                to 2011 and 2014, as described 
                                in the first and second 
                                sentence, respectively, of 
                                subsection (b)(4)(C).
                                  (VI) Additional reduced 
                                payment for multiple imaging 
                                procedures.--Effective for fee 
                                schedules established beginning 
                                with 2010 (but not applied for 
                                services furnished prior to 
                                July 1, 2010), reduced 
                                expenditures attributable to 
                                the increase in the multiple 
                                procedure payment reduction 
                                from 25 to 50 percent (as 
                                described in subsection 
                                (b)(4)(D)).
                                  (VII) Reduced expenditures 
                                for multiple therapy 
                                services.--Effective for fee 
                                schedules established beginning 
                                with 2011, reduced expenditures 
                                attributable to the multiple 
                                procedure payment reduction for 
                                therapy services (as described 
                                in subsection (b)(7)).
                                  (VIII) Reduced expenditures 
                                attributable to application of 
                                quality incentives for computed 
                                tomography.--Effective for fee 
                                schedules established beginning 
                                with 2016, reduced expenditures 
                                attributable to the application 
                                of the quality incentives for 
                                computed tomography under 
                                section 1834(p).
                                  (IX) Reductions for misvalued 
                                services if target not met.--
                                Effective for fee schedules 
                                beginning with 2016, reduced 
                                expenditures attributable to 
                                the application of the target 
                                recapture amount described in 
                                subparagraph (O)(iii).
                          (vi) Alternative application of 
                        budget-neutrality adjustment.--
                        Notwithstanding subsection (d)(9)(A), 
                        effective for fee schedules established 
                        beginning with 2009, with respect to 
                        the 5-year review of work relative 
                        value units used in fee schedules for 
                        2007 and 2008, in lieu of continuing to 
                        apply budget-neutrality adjustments 
                        required under clause (ii) for 2007 and 
                        2008 to work relative value units, the 
                        Secretary shall apply such budget-
                        neutrality adjustments to the 
                        conversion factor otherwise determined 
                        for years beginning with 2009.
                  (C) Computation of relative value units for 
                components.--For purposes of this section for 
                each physicians' service--
                          (i) Work relative value units.--The 
                        Secretary shall determine a number of 
                        work relative value units for the 
                        service or group of services based on 
                        the relative resources incorporating 
                        physician time and intensity required 
                        in furnishing the service or group of 
                        services.
                          (ii) Practice expense relative value 
                        units.--The Secretary shall determine a 
                        number of practice expense relative 
                        value units for the service for years 
                        before 1999 equal to the product of--
                                  (I) the base allowed charges 
                                (as defined in subparagraph 
                                (D)) for the service, and
                                  (II) the practice expense 
                                percentage for the service (as 
                                determined under paragraph 
                                (3)(C)(ii)),
                        and for years beginning with 1999 based 
                        on the relative practice expense 
                        resources involved in furnishing the 
                        service or group of services. For 1999, 
                        such number of units shall be 
                        determined based 75 percent on such 
                        product and based 25 percent on the 
                        relative practice expense resources 
                        involved in furnishing the service. For 
                        2000, such number of units shall be 
                        determined based 50 percent on such 
                        product and based 50 percent on such 
                        relative practice expense resources. 
                        For 2001, such number of units shall be 
                        determined based 25 percent on such 
                        product and based 75 percent on such 
                        relative practice expense resources. 
                        For a subsequent year, such number of 
                        units shall be determined based 
                        entirely on such relative practice 
                        expense resources.
                          (iii) Malpractice relative value 
                        units.--The Secretary shall determine a 
                        number of malpractice relative value 
                        units for the service or group of 
                        services for years before 2000 equal to 
                        the product of--
                                  (I) the base allowed charges 
                                (as defined in subparagraph 
                                (D)) for the service or group 
                                of services, and
                                  (II) the malpractice 
                                percentage for the service or 
                                group of services (as 
                                determined under paragraph 
                                (3)(C)(iii)),
                        and for years beginning with 2000 based 
                        on the malpractice expense resources 
                        involved in furnishing the service or 
                        group of services.
                  (D) Base allowed charges defined.--In this 
                paragraph, the term ``base allowed charges'' 
                means, with respect to a physician's service, 
                the national average allowed charges for the 
                service under this part for services furnished 
                during 1991, as estimated by the Secretary 
                using the most recent data available.
                  (E) Reduction in practice expense relative 
                value units for certain services.--
                          (i) In general.--Subject to clause 
                        (ii), the Secretary shall reduce the 
                        practice expense relative value units 
                        applied to services described in clause 
                        (iii) furnished in--
                                  (I) 1994, by 25 percent of 
                                the number by which the number 
                                of practice expense relative 
                                value units (determined for 
                                1994 without regard to this 
                                subparagraph) exceeds the 
                                number of work relative value 
                                units determined for 1994,
                                  (II) 1995, by an additional 
                                25 percent of such excess, and
                                  (III) 1996, by an additional 
                                25 percent of such excess.
                          (ii) Floor on reductions.--The 
                        practice expense relative value units 
                        for a physician's service shall not be 
                        reduced under this subparagraph to a 
                        number less than 128 percent of the 
                        number of work relative value units.
                          (iii) Services covered.--For purposes 
                        of clause (i), the services described 
                        in this clause are physicians' services 
                        that are not described in clause (iv) 
                        and for which--
                                  (I) there are work relative 
                                value units, and
                                  (II) the number of practice 
                                expense relative value units 
                                (determined for 1994) exceeds 
                                128 percent of the number of 
                                work relative value units 
                                (determined for such year).
                          (iv) Excluded services.--For purposes 
                        of clause (iii), the services described 
                        in this clause are services which the 
                        Secretary determines at least 75 
                        percent of which are provided under 
                        this title in an office setting.
                  (F) Budget neutrality adjustments.--The 
                Secretary--
                          (i) shall reduce the relative values 
                        for all services (other than anesthesia 
                        services) established under this 
                        paragraph (and in the case of 
                        anesthesia services, the conversion 
                        factor established by the Secretary for 
                        such services) by such percentage as 
                        the Secretary determines to be 
                        necessary so that, beginning in 1996, 
                        the amendment made by section 13514(a) 
                        of the Omnibus Budget Reconciliation 
                        Act of 1993 would not result in 
                        expenditures under this section that 
                        exceed the amount of such expenditures 
                        that would have been made if such 
                        amendment had not been made, and
                          (ii) shall reduce the amounts 
                        determined under subsection 
                        (a)(2)(B)(ii)(I) by such percentage as 
                        the Secretary determines to be required 
                        to assure that, taking into account the 
                        reductions made under clause (i), the 
                        amendment made by section 13514(a) of 
                        the Omnibus Budget Reconciliation Act 
                        of 1993 would not result in 
                        expenditures under this section in 1994 
                        that exceed the amount of such 
                        expenditures that would have been made 
                        if such amendment had not been made.
                  (G) Adjustments in relative value units for 
                1998.--
                          (i) In general.--The Secretary 
                        shall--
                                  (I) subject to clauses (iv) 
                                and (v), reduce the practice 
                                expense relative value units 
                                applied to any services 
                                described in clause (ii) 
                                furnished in 1998 to a number 
                                equal to 110 percent of the 
                                number of work relative value 
                                units, and
                                  (II) increase the practice 
                                expense relative value units 
                                for office visit procedure 
                                codes during 1998 by a uniform 
                                percentage which the Secretary 
                                estimates will result in an 
                                aggregate increase in payments 
                                for such services equal to the 
                                aggregate decrease in payments 
                                by reason of subclause (I).
                          (ii) Services covered.--For purposes 
                        of clause (i), the services described 
                        in this clause are physicians' services 
                        that are not described in clause (iii) 
                        and for which--
                                  (I) there are work relative 
                                value units, and
                                  (II) the number of practice 
                                expense relative value units 
                                (determined for 1998) exceeds 
                                110 percent of the number of 
                                work relative value units 
                                (determined for such year).
                          (iii) Excluded services.--For 
                        purposes of clause (ii), the services 
                        described in this clause are services 
                        which the Secretary determines at least 
                        75 percent of which are provided under 
                        this title in an office setting.
                          (iv) Limitation on aggregate 
                        reallocation.--If the application of 
                        clause (i)(I) would result in an 
                        aggregate amount of reductions under 
                        such clause in excess of $390,000,000, 
                        such clause shall be applied by 
                        substituting for 110 percent such 
                        greater percentage as the Secretary 
                        estimates will result in the aggregate 
                        amount of such reductions equaling 
                        $390,000,000.
                          (v) No reduction for certain 
                        services.--Practice expense relative 
                        value units for a procedure performed 
                        in an office or in a setting out of an 
                        office shall not be reduced under 
                        clause (i) if the in-office or out-of-
                        office practice expense relative value, 
                        respectively, for the procedure would 
                        increase under the proposed rule on 
                        resource-based practice expenses issued 
                        by the Secretary on June 18, 1997 (62 
                        Federal Register 33158 et seq.).
                  (H) Adjustments in practice expense relative 
                value units for certain drug administration 
                services beginning in 2004.--
                          (i) Use of survey data.--In 
                        establishing the physician fee schedule 
                        under subsection (b) with respect to 
                        payments for services furnished on or 
                        after January 1, 2004, the Secretary 
                        shall, in determining practice expense 
                        relative value units under this 
                        subsection, utilize a survey submitted 
                        to the Secretary as of January 1, 2003, 
                        by a physician specialty organization 
                        pursuant to section 212 of the 
                        Medicare, Medicaid, and SCHIP Balanced 
                        Budget Refinement Act of 1999 if the 
                        survey--
                                  (I) covers practice expenses 
                                for oncology drug 
                                administration services; and
                                  (II) meets criteria 
                                established by the Secretary 
                                for acceptance of such surveys.
                          (ii) Pricing of clinical oncology 
                        nurses in practice expense 
                        methodology.--If the survey described 
                        in clause (i) includes data on wages, 
                        salaries, and compensation of clinical 
                        oncology nurses, the Secretary shall 
                        utilize such data in the methodology 
                        for determining practice expense 
                        relative value units under subsection 
                        (c).
                          (iii) Work relative value units for 
                        certain drug administration services.--
                        In establishing the relative value 
                        units under this paragraph for drug 
                        administration services described in 
                        clause (iv) furnished on or after 
                        January 1, 2004, the Secretary shall 
                        establish work relative value units 
                        equal to the work relative value units 
                        for a level 1 office medical visit for 
                        an established patient.
                          (iv) Drug administration services 
                        described.--The drug administration 
                        services described in this clause are 
                        physicians' services--
                                  (I) which are classified as 
                                of October 1, 2003, within any 
                                of the following groups of 
                                procedures: therapeutic or 
                                diagnostic infusions (excluding 
                                chemotherapy); chemotherapy 
                                administration services; and 
                                therapeutic, prophylactic, or 
                                diagnostic injections;
                                  (II) for which there are no 
                                work relative value units 
                                assigned under this subsection 
                                as of such date; and
                                  (III) for which national 
                                relative value units have been 
                                assigned under this subsection 
                                as of such date.
                  (I) Adjustments in practice expense relative 
                value units for certain drug administration 
                services beginning with 2005.--
                          (i) In general.--In establishing the 
                        physician fee schedule under subsection 
                        (b) with respect to payments for 
                        services furnished on or after January 
                        1, 2005 or 2006, the Secretary shall 
                        adjust the practice expense relative 
                        value units for such year consistent 
                        with clause (ii).
                          (ii) Use of supplemental survey 
                        data.--
                                  (I) In general.--Subject to 
                                subclause (II), if a specialty 
                                submits to the Secretary by not 
                                later than March 1, 2004, for 
                                2005, or March 1, 2005, for 
                                2006, data that includes 
                                expenses for the administration 
                                of drugs and biologicals for 
                                which the payment amount is 
                                determined pursuant to section 
                                1842(o), the Secretary shall 
                                use such supplemental survey 
                                data in carrying out this 
                                subparagraph for the years 
                                involved insofar as they are 
                                collected and provided by 
                                entities and organizations 
                                consistent with the criteria 
                                established by the Secretary 
                                pursuant to section 212(a) of 
                                the Medicare, Medicaid, and 
                                SCHIP Balanced Budget 
                                Refinement Act of 1999.
                                  (II) Limitation on 
                                specialty.--Subclause (I) shall 
                                apply to a specialty only 
                                insofar as not less than 40 
                                percent of payments for the 
                                specialty under this title in 
                                2002 are attributable to the 
                                administration of drugs and 
                                biologicals, as determined by 
                                the Secretary.
                                  (III) Application.--This 
                                clause shall not apply with 
                                respect to a survey to which 
                                subparagraph (H)(i) applies.
                  (J) Provisions for appropriate reporting and 
                billing for physicians' services associated 
                with the administration of covered outpatient 
                drugs and biologicals.--
                          (i) Evaluation of codes.--The 
                        Secretary shall promptly evaluate 
                        existing drug administration codes for 
                        physicians' services to ensure accurate 
                        reporting and billing for such 
                        services, taking into account levels of 
                        complexity of the administration and 
                        resource consumption.
                          (ii) Use of existing processes.--In 
                        carrying out clause (i), the Secretary 
                        shall use existing processes for the 
                        consideration of coding changes and, to 
                        the extent coding changes are made, 
                        shall use such processes in 
                        establishing relative values for such 
                        services.
                          (iii) Implementation.--In carrying 
                        out clause (i), the Secretary shall 
                        consult with representatives of 
                        physician specialties affected by the 
                        implementation of section 1847A or 
                        section 1847B, and shall take such 
                        steps within the Secretary's authority 
                        to expedite such considerations under 
                        clause (ii).
                          (iv) Subsequent, budget neutral 
                        adjustments permitted.--Nothing in 
                        subparagraph (H) or (I) or this 
                        subparagraph shall be construed as 
                        preventing the Secretary from providing 
                        for adjustments in practice expense 
                        relative value units under (and 
                        consistent with) subparagraph (B) for 
                        years after 2004, 2005, or 2006, 
                        respectively.
                  (K) Potentially misvalued codes.--
                          (i) In general.--The Secretary 
                        shall--
                                  (I) periodically identify 
                                services as being potentially 
                                misvalued using criteria 
                                specified in clause (ii); and
                                  (II) review and make 
                                appropriate adjustments to the 
                                relative values established 
                                under this paragraph for 
                                services identified as being 
                                potentially misvalued under 
                                subclause (I).
                          (ii) Identification of potentially 
                        misvalued codes.--For purposes of 
                        identifying potentially misvalued codes 
                        pursuant to clause (i)(I), the 
                        Secretary shall examine codes (and 
                        families of codes as appropriate) based 
                        on any or all of the following 
                        criteria:
                                  (I) Codes that have 
                                experienced the fastest growth.
                                  (II) Codes that have 
                                experienced substantial changes 
                                in practice expenses.
                                  (III) Codes that describe new 
                                technologies or services within 
                                an appropriate time period 
                                (such as 3 years) after the 
                                relative values are initially 
                                established for such codes.
                                  (IV) Codes which are multiple 
                                codes that are frequently 
                                billed in conjunction with 
                                furnishing a single service.
                                  (V) Codes with low relative 
                                values, particularly those that 
                                are often billed multiple times 
                                for a single treatment.
                                  (VI) Codes that have not been 
                                subject to review since 
                                implementation of the fee 
                                schedule.
                                  (VII) Codes that account for 
                                the majority of spending under 
                                the physician fee schedule.
                                  (VIII) Codes for services 
                                that have experienced a 
                                substantial change in the 
                                hospital length of stay or 
                                procedure time.
                                  (IX) Codes for which there 
                                may be a change in the typical 
                                site of service since the code 
                                was last valued.
                                  (X) Codes for which there is 
                                a significant difference in 
                                payment for the same service 
                                between different sites of 
                                service.
                                  (XI) Codes for which there 
                                may be anomalies in relative 
                                values within a family of 
                                codes.
                                  (XII) Codes for services 
                                where there may be efficiencies 
                                when a service is furnished at 
                                the same time as other 
                                services.
                                  (XIII) Codes with high intra-
                                service work per unit of time.
                                  (XIV) Codes with high 
                                practice expense relative value 
                                units.
                                  (XV) Codes with high cost 
                                supplies.
                                  (XVI) Codes as determined 
                                appropriate by the Secretary.
                          (iii) Review and adjustments.--
                                  (I) The Secretary may use 
                                existing processes to receive 
                                recommendations on the review 
                                and appropriate adjustment of 
                                potentially misvalued services 
                                described in clause (i)(II).
                                  (II) The Secretary may 
                                conduct surveys, other data 
                                collection activities, studies, 
                                or other analyses as the 
                                Secretary determines to be 
                                appropriate to facilitate the 
                                review and appropriate 
                                adjustment described in clause 
                                (i)(II).
                                  (III) The Secretary may use 
                                analytic contractors to 
                                identify and analyze services 
                                identified under clause (i)(I), 
                                conduct surveys or collect 
                                data, and make recommendations 
                                on the review and appropriate 
                                adjustment of services 
                                described in clause (i)(II).
                                  (IV) The Secretary may 
                                coordinate the review and 
                                appropriate adjustment 
                                described in clause (i)(II) 
                                with the periodic review 
                                described in subparagraph (B).
                                  (V) As part of the review and 
                                adjustment described in clause 
                                (i)(II), including with respect 
                                to codes with low relative 
                                values described in clause 
                                (ii), the Secretary may make 
                                appropriate coding revisions 
                                (including using existing 
                                processes for consideration of 
                                coding changes) which may 
                                include consolidation of 
                                individual services into 
                                bundled codes for payment under 
                                the fee schedule under 
                                subsection (b).
                                  (VI) The provisions of 
                                subparagraph (B)(ii)(II) and 
                                paragraph (7) shall apply to 
                                adjustments to relative value 
                                units made pursuant to this 
                                subparagraph in the same manner 
                                as such provisions apply to 
                                adjustments under subparagraph 
                                (B)(ii)(I).
                  (L) Validating relative value units.--
                          (i) In general.--The Secretary shall 
                        establish a process to validate 
                        relative value units under the fee 
                        schedule under subsection (b).
                          (ii) Components and elements of 
                        work.--The process described in clause 
                        (i) may include validation of work 
                        elements (such as time, mental effort 
                        and professional judgment, technical 
                        skill and physical effort, and stress 
                        due to risk) involved with furnishing a 
                        service and may include validation of 
                        the pre-, post-, and intra-service 
                        components of work.
                          (iii) Scope of codes.--The validation 
                        of work relative value units shall 
                        include a sampling of codes for 
                        services that is the same as the codes 
                        listed under subparagraph (K)(ii).
                          (iv) Methods.--The Secretary may 
                        conduct the validation under this 
                        subparagraph using methods described in 
                        subclauses (I) through (V) of 
                        subparagraph (K)(iii) as the Secretary 
                        determines to be appropriate.
                          (v) Adjustments.--The Secretary shall 
                        make appropriate adjustments to the 
                        work relative value units under the fee 
                        schedule under subsection (b). The 
                        provisions of subparagraph (B)(ii)(II) 
                        shall apply to adjustments to relative 
                        value units made pursuant to this 
                        subparagraph in the same manner as such 
                        provisions apply to adjustments under 
                        subparagraph (B)(ii)(II).
                  (M) Authority to collect and use information 
                on physicians' services in the determination of 
                relative values.--
                          (i) Collection of information.--
                        Notwithstanding any other provision of 
                        law, the Secretary may collect or 
                        obtain information on the resources 
                        directly or indirectly related to 
                        furnishing services for which payment 
                        is made under the fee schedule 
                        established under subsection (b). Such 
                        information may be collected or 
                        obtained from any eligible professional 
                        or any other source.
                          (ii) Use of information.--
                        Notwithstanding any other provision of 
                        law, subject to clause (v), the 
                        Secretary may (as the Secretary 
                        determines appropriate) use information 
                        collected or obtained pursuant to 
                        clause (i) in the determination of 
                        relative values for services under this 
                        section.
                          (iii) Types of information.--The 
                        types of information described in 
                        clauses (i) and (ii) may, at the 
                        Secretary's discretion, include any or 
                        all of the following:
                                  (I) Time involved in 
                                furnishing services.
                                  (II) Amounts and types of 
                                practice expense inputs 
                                involved with furnishing 
                                services.
                                  (III) Prices (net of any 
                                discounts) for practice expense 
                                inputs, which may include paid 
                                invoice prices or other 
                                documentation or records.
                                  (IV) Overhead and accounting 
                                information for practices of 
                                physicians and other suppliers.
                                  (V) Any other element that 
                                would improve the valuation of 
                                services under this section.
                          (iv) Information collection 
                        mechanisms.--Information may be 
                        collected or obtained pursuant to this 
                        subparagraph from any or all of the 
                        following:
                                  (I) Surveys of physicians, 
                                other suppliers, providers of 
                                services, manufacturers, and 
                                vendors.
                                  (II) Surgical logs, billing 
                                systems, or other practice or 
                                facility records.
                                  (III) Electronic health 
                                records.
                                  (IV) Any other mechanism 
                                determined appropriate by the 
                                Secretary.
                          (v) Transparency of use of 
                        information.--
                                  (I) In general.--Subject to 
                                subclauses (II) and (III), if 
                                the Secretary uses information 
                                collected or obtained under 
                                this subparagraph in the 
                                determination of relative 
                                values under this subsection, 
                                the Secretary shall disclose 
                                the information source and 
                                discuss the use of such 
                                information in such 
                                determination of relative 
                                values through notice and 
                                comment rulemaking.
                                  (II) Thresholds for use.--The 
                                Secretary may establish 
                                thresholds in order to use such 
                                information, including the 
                                exclusion of information 
                                collected or obtained from 
                                eligible professionals who use 
                                very high resources (as 
                                determined by the Secretary) in 
                                furnishing a service.
                                  (III) Disclosure of 
                                information.--The Secretary 
                                shall make aggregate 
                                information available under 
                                this subparagraph but shall not 
                                disclose information in a form 
                                or manner that identifies an 
                                eligible professional or a 
                                group practice, or information 
                                collected or obtained pursuant 
                                to a nondisclosure agreement.
                          (vi) Incentive to participate.--The 
                        Secretary may provide for such payments 
                        under this part to an eligible 
                        professional that submits such 
                        solicited information under this 
                        subparagraph as the Secretary 
                        determines appropriate in order to 
                        compensate such eligible professional 
                        for such submission. Such payments 
                        shall be provided in a form and manner 
                        specified by the Secretary.
                          (vii) Administration.--Chapter 35 of 
                        title 44, United States Code, shall not 
                        apply to information collected or 
                        obtained under this subparagraph.
                          (viii) Definition of eligible 
                        professional.--In this subparagraph, 
                        the term ``eligible professional'' has 
                        the meaning given such term in 
                        subsection (k)(3)(B).
                          (ix) Funding.--For purposes of 
                        carrying out this subparagraph, in 
                        addition to funds otherwise 
                        appropriated, the Secretary shall 
                        provide for the transfer, from the 
                        Federal Supplementary Medical Insurance 
                        Trust Fund under section 1841, of 
                        $2,000,000 to the Centers for Medicare 
                        & Medicaid Services Program Management 
                        Account for each fiscal year beginning 
                        with fiscal year 2014. Amounts 
                        transferred under the preceding 
                        sentence for a fiscal year shall be 
                        available until expended.
                  (N) Authority for alternative approaches to 
                establishing practice expense relative 
                values.--The Secretary may establish or adjust 
                practice expense relative values under this 
                subsection using cost, charge, or other data 
                from suppliers or providers of services, 
                including information collected or obtained 
                under subparagraph (M).
                  (O) Target for relative value adjustments for 
                misvalued services.--With respect to fee 
                schedules established for each of 2016 through 
                2018, the following shall apply:
                          (i) Determination of net reduction in 
                        expenditures.--For each year, the 
                        Secretary shall determine the estimated 
                        net reduction in expenditures under the 
                        fee schedule under this section with 
                        respect to the year as a result of 
                        adjustments to the relative values 
                        established under this paragraph for 
                        misvalued codes.
                          (ii) Budget neutral redistribution of 
                        funds if target met and counting 
                        overages towards the target for the 
                        succeeding year.--If the estimated net 
                        reduction in expenditures determined 
                        under clause (i) for the year is equal 
                        to or greater than the target for the 
                        year--
                                  (I) reduced expenditures 
                                attributable to such 
                                adjustments shall be 
                                redistributed for the year in a 
                                budget neutral manner in 
                                accordance with subparagraph 
                                (B)(ii)(II); and
                                  (II) the amount by which such 
                                reduced expenditures exceeds 
                                the target for the year shall 
                                be treated as a reduction in 
                                expenditures described in 
                                clause (i) for the succeeding 
                                year, for purposes of 
                                determining whether the target 
                                has or has not been met under 
                                this subparagraph with respect 
                                to that year.
                          (iii) Exemption from budget 
                        neutrality if target not met.--If the 
                        estimated net reduction in expenditures 
                        determined under clause (i) for the 
                        year is less than the target for the 
                        year, reduced expenditures in an amount 
                        equal to the target recapture amount 
                        shall not be taken into account in 
                        applying subparagraph (B)(ii)(II) with 
                        respect to fee schedules beginning with 
                        2016.
                          (iv) Target recapture amount.--For 
                        purposes of clause (iii), the target 
                        recapture amount is, with respect to a 
                        year, an amount equal to the difference 
                        between--
                                  (I) the target for the year; 
                                and
                                  (II) the estimated net 
                                reduction in expenditures 
                                determined under clause (i) for 
                                the year.
                          (v) Target.--For purposes of this 
                        subparagraph, with respect to a year, 
                        the target is calculated as 0.5 percent 
                        (or, for 2016, 1.0 percent) of the 
                        estimated amount of expenditures under 
                        the fee schedule under this section for 
                        the year.
          (3) Component percentages.--For purposes of paragraph 
        (2), the Secretary shall determine a work percentage, a 
        practice expense percentage, and a malpractice 
        percentage for each physician's service as follows:
                  (A) Division of services by specialty.--For 
                each physician's service or class of 
                physicians' services, the Secretary shall 
                determine the average percentage of each such 
                service or class of services that is performed, 
                nationwide, under this part by physicians in 
                each of the different physician specialties (as 
                identified by the Secretary).
                  (B) Division of specialty by component.--The 
                Secretary shall determine the average 
                percentage division of resources, among the 
                work component, the practice expense component, 
                and the malpractice component, used by 
                physicians in each of such specialties in 
                furnishing physicians' services. Such 
                percentages shall be based on national data 
                that describe the elements of physician 
                practice costs and revenues, by physician 
                specialty. The Secretary may use extrapolation 
                and other techniques to determine practice 
                costs and revenues for specialties for which 
                adequate data are not available.
                  (C) Determination of component percentages.--
                          (i) Work percentage.--The work 
                        percentage for a service (or class of 
                        services) is equal to the sum (for all 
                        physician specialties) of--
                                  (I) the average percentage 
                                division for the work component 
                                for each physician specialty 
                                (determined under subparagraph 
                                (B)), multiplied by
                                  (II) the proportion 
                                (determined under subparagraph 
                                (A)) of such service (or 
                                services) performed by 
                                physicians in that specialty.
                          (ii) Practice expense percentage.--
                        For years before 2002, the practice 
                        expense percentage for a service (or 
                        class of services) is equal to the sum 
                        (for all physician specialties) of--
                                  (I) the average percentage 
                                division for the practice 
                                expense component for each 
                                physician specialty (determined 
                                under subparagraph (B)), 
                                multiplied by
                                  (II) the proportion 
                                (determined under subparagraph 
                                (A)) of such service (or 
                                services) performed by 
                                physicians in that specialty.
                          (iii) Malpractice percentage.--For 
                        years before 1999, the malpractice 
                        percentage for a service (or class of 
                        services) is equal to the sum (for all 
                        physician specialties) of--
                                  (I) the average percentage 
                                division for the malpractice 
                                component for each physician 
                                specialty (determined under 
                                subparagraph (B)), multiplied 
                                by
                                  (II) the proportion 
                                (determined under subparagraph 
                                (A)) of such service (or 
                                services) performed by 
                                physicians in that specialty.
                  (D) Periodic recomputation.--The Secretary 
                may, from time to time, provide for the 
                recomputation of work percentages, practice 
                expense percentages, and malpractice 
                percentages determined under this paragraph.
          (4) Ancillary policies.--The Secretary may establish 
        ancillary policies (with respect to the use of 
        modifiers, local codes, and other matters) as may be 
        necessary to implement this section.
          (5) Coding.--The Secretary shall establish a uniform 
        procedure coding system for the coding of all 
        physicians' services. The Secretary shall provide for 
        an appropriate coding structure for visits and 
        consultations. The Secretary may incorporate the use of 
        time in the coding for visits and consultations. The 
        Secretary, in establishing such coding system, shall 
        consult with the Physician Payment Review Commission 
        and other organizations representing physicians.
          (6) No variation for specialists.--The Secretary may 
        not vary the conversion factor or the number of 
        relative value units for a physicians' service based on 
        whether the physician furnishing the service is a 
        specialist or based on the type of specialty of the 
        physician.
          (7) Phase-in of significant relative value unit (rvu) 
        reductions.--Effective for fee schedules established 
        beginning with 2016, for services that are not new or 
        revised codes, if the total relative value units for a 
        service for a year would otherwise be decreased by an 
        estimated amount equal to or greater than 20 percent as 
        compared to the total relative value units for the 
        previous year, the applicable adjustments in work, 
        practice expense, and malpractice relative value units 
        shall be phased-in over a 2-year period.
  (d) Conversion Factors.--
          (1) Establishment.--
                  (A) In general.--The conversion factor for 
                each year shall be the conversion factor 
                established under this subsection for the 
                previous year (or, in the case of 1992, 
                specified in subparagraph (B)) adjusted by the 
                update (established under paragraph (3)) for 
                the year involved (for years before 2001) and, 
                for years beginning with 2001, multiplied by 
                the update (established under paragraph (4)) 
                for the year involved.
                  (B) Special provision for 1992.--For purposes 
                of subparagraph (A), the conversion factor 
                specified in this subparagraph is a conversion 
                factor (determined by the Secretary) which, if 
                this section were to apply during 1991 using 
                such conversion factor, would result in the 
                same aggregate amount of payments under this 
                part for physicians' services as the estimated 
                aggregate amount of the payments under this 
                part for such services in 1991.
                  (C) Special rules for 1998.--Except as 
                provided in subparagraph (D), the single 
                conversion factor for 1998 under this 
                subsection shall be the conversion factor for 
                primary care services for 1997, increased by 
                the Secretary's estimate of the weighted 
                average of the three separate updates that 
                would otherwise occur were it not for the 
                enactment of chapter 1 of subtitle F of title 
                IV of the Balanced Budget Act of 1997.
                  (D) Special rules for anesthesia services.--
                The separate conversion factor for anesthesia 
                services for a year shall be equal to 46 
                percent of the single conversion factor 
                established for other physicians' services, 
                except as adjusted for changes in work, 
                practice expense, or malpractice relative value 
                units.
                  (E) Publication and dissemination of 
                information.--The Secretary shall--
                          (i) cause to have published in the 
                        Federal Register not later than 
                        November 1 of each year (beginning with 
                        2000) the conversion factor which will 
                        apply to physicians' services for the 
                        succeeding year, the update determined 
                        under paragraph (4) for such succeeding 
                        year, and the allowed expenditures 
                        under such paragraph for such 
                        succeeding year; and
                          (ii) make available to the Medicare 
                        Payment Advisory Commission and the 
                        public by March 1 of each year 
                        (beginning with 2000) an estimate of 
                        the sustainable growth rate and of the 
                        conversion factor which will apply to 
                        physicians' services for the succeeding 
                        year and data used in making such 
                        estimate.
          (3) Update for 1999 and 2000.--
                  (A) In general.--Unless otherwise provided by 
                law, subject to subparagraph (D) and the 
                budget-neutrality factor determined by the 
                Secretary under subsection (c)(2)(B)(ii), the 
                update to the single conversion factor 
                established in paragraph (1)(C) for 1999 and 
                2000 is equal to the product of--
                          (i) 1 plus the Secretary's estimate 
                        of the percentage increase in the MEI 
                        (as defined in section 1842(i)(3)) for 
                        the year (divided by 100), and
                          (ii) 1 plus the Secretary's estimate 
                        of the update adjustment factor for the 
                        year (divided by 100),
                minus 1 and multiplied by 100.
                  (B) Update adjustment factor.--For purposes 
                of subparagraph (A)(ii), the ``update 
                adjustment factor'' for a year is equal (as 
                estimated by the Secretary) to--
                          (i) the difference between (I) the 
                        sum of the allowed expenditures for 
                        physicians' services (as determined 
                        under subparagraph (C)) for the period 
                        beginning April 1, 1997, and ending on 
                        March 31 of the year involved, and (II) 
                        the amount of actual expenditures for 
                        physicians' services furnished during 
                        the period beginning April 1, 1997, and 
                        ending on March 31 of the preceding 
                        year; divided by
                          (ii) the actual expenditures for 
                        physicians' services for the 12-month 
                        period ending on March 31 of the 
                        preceding year, increased by the 
                        sustainable growth rate under 
                        subsection (f) for the fiscal year 
                        which begins during such 12-month 
                        period.
                  (C) Determination of allowed expenditures.--
                For purposes of this paragraph and paragraph 
                (4), the allowed expenditures for physicians' 
                services for the 12-month period ending with 
                March 31 of--
                          (i) 1997 is equal to the actual 
                        expenditures for physicians' services 
                        furnished during such 12-month period, 
                        as estimated by the Secretary; or
                          (ii) a subsequent year is equal to 
                        the allowed expenditures for 
                        physicians' services for the previous 
                        year, increased by the sustainable 
                        growth rate under subsection (f) for 
                        the fiscal year which begins during 
                        such 12-month period.
                  (D) Restriction on variation from medicare 
                economic index.--Notwithstanding the amount of 
                the update adjustment factor determined under 
                subparagraph (B) for a year, the update in the 
                conversion factor under this paragraph for the 
                year may not be--
                          (i) greater than 100 times the 
                        following amount: (1.03 + (MEI 
                        percentage/100)) -1; or
                          (ii) less than 100 times the 
                        following amount: (0.93 + (MEI 
                        percentage/100)) -1,
                where ``MEI percentage'' means the Secretary's 
                estimate of the percentage increase in the MEI 
                (as defined in section 1842(i)(3)) for the year 
                involved.
          (4) Update for years beginning with 2001.--
                  (A) In general.--Unless otherwise provided by 
                law, subject to the budget-neutrality factor 
                determined by the Secretary under subsection 
                (c)(2)(B)(ii) and subject to adjustment under 
                subparagraph (F), the update to the single 
                conversion factor established in paragraph 
                (1)(C) for a year beginning with 2001 is equal 
                to the product of--
                          (i) 1 plus the Secretary's estimate 
                        of the percentage increase in the MEI 
                        (as defined in section 1842(i)(3)) for 
                        the year (divided by 100); and
                          (ii) 1 plus the Secretary's estimate 
                        of the update adjustment factor under 
                        subparagraph (B) for the year.
                  (B) Update adjustment factor.--For purposes 
                of subparagraph (A)(ii), subject to 
                subparagraph (D) and the succeeding paragraphs 
                of this subsection, the ``update adjustment 
                factor'' for a year is equal (as estimated by 
                the Secretary) to the sum of the following:
                          (i) Prior year adjustment 
                        component.--An amount determined by--
                                  (I) computing the difference 
                                (which may be positive or 
                                negative) between the amount of 
                                the allowed expenditures for 
                                physicians' services for the 
                                prior year (as determined under 
                                subparagraph (C)) and the 
                                amount of the actual 
                                expenditures for such services 
                                for that year;
                                  (II) dividing that difference 
                                by the amount of the actual 
                                expenditures for such services 
                                for that year; and
                                  (III) multiplying that 
                                quotient by 0.75.
                          (ii) Cumulative adjustment 
                        component.--An amount determined by--
                                  (I) computing the difference 
                                (which may be positive or 
                                negative) between the amount of 
                                the allowed expenditures for 
                                physicians' services (as 
                                determined under subparagraph 
                                (C)) from April 1, 1996, 
                                through the end of the prior 
                                year and the amount of the 
                                actual expenditures for such 
                                services during that period;
                                  (II) dividing that difference 
                                by actual expenditures for such 
                                services for the prior year as 
                                increased by the sustainable 
                                growth rate under subsection 
                                (f) for the year for which the 
                                update adjustment factor is to 
                                be determined; and
                                  (III) multiplying that 
                                quotient by 0.33.
                  (C) Determination of allowed expenditures.--
                For purposes of this paragraph:
                          (i) Period up to april 1, 1999.--The 
                        allowed expenditures for physicians' 
                        services for a period before April 1, 
                        1999, shall be the amount of the 
                        allowed expenditures for such period as 
                        determined under paragraph (3)(C).
                          (ii) Transition to calendar year 
                        allowed expenditures.--Subject to 
                        subparagraph (E), the allowed 
                        expenditures for--
                                  (I) the 9-month period 
                                beginning April 1, 1999, shall 
                                be the Secretary's estimate of 
                                the amount of the allowed 
                                expenditures that would be 
                                permitted under paragraph 
                                (3)(C) for such period; and
                                  (II) the year of 1999, shall 
                                be the Secretary's estimate of 
                                the amount of the allowed 
                                expenditures that would be 
                                permitted under paragraph 
                                (3)(C) for such year.
                          (iii) Years beginning with 2000.--The 
                        allowed expenditures for a year 
                        (beginning with 2000) is equal to the 
                        allowed expenditures for physicians' 
                        services for the previous year, 
                        increased by the sustainable growth 
                        rate under subsection (f) for the year 
                        involved.
                  (D) Restriction on update adjustment 
                factor.--The update adjustment factor 
                determined under subparagraph (B) for a year 
                may not be less than -0.07 or greater than 
                0.03.
                  (E) Recalculation of allowed expenditures for 
                updates beginning with 2001.--For purposes of 
                determining the update adjustment factor for a 
                year beginning with 2001, the Secretary shall 
                recompute the allowed expenditures for previous 
                periods beginning on or after April 1, 1999, 
                consistent with subsection (f)(3).
                  (F) Transitional adjustment designed to 
                provide for budget neutrality.--Under this 
                subparagraph the Secretary shall provide for an 
                adjustment to the update under subparagraph 
                (A)--
                          (i) for each of 2001, 2002, 2003, and 
                        2004, of -0.2 percent; and
                          (ii) for 2005 of +0.8 percent.
          (5) Update for 2004 and 2005.--The update to the 
        single conversion factor established in paragraph 
        (1)(C) for each of 2004 and 2005 shall be not less than 
        1.5 percent.
          (6) Update for 2006.--The update to the single 
        conversion factor established in paragraph (1)(C) for 
        2006 shall be 0 percent.
          (7) Conversion factor for 2007.--
                  (A) In general.--The conversion factor that 
                would otherwise be applicable under this 
                subsection for 2007 shall be the amount of such 
                conversion factor divided by the product of--
                          (i) 1 plus the Secretary's estimate 
                        of the percentage increase in the MEI 
                        (as defined in section 1842(i)(3)) for 
                        2007 (divided by 100); and
                          (ii) 1 plus the Secretary's estimate 
                        of the update adjustment factor under 
                        paragraph (4)(B) for 2007.
                  (B) No effect on computation of conversion 
                factor for 2008.--The conversion factor under 
                this subsection shall be computed under 
                paragraph (1)(A) for 2008 as if subparagraph 
                (A) had never applied.
          (8) Update for 2008.--
                  (A) In general.--Subject to paragraph (7)(B), 
                in lieu of the update to the single conversion 
                factor established in paragraph (1)(C) that 
                would otherwise apply for 2008, the update to 
                the single conversion factor shall be 0.5 
                percent.
                  (B) No effect on computation of conversion 
                factor for 2009.--The conversion factor under 
                this subsection shall be computed under 
                paragraph (1)(A) for 2009 and subsequent years 
                as if subparagraph (A) had never applied.
          (9) Update for 2009.--
                  (A) In general.--Subject to paragraphs (7)(B) 
                and (8)(B), in lieu of the update to the single 
                conversion factor established in paragraph 
                (1)(C) that would otherwise apply for 2009, the 
                update to the single conversion factor shall be 
                1.1 percent.
                  (B) No effect on computation of conversion 
                factor for 2010 and subsequent years.--The 
                conversion factor under this subsection shall 
                be computed under paragraph (1)(A) for 2010 and 
                subsequent years as if subparagraph (A) had 
                never applied.
          (10) Update for january through may of 2010.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), and (9)(B), in lieu of the 
                update to the single conversion factor 
                established in paragraph (1)(C) that would 
                otherwise apply for 2010 for the period 
                beginning on January 1, 2010, and ending on May 
                31, 2010, the update to the single conversion 
                factor shall be 0 percent for 2010.
                  (B) No effect on computation of conversion 
                factor for remaining portion of 2010 and 
                subsequent years.--The conversion factor under 
                this subsection shall be computed under 
                paragraph (1)(A) for the period beginning on 
                June 1, 2010, and ending on December 31, 2010, 
                and for 2011 and subsequent years as if 
                subparagraph (A) had never applied.
          (11) Update for june through december of 2010.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), (9)(B), and (10)(B), in lieu of 
                the update to the single conversion factor 
                established in paragraph (1)(C) that would 
                otherwise apply for 2010 for the period 
                beginning on June 1, 2010, and ending on 
                December 31, 2010, the update to the single 
                conversion factor shall be 2.2 percent.
                  (B) No effect on computation of conversion 
                factor for 2011 and subsequent years.--The 
                conversion factor under this subsection shall 
                be computed under paragraph (1)(A) for 2011 and 
                subsequent years as if subparagraph (A) had 
                never applied.
          (12) Update for 2011.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), (9)(B), (10)(B), and (11)(B), 
                in lieu of the update to the single conversion 
                factor established in paragraph (1)(C) that 
                would otherwise apply for 2011, the update to 
                the single conversion factor shall be 0 
                percent.
                  (B) No effect on computation of conversion 
                factor for 2012 and subsequent years.--The 
                conversion factor under this subsection shall 
                be computed under paragraph (1)(A) for 2012 and 
                subsequent years as if subparagraph (A) had 
                never applied.
          (13) Update for 2012.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), (9)(B), (10)(B), (11)(B), and 
                (12)(B), in lieu of the update to the single 
                conversion factor established in paragraph 
                (1)(C) that would otherwise apply for 2012, the 
                update to the single conversion factor shall be 
                zero percent.
                  (B) No effect on computation of conversion 
                factor for 2013 and subsequent years.--The 
                conversion factor under this subsection shall 
                be computed under paragraph (1)(A) for 2013 and 
                subsequent years as if subparagraph (A) had 
                never applied.
          (14) Update for 2013.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), (9)(B), (10)(B), (11)(B), 
                (12)(B), and (13)(B), in lieu of the update to 
                the single conversion factor established in 
                paragraph (1)(C) that would otherwise apply for 
                2013, the update to the single conversion 
                factor for such year shall be zero percent.
                  (B) No effect on computation of conversion 
                factor for 2014 and subsequent years.--The 
                conversion factor under this subsection shall 
                be computed under paragraph (1)(A) for 2014 and 
                subsequent years as if subparagraph (A) had 
                never applied.
          (15) Update for 2014.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), (9)(B), (10)(B), (11)(B), 
                (12)(B), (13)(B), and (14)(B), in lieu of the 
                update to the single conversion factor 
                established in paragraph (1)(C) that would 
                otherwise apply for 2014, the update to the 
                single conversion factor shall be 0.5 percent.
                  (B) No effect on computation of conversion 
                factor for subsequent years.--The conversion 
                factor under this subsection shall be computed 
                under paragraph (1)(A) for 2015 and subsequent 
                years as if subparagraph (A) had never applied.
          (16) Update for january through march of 2015.--
                  (A) In general.--Subject to paragraphs 
                (7)(B), (8)(B), (9)(B), (10)(B), (11)(B), 
                (12)(B), (13)(B), (14)(B), and (15)(B), in lieu 
                of the update to the single conversion factor 
                established in paragraph (1)(C) that would 
                otherwise apply for 2015 for the period 
                beginning on January 1, 2015, and ending on 
                March 31, 2015, the update to the single 
                conversion factor shall be 0.0 percent.
                  (B) No effect on computation of conversion 
                factor for remaining portion of 2015 and 
                subsequent years.--The conversion factor under 
                this subsection shall be computed under 
                paragraph (1)(A) for the period beginning on 
                April 1, 2015, and ending on December 31, 2015, 
                and for 2016 and subsequent years as if 
                subparagraph (A) had never applied.
  (e) Geographic Adjustment Factors.--
          (1) Establishment of geographic indices.--
                  (A) In general.--Subject to subparagraphs 
                (B), (C), (E), (G), (H), and (I), the Secretary 
                shall establish--
                          (i) an index which reflects the 
                        relative costs of the mix of goods and 
                        services comprising practice expenses 
                        (other than malpractice expenses) in 
                        the different fee schedule areas 
                        compared to the national average of 
                        such costs,
                          (ii) an index which reflects the 
                        relative costs of malpractice expenses 
                        in the different fee schedule areas 
                        compared to the national average of 
                        such costs, and
                          (iii) an index which reflects \1/4\ 
                        of the difference between the relative 
                        value of physicians' work effort in 
                        each of the different fee schedule 
                        areas and the national average of such 
                        work effort.
                  (B) Class-specific geographic cost-of-
                practice indices.--The Secretary may establish 
                more than one index under subparagraph (A)(i) 
                in the case of classes of physicians' services, 
                if, because of differences in the mix of goods 
                and services comprising practice expenses for 
                the different classes of services, the 
                application of a single index under such clause 
                to different classes of such services would be 
                substantially inequitable.
                  (C) Periodic review and adjustments in 
                geographic adjustment factors.--The Secretary, 
                not less often than every 3 years, shall, in 
                consultation with appropriate representatives 
                of physicians, review the indices established 
                under subparagraph (A) and the geographic index 
                values applied under this subsection for all 
                fee schedule areas. Based on such review, the 
                Secretary may revise such index and adjust such 
                index values, except that, if more than 1 year 
                has elapsed since the date of the last previous 
                adjustment, the adjustment to be applied in the 
                first year of the next adjustment shall be \1/
                2\ of the adjustment that otherwise would be 
                made.
                  (D) Use of recent data.--In establishing 
                indices and index values under this paragraph, 
                the Secretary shall use the most recent data 
                available relating to practice expenses, 
                malpractice expenses, and physician work effort 
                in different fee schedule areas.
                  (E) Floor at 1.0 on work geographic index.--
                After calculating the work geographic index in 
                subparagraph (A)(iii), for purposes of payment 
                for services furnished on or after January 1, 
                2004, and before April 1, 2015, the Secretary 
                shall increase the work geographic index to 
                1.00 for any locality for which such work 
                geographic index is less than 1.00.
                  (G) Floor for practice expense, malpractice, 
                and work geographic indices for services 
                furnished in alaska.--For purposes of payment 
                for services furnished in Alaska on or after 
                January 1, 2004, and before January 1, 2006, 
                after calculating the practice expense, 
                malpractice, and work geographic indices in 
                clauses (i), (ii), and (iii) of subparagraph 
                (A) and in subparagraph (B), the Secretary 
                shall increase any such index to 1.67 if such 
                index would otherwise be less than 1.67. For 
                purposes of payment for services furnished in 
                the State described in the preceding sentence 
                on or after January 1, 2009, after calculating 
                the work geographic index in subparagraph 
                (A)(iii), the Secretary shall increase the work 
                geographic index to 1.5 if such index would 
                otherwise be less than 1.5
                  (H) Practice expense geographic adjustment 
                for 2010 and subsequent years.--
                          (i) For 2010.--Subject to clause 
                        (iii), for services furnished during 
                        2010, the employee wage and rent 
                        portions of the practice expense 
                        geographic index described in 
                        subparagraph (A)(i) shall reflect \1/2\ 
                        of the difference between the relative 
                        costs of employee wages and rents in 
                        each of the different fee schedule 
                        areas and the national average of such 
                        employee wages and rents.
                          (ii) For 2011.--Subject to clause 
                        (iii), for services furnished during 
                        2011, the employee wage and rent 
                        portions of the practice expense 
                        geographic index described in 
                        subparagraph (A)(i) shall reflect \1/2\ 
                        of the difference between the relative 
                        costs of employee wages and rents in 
                        each of the different fee schedule 
                        areas and the national average of such 
                        employee wages and rents.
                          (iii) Hold harmless.--The practice 
                        expense portion of the geographic 
                        adjustment factor applied in a fee 
                        schedule area for services furnished in 
                        2010 or 2011 shall not, as a result of 
                        the application of clause (i) or (ii), 
                        be reduced below the practice expense 
                        portion of the geographic adjustment 
                        factor under subparagraph (A)(i) (as 
                        calculated prior to the application of 
                        such clause (i) or (ii), respectively) 
                        for such area for such year.
                          (iv) Analysis.--The Secretary shall 
                        analyze current methods of establishing 
                        practice expense geographic adjustments 
                        under subparagraph (A)(i) and evaluate 
                        data that fairly and reliably 
                        establishes distinctions in the costs 
                        of operating a medical practice in the 
                        different fee schedule areas. Such 
                        analysis shall include an evaluation of 
                        the following:
                                  (I) The feasibility of using 
                                actual data or reliable survey 
                                data developed by medical 
                                organizations on the costs of 
                                operating a medical practice, 
                                including office rents and non-
                                physician staff wages, in 
                                different fee schedule areas.
                                  (II) The office expense 
                                portion of the practice expense 
                                geographic adjustment described 
                                in subparagraph (A)(i), 
                                including the extent to which 
                                types of office expenses are 
                                determined in local markets 
                                instead of national markets.
                                  (III) The weights assigned to 
                                each of the categories within 
                                the practice expense geographic 
                                adjustment described in 
                                subparagraph (A)(i).
                          (v) Revision for 2012 and subsequent 
                        years.--As a result of the analysis 
                        described in clause (iv), the Secretary 
                        shall, not later than January 1, 2012, 
                        make appropriate adjustments to the 
                        practice expense geographic adjustment 
                        described in subparagraph (A)(i) to 
                        ensure accurate geographic adjustments 
                        across fee schedule areas, including--
                                  (I) basing the office rents 
                                component and its weight on 
                                office expenses that vary among 
                                fee schedule areas; and
                                  (II) considering a 
                                representative range of 
                                professional and non-
                                professional personnel employed 
                                in a medical office based on 
                                the use of the American 
                                Community Survey data or other 
                                reliable data for wage 
                                adjustments.
                        Such adjustments shall be made without 
                        regard to adjustments made pursuant to 
                        clauses (i) and (ii) and shall be made 
                        in a budget neutral manner.
                  (I) Floor for practice expense index for 
                services furnished in frontier states.--
                          (i) In general.--Subject to clause 
                        (ii), for purposes of payment for 
                        services furnished in a frontier State 
                        (as defined in section 
                        1886(d)(3)(E)(iii)(II)) on or after 
                        January 1, 2011, after calculating the 
                        practice expense index in subparagraph 
                        (A)(i), the Secretary shall increase 
                        any such index to 1.00 if such index 
                        would otherwise be less that 1.00. The 
                        preceding sentence shall not be applied 
                        in a budget neutral manner.
                          (ii) Limitation.--This subparagraph 
                        shall not apply to services furnished 
                        in a State that receives a non-labor 
                        related share adjustment under section 
                        1886(d)(5)(H).
          (2) Computation of geographic adjustment factor.--For 
        purposes of subsection (b)(1)(C), for all physicians' 
        services for each fee schedule area the Secretary shall 
        establish a geographic 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 geographic physician work adjustment 
        factor (specified in paragraph (5)) for the service and 
        the area.
          (3) Geographic cost-of-practice adjustment factor.--
        For purposes of paragraph (2), the ``geographic cost-
        of-practice adjustment factor'', for a service for a 
        fee schedule area, is the product of--
                  (A) the proportion of the total relative 
                value for the service that reflects the 
                relative value units for the practice expense 
                component, and
                  (B) the geographic cost-of-practice index 
                value for the area for the service, based on 
                the index established under paragraph (1)(A)(i) 
                or (1)(B) (as the case may be).
          (4) Geographic malpractice adjustment factor.--For 
        purposes of paragraph (2), the ``geographic malpractice 
        adjustment factor'', for a service for a fee schedule 
        area, is the product of--
                  (A) the proportion of the total relative 
                value for the service that reflects the 
                relative value units for the malpractice 
                component, and
                  (B) the geographic malpractice index value 
                for the area, based on the index established 
                under paragraph (1)(A)(ii).
          (5) Geographic physician work adjustment factor.--For 
        purposes of paragraph (2), the ``geographic physician 
        work adjustment factor'', for a service for a fee 
        schedule area, 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 geographic physician work index value 
                for the area, based on the index established 
                under paragraph (1)(A)(iii).
          (6) Use of msas as fee schedule areas in 
        california.--
                  (A) In general.--Subject to the succeeding 
                provisions of this paragraph and 
                notwithstanding the previous provisions of this 
                subsection, for services furnished on or after 
                January 1, 2017, the fee schedule areas used 
                for payment under this section applicable to 
                California shall be the following:
                          (i) Each Metropolitan Statistical 
                        Area (each in this paragraph referred 
                        to as an ``MSA''), as defined by the 
                        Director of the Office of Management 
                        and Budget as of December 31 of the 
                        previous year, shall be a fee schedule 
                        area.
                          (ii) All areas not included in an MSA 
                        shall be treated as a single rest-of-
                        State fee schedule area.
                  (B) Transition for msas previously in rest-
                of-state payment locality or in locality 3.--
                          (i) In general.--For services 
                        furnished in California during a year 
                        beginning with 2017 and ending with 
                        2021 in an MSA in a transition area (as 
                        defined in subparagraph (D)), subject 
                        to subparagraph (C), the geographic 
                        index values to be applied under this 
                        subsection for such year shall be equal 
                        to the sum of the following:
                                  (I) Current law component.--
                                The old weighting factor 
                                (described in clause (ii)) for 
                                such year multiplied by the 
                                geographic index values under 
                                this subsection for the fee 
                                schedule area that included 
                                such MSA that would have 
                                applied in such area (as 
                                estimated by the Secretary) if 
                                this paragraph did not apply.
                                  (II) MSA-based component.--
                                The MSA-based weighting factor 
                                (described in clause (iii)) for 
                                such year multiplied by the 
                                geographic index values 
                                computed for the fee schedule 
                                area under subparagraph (A) for 
                                the year (determined without 
                                regard to this subparagraph).
                          (ii) Old weighting factor.--The old 
                        weighting factor described in this 
                        clause--
                                  (I) for 2017, is \5/6\; and
                                  (II) for each succeeding 
                                year, is the old weighting 
                                factor described in this clause 
                                for the previous year minus \1/
                                6\.
                          (iii) MSA-based weighting factor.--
                        The MSA-based weighting factor 
                        described in this clause for a year is 
                        1 minus the old weighting factor under 
                        clause (ii) for that year.
                  (C) Hold harmless.--For services furnished in 
                a transition area in California during a year 
                beginning with 2017, the geographic index 
                values to be applied under this subsection for 
                such year shall not be less than the 
                corresponding geographic index values that 
                would have applied in such transition area (as 
                estimated by the Secretary) if this paragraph 
                did not apply.
                  (D) Transition area defined.--In this 
                paragraph, the term ``transition area'' means 
                each of the following fee schedule areas for 
                2013:
                          (i) The rest-of-State payment 
                        locality.
                          (ii) Payment locality 3.
                  (E) References to fee schedule areas.--
                Effective for services furnished on or after 
                January 1, 2017, for California, any reference 
                in this section to a fee schedule area shall be 
                deemed a reference to a fee schedule area 
                established in accordance with this paragraph.
  (f) Sustainable Growth Rate.--
          (1) Publication.--The Secretary shall cause to have 
        published in the Federal Register not later than--
                  (A) November 1, 2000, the sustainable growth 
                rate for 2000 and 2001; and
                  (B) November 1 of each succeeding year the 
                sustainable growth rate for such succeeding 
                year and each of the preceding 2 years.
          (2) Specification of growth rate.--The sustainable 
        growth rate for all physicians' services for a fiscal 
        year (beginning with fiscal year 1998 and ending with 
        fiscal year 2000) and a year beginning with 2000 shall 
        be equal to the product of--
                  (A) 1 plus the Secretary's estimate of the 
                weighted average percentage increase (divided 
                by 100) in the fees for all physicians' 
                services in the applicable period involved,
                  (B) 1 plus the Secretary's estimate of the 
                percentage change (divided by 100) in the 
                average number of individuals enrolled under 
                this part (other than Medicare+Choice plan 
                enrollees) from the previous applicable period 
                to the applicable period involved,
                  (C) 1 plus the Secretary's estimate of the 
                annual average percentage growth in real gross 
                domestic product per capita (divided by 100) 
                during the 10-year period ending with the 
                applicable period involved, and
                  (D) 1 plus the Secretary's estimate of the 
                percentage change (divided by 100) in 
                expenditures for all physicians' services in 
                the applicable period (compared with the 
                previous applicable period) which will result 
                from changes in law and regulations, determined 
                without taking into account estimated changes 
                in expenditures resulting from the update 
                adjustment factor determined under subsection 
                (d)(3)(B) or (d)(4)(B), as the case may be,
        minus 1 and multiplied by 100.
          (3) Data to be used.--For purposes of determining the 
        update adjustment factor under subsection (d)(4)(B) for 
        a year beginning with 2001, the sustainable growth 
        rates taken into consideration in the determination 
        under paragraph (2) shall be determined as follows:
                  (A) For 2001.--For purposes of such 
                calculations for 2001, the sustainable growth 
                rates for fiscal year 2000 and the years 2000 
                and 2001 shall be determined on the basis of 
                the best data available to the Secretary as of 
                September 1, 2000.
                  (B) For 2002.--For purposes of such 
                calculations for 2002, the sustainable growth 
                rates for fiscal year 2000 and for years 2000, 
                2001, and 2002 shall be determined on the basis 
                of the best data available to the Secretary as 
                of September 1, 2001.
                  (C) For 2003 and succeeding years.--For 
                purposes of such calculations for a year after 
                2002--
                          (i) the sustainable growth rates for 
                        that year and the preceding 2 years 
                        shall be determined on the basis of the 
                        best data available to the Secretary as 
                        of September 1 of the year preceding 
                        the year for which the calculation is 
                        made; and
                          (ii) the sustainable growth rate for 
                        any year before a year described in 
                        clause (i) shall be the rate as most 
                        recently determined for that year under 
                        this subsection.
        Nothing in this paragraph shall be construed as 
        affecting the sustainable growth rates established for 
        fiscal year 1998 or fiscal year 1999.
          (4) Definitions.--In this subsection:
                  (A) Services included in physicians' 
                services.--The term ``physicians' services'' 
                includes other items and services (such as 
                clinical diagnostic laboratory tests and 
                radiology services), specified by the 
                Secretary, that are commonly performed or 
                furnished by a physician or in a physician's 
                office, but does not include services furnished 
                to a Medicare+Choice plan enrollee.
                  (B) Medicare+choice plan enrollee.--The term 
                ``Medicare+Choice plan enrollee'' means, with 
                respect to a fiscal year, an individual 
                enrolled under this part who has elected to 
                receive benefits under this title for the 
                fiscal year through a Medicare+Choice plan 
                offered under part C, and also includes an 
                individual who is receiving benefits under this 
                part through enrollment with an eligible 
                organization with a risk-sharing contract under 
                section 1876.
                  (C) Applicable period.--The term ``applicable 
                period'' means--
                          (i) a fiscal year, in the case of 
                        fiscal year 1998, fiscal year 1999, and 
                        fiscal year 2000; or
                          (ii) a calendar year with respect to 
                        a year beginning with 2000;
                as the case may be.
  (g) Limitation on Beneficiary Liability.--
          (1) Limitation on actual charges.--
                  (A) In general.--In the case of a 
                nonparticipating physician or nonparticipating 
                supplier or other person (as defined in section 
                1842(i)(2)) who does not accept payment on an 
                assignment-related basis for a physician's 
                service furnished with respect to an individual 
                enrolled under this part, the following rules 
                apply:
                          (i) Application of limiting charge.--
                        No person may bill or collect an actual 
                        charge for the service in excess of the 
                        limiting charge described in paragraph 
                        (2) for such service.
                          (ii) No liability for excess 
                        charges.--No person is liable for 
                        payment of any amounts billed for the 
                        service in excess of such limiting 
                        charge.
                          (iii) Correction of excess charges.--
                        If such a physician, supplier, or other 
                        person bills, but does not collect, an 
                        actual charge for a service in 
                        violation of clause (i), the physician, 
                        supplier, or other person shall reduce 
                        on a timely basis the actual charge 
                        billed for the service to an amount not 
                        to exceed the limiting charge for the 
                        service.
                          (iv) Refund of excess collections.--
                        If such a physician, supplier, or other 
                        person collects an actual charge for a 
                        service in violation of clause (i), the 
                        physician, supplier, or other person 
                        shall provide on a timely basis a 
                        refund to the individual charged in the 
                        amount by which the amount collected 
                        exceeded the limiting charge for the 
                        service. The amount of such a refund 
                        shall be reduced to the extent the 
                        individual has an outstanding balance 
                        owed by the individual to the 
                        physician.
                  (B) Sanctions.--If a physician, supplier, or 
                other person--
                          (i) knowingly and willfully bills or 
                        collects for services in violation of 
                        subparagraph (A)(i) on a repeated 
                        basis, or
                          (ii) fails to comply with clause 
                        (iii) or (iv) of subparagraph (A) on a 
                        timely basis,
                the Secretary may apply sanctions against the 
                physician, supplier, or other person in 
                accordance with paragraph (2) of section 
                1842(j). In applying this subparagraph, 
                paragraph (4) of such section applies in the 
                same manner as such paragraph applies to such 
                section and any reference in such section to a 
                physician is deemed also to include a reference 
                to a supplier or other person under this 
                subparagraph.
                  (C) Timely basis.--For purposes of this 
                paragraph, a correction of a bill for an excess 
                charge or refund of an amount with respect to a 
                violation of subparagraph (A)(i) in the case of 
                a service is considered to be provided ``on a 
                timely basis'', if the reduction or refund is 
                made not later than 30 days after the date the 
                physician, supplier, or other person is 
                notified by the carrier under this part of such 
                violation and of the requirements of 
                subparagraph (A).
          (2) Limiting charge defined.--
                  (A) For 1991.--For physicians' services of a 
                physician furnished during 1991, other than 
                radiologist services subject to section 
                1834(b), the ``limiting charge'' shall be the 
                same percentage (or, if less, 25 percent) above 
                the recognized payment amount under this part 
                with respect to the physician (as a 
                nonparticipating physician) as the percentage 
                by which--
                          (i) the maximum allowable actual 
                        charge (as determined under section 
                        1842(j)(1)(C) as of December 31, 1990, 
                        or, if less, the maximum actual charge 
                        otherwise permitted for the service 
                        under this part as of such date) for 
                        the service of the physician, exceeds
                          (ii) the recognized payment amount 
                        for the service of the physician (as a 
                        nonparticipating physician) as of such 
                        date.
In the case of evaluation and management services (as specified 
in section 1842(b)(16)(B)(ii)), the preceding sentence shall be 
applied by substituting ``40 percent'' for ``25 percent''.
                  (B) For 1992.--For physicians' services 
                furnished during 1992, other than radiologist 
                services subject to section 1834(b), the 
                ``limiting charge'' shall be the same 
                percentage (or, if less, 20 percent) above the 
                recognized payment amount under this part for 
                nonparticipating physicians as the percentage 
                by which--
                          (i) the limiting charge (as 
                        determined under subparagraph (A) as of 
                        December 31, 1991) for the service, 
                        exceeds
                          (ii) the recognized payment amount 
                        for the service for nonparticipating 
                        physicians as of such date.
                  (C) After 1992.--For physicians' services 
                furnished in a year after 1992, the ``limiting 
                charge'' shall be 115 percent of the recognized 
                payment amount under this part for 
                nonparticipating physicians or for 
                nonparticipating suppliers or other persons.
                  (D) Recognized payment amount.--In this 
                section, the term ``recognized payment amount'' 
                means, for services furnished on or after 
                January 1, 1992, the fee schedule amount 
                determined under subsection (a) (or, if payment 
                under this part is made on a basis other than 
                the fee schedule under this section, 95 percent 
                of the other payment basis), and, for services 
                furnished during 1991, the applicable 
                percentage (as defined in section 
                1842(b)(4)(A)(iv)) of the prevailing charge (or 
                fee schedule amount) for nonparticipating 
                physicians for that year.
          (3) Limitation on charges for medicare beneficiaries 
        eligible for medicaid benefits.--
                  (A) In general.--Payment for physicians' 
                services furnished on or after April 1, 1990, 
                to an individual who is enrolled under this 
                part and eligible for any medical assistance 
                (including as a qualified medicare beneficiary, 
                as defined in section 1905(p)(1)) with respect 
                to such services under a State plan approved 
                under title XIX may only be made on an 
                assignment-related basis and the provisions of 
                section 1902(n)(3)(A) apply to further limit 
                permissible charges under this section.
                  (B) Penalty.--A person may not bill for 
                physicians' services subject to subparagraph 
                (A) other than on an assignment-related basis. 
                No person is liable for payment of any amounts 
                billed for such a service in violation of the 
                previous sentence. If a person knowingly and 
                willfully bills for physicians' services in 
                violation of the first sentence, the Secretary 
                may apply sanctions against the person in 
                accordance with section 1842(j)(2).
          (4) Physician submission of claims.--
                  (A) In general.--For services furnished on or 
                after September 1, 1990, within 1 year after 
                the date of providing a service for which 
                payment is made under this part on a reasonable 
                charge or fee schedule basis, a physician, 
                supplier, or other person (or an employer or 
                facility in the cases described in section 
                1842(b)(6)(A))--
                          (i) shall complete and submit a claim 
                        for such service on a standard claim 
                        form specified by the Secretary to the 
                        carrier on behalf of a beneficiary, and
                          (ii) may not impose any charge 
                        relating to completing and submitting 
                        such a form.
                  (B) Penalty.--(i) With respect to an assigned 
                claim wherever a physician, provider, supplier 
                or other person (or an employer or facility in 
                the cases described in section 1842(b)(6)(A)) 
                fails to submit such a claim as required in 
                subparagraph (A), the Secretary shall reduce by 
                10 percent the amount that would otherwise be 
                paid for such claim under this part.
                  (ii) If a physician, supplier, or other 
                person (or an employer or facility in the cases 
                described in section 1842(b)(6)(A)) fails to 
                submit a claim required to be submitted under 
                subparagraph (A) or imposes a charge in 
                violation of such subparagraph, the Secretary 
                shall apply the sanction with respect to such a 
                violation in the same manner as a sanction may 
                be imposed under section 1842(p)(3) for a 
                violation of section 1842(p)(1).
          (5) Electronic billing; direct deposit.--The 
        Secretary shall encourage and develop a system 
        providing for expedited payment for claims submitted 
        electronically. The Secretary shall also encourage and 
        provide incentives allowing for direct deposit as 
        payments for services furnished by participating 
        physicians. The Secretary shall provide physicians with 
        such technical information as necessary to enable such 
        physicians to submit claims electronically. The 
        Secretary shall submit a plan to Congress on this 
        paragraph by May 1, 1990.
          (6) Monitoring of charges.--
                  (A) In general.--The Secretary shall 
                monitor--
                          (i) the actual charges of 
                        nonparticipating physicians for 
                        physicians' services furnished on or 
                        after January 1, 1991, to individuals 
                        enrolled under this part, and
                          (ii) changes (by specialty, type of 
                        service, and geographic area) in (I) 
                        the proportion of expenditures for 
                        physicians' services provided under 
                        this part by participating physicians, 
                        (II) the proportion of expenditures for 
                        such services for which payment is made 
                        under this part on an assignment-
                        related basis, and (III) the amounts 
                        charged above the recognized payment 
                        amounts under this part.
                  (B) Report.--The Secretary shall, by not 
                later than April 15 of each year (beginning in 
                1992), report to the Congress information on 
                the extent to which actual charges exceed 
                limiting charges, the number and types of 
                services involved, and the average amount of 
                excess charges and information regarding the 
                changes described in subparagraph (A)(ii).
                  (C) Plan.--If the Secretary finds that there 
                has been a significant decrease in the 
                proportions described in subclauses (I) and 
                (II) of subparagraph (A)(ii) or an increase in 
                the amounts described in subclause (III) of 
                that subparagraph, the Secretary shall develop 
                a plan to address such a problem and transmit 
                to Congress recommendations regarding the plan. 
                The Medicare Payment Advisory Commission shall 
                review the Secretary's plan and recommendations 
                and transmit to Congress its comments regarding 
                such plan and recommendations.
          (7) Monitoring of utilization and access.--
                  (A) In general.--The Secretary shall 
                monitor--
                          (i) changes in the utilization of and 
                        access to services furnished under this 
                        part within geographic, population, and 
                        service related categories,
                          (ii) possible sources of 
                        inappropriate utilization of services 
                        furnished under this part which 
                        contribute to the overall level of 
                        expenditures under this part, and
                          (iii) factors underlying these 
                        changes and their interrelationships.
                  (B) Report.--The Secretary shall by not later 
                than April 15, of each year (beginning with 
                1991) report to the Congress on the changes 
                described in subparagraph (A)(i) and shall 
                include in the report an examination of the 
                factors (including factors relating to 
                different services and specific categories and 
                groups of services and geographic and 
                demographic variations in utilization) which 
                may contribute to such changes.
                  (C) Recommendations.--The Secretary shall 
                include in each annual report under 
                subparagraph (B) recommendations--
                          (i) addressing any identified 
                        patterns of inappropriate utilization,
                          (ii) on utilization review,
                          (iii) on physician education or 
                        patient education,
                          (iv) addressing any problems of 
                        beneficiary access to care made evident 
                        by the monitoring process, and
                          (v) on such other matters as the 
                        Secretary deems appropriate.
                The Medicare Payment Advisory Commission shall 
                comment on the Secretary's recommendations and 
                in developing its comments, the Commission 
                shall convene and consult a panel of physician 
                experts to evaluate the implications of medical 
                utilization patterns for the quality of and 
                access to patient care.
  (h) Sending Information to Physicians.--Before the beginning 
of each year (beginning with 1992), the Secretary shall send to 
each physician or nonparticipating supplier or other person 
furnishing physicians' services (as defined in section 
1848(j)(3)) furnishing physicians' services under this part, 
for services commonly performed by the physician, supplier, or 
other person, information on fee schedule amounts that apply 
for the year in the fee schedule area for participating and 
non-participating physicians, and the maximum amount that may 
be charged consistent with subsection (g)(2). Such information 
shall be transmitted in conjunction with notices to physicians, 
suppliers, and other persons under section 1842(h) (relating to 
the participating physician program) for a year.
  (i) Miscellaneous Provisions.--
          (1) Restriction on administrative and judicial 
        review.--There shall be no administrative or judicial 
        review under section 1869 or otherwise of--
                  (A) the determination of the adjusted 
                historical payment basis (as defined in 
                subsection (a)(2)(D)(i)),
                  (B) the determination of relative values and 
                relative value units under subsection (c), 
                including adjustments under subsections 
                (c)(2)(F), (c)(2)(H), and (c)(2)(I) and section 
                13515(b) of the Omnibus Budget Reconciliation 
                Act of 1993,
                  (C) the determination of conversion factors 
                under subsection (d), including without 
                limitation a prospective redetermination of the 
                sustainable growth rates for any or all 
                previous fiscal years,
                  (D) the establishment of geographic 
                adjustment factors under subsection (e),
                  (E) the establishment of the system for the 
                coding of physicians' services under this 
                section, and
                  (F) the collection and use of information in 
                the determination of relative values under 
                subsection (c)(2)(M).
          (2) Assistants-at-surgery.--
                  (A) In general.--Subject to subparagraph (B), 
                in the case of a surgical service furnished by 
                a physician, if payment is made separately 
                under this part for the services of a physician 
                serving as an assistant-at-surgery, the fee 
                schedule amount shall not exceed 16 percent of 
                the fee schedule amount otherwise determined 
                under this section for the global surgical 
                service involved.
                  (B) Denial of payment in certain cases.--If 
                the Secretary determines, based on the most 
                recent data available, that for a surgical 
                procedure (or class of surgical procedures) the 
                national average percentage of such procedure 
                performed under this part which involve the use 
                of a physician as an assistant at surgery is 
                less than 5 percent, no payment may be made 
                under this part for services of an assistant at 
                surgery involved in the procedure.
          (3) No comparability adjustment.--For physicians' 
        services for which payment under this part is 
        determined under this section--
                  (A) a carrier may not make any adjustment in 
                the payment amount under section 1842(b)(3)(B) 
                on the basis that the payment amount is higher 
                than the charge applicable, for comparable 
                services and under comparable circumstances, to 
                the policyholders and subscribers of the 
                carrier,
                  (B) no payment adjustment may be made under 
                section 1842(b)(8), and
                  (C) section 1842(b)(9) shall not apply.
  (j) Definitions.--In this section:
          (1) Category.--For services furnished before January 
        1, 1998, the term ``category'' means, with respect to 
        physicians' services, surgical services (as defined by 
        the Secretary and including anesthesia services), 
        primary care services (as defined in section 
        1842(i)(4)), and all other physicians' services. The 
        Secretary shall define surgical services and publish 
        such definitions in the Federal Register no later than 
        May 1, 1990, after consultation with organizations 
        representing physicians.
          (2) Fee schedule area.--Except as provided in 
        subsection (e)(6)(D), the term ``fee schedule area'' 
        means a locality used under section 1842(b) for 
        purposes of computing payment amounts for physicians' 
        services.
          (3) Physicians' services.--The term ``physicians' 
        services'' includes items and services described in 
        paragraphs (1), (2)(A), (2)(D), (2)(G), (2)(P) (with 
        respect to services described in subparagraphs (A) and 
        (C) of section 1861(oo)(2)), (2)(R) (with respect to 
        services described in suparagraphs (B), (C), and (D) of 
        section 1861(pp)(1)), (2)(S), (2)(W), (2)(AA), (2)(DD), 
        (2)(EE), (2)(FF) (including administration of the 
        health risk assessment), (3), (4), (13), (14) (with 
        respect to services described in section 1861(nn)(2)), 
        and (15) of section 1861(s) (other than clinical 
        diagnostic laboratory tests and, except for purposes of 
        subsection (a)(3), (g), and (h) such other items and 
        services as the Secretary may specify).
          (4) Practice expenses.--The term ``practice 
        expenses'' includes all expenses for furnishing 
        physicians' services, excluding malpractice expenses, 
        physician compensation, and other physician fringe 
        benefits.
  (k) Quality Reporting System.--
          (1) In general.--The Secretary shall implement a 
        system for the reporting by eligible professionals of 
        data on quality measures specified under paragraph (2). 
        Such data shall be submitted in a form and manner 
        specified by the Secretary (by program instruction or 
        otherwise), which may include submission of such data 
        on claims under this part.
          (2) Use of consensus-based quality measures.--
                  (A) For 2007.--
                          (i) In general.--For purposes of 
                        applying this subsection for the 
                        reporting of data on quality measures 
                        for covered professional services 
                        furnished during the period beginning 
                        July 1, 2007, and ending December 31, 
                        2007, the quality measures specified 
                        under this paragraph are the measures 
                        identified as 2007 physician quality 
                        measures under the Physician Voluntary 
                        Reporting Program as published on the 
                        public website of the Centers for 
                        Medicare & Medicaid Services as of the 
                        date of the enactment of this 
                        subsection, except as may be changed by 
                        the Secretary based on the results of a 
                        consensus-based process in January of 
                        2007, if such change is published on 
                        such website by not later than April 1, 
                        2007.
                          (ii) Subsequent refinements in 
                        application permitted.--The Secretary 
                        may, from time to time (but not later 
                        than July 1, 2007), publish on such 
                        website (without notice or opportunity 
                        for public comment) modifications or 
                        refinements (such as code additions, 
                        corrections, or revisions) for the 
                        application of quality measures 
                        previously published under clause (i), 
                        but may not, under this clause, change 
                        the quality measures under the 
                        reporting system.
                          (iii) Implementation.--
                        Notwithstanding any other provision of 
                        law, the Secretary may implement by 
                        program instruction or otherwise this 
                        subsection for 2007.
                  (B) For 2008 and 2009.--
                          (i) In general.--For purposes of 
                        reporting data on quality measures for 
                        covered professional services furnished 
                        during 2008 and 2009, the quality 
                        measures specified under this paragraph 
                        for covered professional services shall 
                        be measures that have been adopted or 
                        endorsed by a consensus organization 
                        (such as the National Quality Forum or 
                        AQA), that include measures that have 
                        been submitted by a physician 
                        specialty, and that the Secretary 
                        identifies as having used a consensus-
                        based process for developing such 
                        measures. Such measures shall include 
                        structural measures, such as the use of 
                        electronic health records and 
                        electronic prescribing technology.
                          (ii) Proposed set of measures.--Not 
                        later than August 15 of each of 2007 
                        and 2008, the Secretary shall publish 
                        in the Federal Register a proposed set 
                        of quality measures that the Secretary 
                        determines are described in clause (i) 
                        and would be appropriate for eligible 
                        professionals to use to submit data to 
                        the Secretary in 2008 or 2009, as 
                        applicable. The Secretary shall provide 
                        for a period of public comment on such 
                        set of measures.
                          (iii) Final set of measures.--Not 
                        later than November 15 of each of 2007 
                        and 2008, the Secretary shall publish 
                        in the Federal Register a final set of 
                        quality measures that the Secretary 
                        determines are described in clause (i) 
                        and would be appropriate for eligible 
                        professionals to use to submit data to 
                        the Secretary in 2008 or 2009, as 
                        applicable.
                  (C) For 2010 and subsequent years.--
                          (i) In general.--Subject to clause 
                        (ii), for purposes of reporting data on 
                        quality measures for covered 
                        professional services furnished during 
                        2010 and each subsequent year, subject 
                        to subsection (m)(3)(C), the quality 
                        measures (including electronic 
                        prescribing quality measures) specified 
                        under this paragraph shall be such 
                        measures selected by the Secretary from 
                        measures that have been endorsed by the 
                        entity with a contract with the 
                        Secretary under section 1890(a).
                          (ii) Exception.--In the case of a 
                        specified area or medical topic 
                        determined appropriate by the Secretary 
                        for which a feasible and practical 
                        measure has not been endorsed by the 
                        entity with a contract under section 
                        1890(a), the Secretary may specify a 
                        measure that is not so endorsed as long 
                        as due consideration is given to 
                        measures that have been endorsed or 
                        adopted by a consensus organization 
                        identified by the Secretary, such as 
                        the AQA alliance.
                  (D) Opportunity to provide input on measures 
                for 2009 and subsequent years.--For each 
                quality measure (including an electronic 
                prescribing quality measure) adopted by the 
                Secretary under subparagraph (B) (with respect 
                to 2009) or subparagraph (C), the Secretary 
                shall ensure that eligible professionals have 
                the opportunity to provide input during the 
                development, endorsement, or selection of 
                measures applicable to services they furnish.
          (3) Covered professional services and eligible 
        professionals defined.--For purposes of this 
        subsection:
                  (A) Covered professional services.--The term 
                ``covered professional services'' means 
                services for which payment is made under, or is 
                based on, the fee schedule established under 
                this section and which are furnished by an 
                eligible professional.
                  (B) Eligible professional.--The term 
                ``eligible professional'' means any of the 
                following:
                          (i) A physician.
                          (ii) A practitioner described in 
                        section 1842(b)(18)(C).
                          (iii) A physical or occupational 
                        therapist or a qualified speech-
                        language pathologist.
                          (iv) Beginning with 2009, a qualified 
                        audiologist (as defined in section 
                        1861(ll)(3)(B)).
          (4) Use of registry-based reporting.--As part of the 
        publication of proposed and final quality measures for 
        2008 under clauses (ii) and (iii) of paragraph (2)(B), 
        the Secretary shall address a mechanism whereby an 
        eligible professional may provide data on quality 
        measures through an appropriate medical registry (such 
        as the Society of Thoracic Surgeons National Database) 
        or through a Maintenance of Certification program 
        operated by a specialty body of the American Board of 
        Medical Specialties that meets the criteria for such a 
        registry, as identified by the Secretary.
          (5) Identification units.--For purposes of applying 
        this subsection, the Secretary may identify eligible 
        professionals through billing units, which may include 
        the use of the Provider Identification Number, the 
        unique physician identification number (described in 
        section 1833(q)(1)), the taxpayer identification 
        number, or the National Provider Identifier. For 
        purposes of applying this subsection for 2007, the 
        Secretary shall use the taxpayer identification number 
        as the billing unit.
          (6) Education and outreach.--The Secretary shall 
        provide for education and outreach to eligible 
        professionals on the operation of this subsection.
          (7) Limitations on review.--There shall be no 
        administrative or judicial review under section 1869, 
        section 1878, or otherwise, of the development and 
        implementation of the reporting system under paragraph 
        (1), including identification of quality measures under 
        paragraph (2) and the application of paragraphs (4) and 
        (5).
          (8) Implementation.--The Secretary shall carry out 
        this subsection acting through the Administrator of the 
        Centers for Medicare & Medicaid Services.
  (l) Physician Assistance and Quality Initiative Fund.--
          (1) Establishment.--The Secretary shall establish 
        under this subsection a Physician Assistance and 
        Quality Initiative Fund (in this subsection referred to 
        as the ``Fund'') which shall be available to the 
        Secretary for physician payment and quality improvement 
        initiatives, which may include application of an 
        adjustment to the update of the conversion factor under 
        subsection (d).
          (2) Funding.--
                  (A) Amount available.--
                          (i) In general.--Subject to clause 
                        (ii), there shall be available to the 
                        Fund the following amounts:
                                  (I) For expenditures during 
                                2008, an amount equal to 
                                $150,500,000.
                                  (II) For expenditures during 
                                2009, an amount equal to 
                                $24,500,000.
                          (ii) Limitations on expenditures.--
                                  (I) 2008.--The amount 
                                available for expenditures 
                                during 2008 shall be reduced as 
                                provided by subparagraph (A) of 
                                section 225(c)(1) and section 
                                524 of the Departments of 
                                Labor, Health and Human 
                                Services, and Education, and 
                                Related Agencies Appropriations 
                                Act, 2008 (division G of the 
                                Consolidated Appropriations 
                                Act, 2008).
                                  (II) 2009.--The amount 
                                available for expenditures 
                                during 2009 shall be reduced as 
                                provided by subparagraph (B) of 
                                such section 225(c)(1).
                  (B) Timely obligation of all available funds 
                for services.--The Secretary shall provide for 
                expenditures from the Fund in a manner designed 
                to provide (to the maximum extent feasible) for 
                the obligation of the entire amount available 
                for expenditures, after application of 
                subparagraph (A)(ii), during--
                          (i) 2008 for payment with respect to 
                        physicians' services furnished during 
                        2008; and
                          (ii) 2009 for payment with respect to 
                        physicians' services furnished during 
                        2009.
                  (C) Payment from trust fund.--The amount 
                specified in subparagraph (A) shall be 
                available to the Fund, as expenditures are made 
                from the Fund, from the Federal Supplementary 
                Medical Insurance Trust Fund under section 
                1841.
                  (D) Funding limitation.--Amounts in the Fund 
                shall be available in advance of appropriations 
                in accordance with subparagraph (B) but only if 
                the total amount obligated from the Fund does 
                not exceed the amount available to the Fund 
                under subparagraph (A). The Secretary may 
                obligate funds from the Fund only if the 
                Secretary determines (and the Chief Actuary of 
                the Centers for Medicare & Medicaid Services 
                and the appropriate budget officer certify) 
                that there are available in the Fund sufficient 
                amounts to cover all such obligations incurred 
                consistent with the previous sentence.
                  (E) Construction.--In the case that 
                expenditures from the Fund are applied to, or 
                otherwise affect, a conversion factor under 
                subsection (d) for a year, the conversion 
                factor under such subsection shall be computed 
                for a subsequent year as if such application or 
                effect had never occurred.
  (m) Incentive Payments for Quality Reporting.--
          (1) Incentive payments.--
                  (A) In general.--For 2007 through 2014, with 
                respect to covered professional services 
                furnished during a reporting period by an 
                eligible professional, if--
                          (i) there are any quality measures 
                        that have been established under the 
                        physician reporting system that are 
                        applicable to any such services 
                        furnished by such professional for such 
                        reporting period;
                          (ii) the eligible professional 
                        satisfactorily submits (as determined 
                        under this subsection) to the Secretary 
                        data on such quality measures in 
                        accordance with such reporting system 
                        for such reporting period,
                in addition to the amount otherwise paid under 
                this part, there also shall be paid to the 
                eligible professional (or to an employer or 
                facility in the cases described in clause (A) 
                of section 1842(b)(6)) or, in the case of a 
                group practice under paragraph (3)(C), to the 
                group practice, from the Federal Supplementary 
                Medical Insurance Trust Fund established under 
                section 1841 an amount equal to the applicable 
                quality percent of the Secretary's estimate 
                (based on claims submitted not later than 2 
                months after the end of the reporting period) 
                of the allowed charges under this part for all 
                such covered professional services furnished by 
                the eligible professional (or, in the case of a 
                group practice under paragraph (3)(C), by the 
                group practice) during the reporting period.
                  (B) Applicable quality percent.--For purposes 
                of subparagraph (A), the term ``applicable 
                quality percent'' means--
                          (i) for 2007 and 2008, 1.5 percent; 
                        and
                          (ii) for 2009 and 2010, 2.0 percent;
                          (iii) for 2011, 1.0 percent; and
                          (iv) for 2012, 2013, and 2014, 0.5 
                        percent.
          (2) Incentive payments for electronic prescribing.--
                  (A) In general.--Subject to subparagraph (D), 
                for 2009 through 2013, with respect to covered 
                professional services furnished during a 
                reporting period by an eligible professional, 
                if the eligible professional is a successful 
                electronic prescriber for such reporting 
                period, in addition to the amount otherwise 
                paid under this part, there also shall be paid 
                to the eligible professional (or to an employer 
                or facility in the cases described in clause 
                (A) of section 1842(b)(6)) or, in the case of a 
                group practice under paragraph (3)(C), to the 
                group practice, from the Federal Supplementary 
                Medical Insurance Trust Fund established under 
                section 1841 an amount equal to the applicable 
                electronic prescribing percent of the 
                Secretary's estimate (based on claims submitted 
                not later than 2 months after the end of the 
                reporting period) of the allowed charges under 
                this part for all such covered professional 
                services furnished by the eligible professional 
                (or, in the case of a group practice under 
                paragraph (3)(C), by the group practice) during 
                the reporting period.
                  (B) Limitation with respect to electronic 
                prescribing quality measures.--The provisions 
                of this paragraph and subsection (a)(5) shall 
                not apply to an eligible professional (or, in 
                the case of a group practice under paragraph 
                (3)(C), to the group practice) if, for the 
                reporting period (or, for purposes of 
                subsection (a)(5), for the reporting period for 
                a year)--
                          (i) the allowed charges under this 
                        part for all covered professional 
                        services furnished by the eligible 
                        professional (or group, as applicable) 
                        for the codes to which the electronic 
                        prescribing quality measure applies (as 
                        identified by the Secretary and 
                        published on the Internet website of 
                        the Centers for Medicare & Medicaid 
                        Services as of January 1, 2008, and as 
                        subsequently modified by the Secretary) 
                        are less than 10 percent of the total 
                        of the allowed charges under this part 
                        for all such covered professional 
                        services furnished by the eligible 
                        professional (or the group, as 
                        applicable); or
                          (ii) if determined appropriate by the 
                        Secretary, the eligible professional 
                        does not submit (including both 
                        electronically and nonelectronically) a 
                        sufficient number (as determined by the 
                        Secretary) of prescriptions under part 
                        D.
                If the Secretary makes the determination to 
                apply clause (ii) for a period, then clause (i) 
                shall not apply for such period.
                  (C) Applicable electronic prescribing 
                percent.--For purposes of subparagraph (A), the 
                term ``applicable electronic prescribing 
                percent'' means--
                          (i) for 2009 and 2010, 2.0 percent;
                          (ii) for 2011 and 2012, 1.0 percent; 
                        and
                          (iii) for 2013, 0.5 percent.
                  (D) Limitation with respect to ehr incentive 
                payments.--The provisions of this paragraph 
                shall not apply to an eligible professional 
                (or, in the case of a group practice under 
                paragraph (3)(C), to the group practice) if, 
                for the EHR reporting period the eligible 
                professional (or group practice) receives an 
                incentive payment under subsection (o)(1)(A) 
                with respect to a certified EHR technology (as 
                defined in subsection (o)(4)) that has the 
                capability of electronic prescribing.
          (3) Satisfactory reporting and successful electronic 
        prescriber and described.--
                  (A) In general.--For purposes of paragraph 
                (1), an eligible professional shall be treated 
                as satisfactorily submitting data on quality 
                measures for covered professional services for 
                a reporting period (or, for purposes of 
                subsection (a)(8), for the quality reporting 
                period for the year) if quality measures have 
                been reported as follows:
                          (i) Three or fewer quality measures 
                        applicable.--If there are no more than 
                        3 quality measures that are provided 
                        under the physician reporting system 
                        and that are applicable to such 
                        services of such professional furnished 
                        during the period, each such quality 
                        measure has been reported under such 
                        system in at least 80 percent of the 
                        cases in which such measure is 
                        reportable under the system.
                          (ii) Four or more quality measures 
                        applicable.--If there are 4 or more 
                        quality measures that are provided 
                        under the physician reporting system 
                        and that are applicable to such 
                        services of such professional 
                        furnishedduring the period, at least 3 
                        such quality measures have been 
                        reported under such system in at least 
                        80 percent of the cases in which the 
                        respective measure is reportable under 
                        the system.
                For years after 2008, quality measures for 
                purposes of this subparagraph shall not include 
                electronic prescribing quality measures.
                  (B) Successful electronic prescriber.--
                          (i) In general.--For purposes of 
                        paragraph (2) and subsection (a)(5), an 
                        eligible professional shall be treated 
                        as a successful electronic prescriber 
                        for a reporting period (or, for 
                        purposes of subsection (a)(5), for the 
                        reporting period for a year) if the 
                        eligible professional meets the 
                        requirement described in clause (ii), 
                        or, if the Secretary determines 
                        appropriate, the requirement described 
                        in clause (iii). If the Secretary makes 
                        the determination under the preceding 
                        sentence to apply the requirement 
                        described in clause (iii) for a period, 
                        then the requirement described in 
                        clause (ii) shall not apply for such 
                        period.
                          (ii) Requirement for submitting data 
                        on electronic prescribing quality 
                        measures.--The requirement described in 
                        this clause is that, with respect to 
                        covered professional services furnished 
                        by an eligible professional during a 
                        reporting period (or, for purposes of 
                        subsection (a)(5), for the reporting 
                        period for a year), if there are any 
                        electronic prescribing quality measures 
                        that have been established under the 
                        physician reporting system and are 
                        applicable to any such services 
                        furnished by such professional for the 
                        period, such professional reported each 
                        such measure under such system in at 
                        least 50 percent of the cases in which 
                        such measure is reportable by such 
                        professional under such system.
                          (iii) Requirement for electronically 
                        prescribing under part d.--The 
                        requirement described in this clause is 
                        that the eligible professional 
                        electronically submitted a sufficient 
                        number (as determined by the Secretary) 
                        of prescriptions under part D during 
                        the reporting period (or, for purposes 
                        of subsection (a)(5), for the reporting 
                        period for a year).
                          (iv) Use of part d data.--
                        Notwithstanding sections 1860D-
                        15(d)(2)(B) and 1860D-15(f)(2), the 
                        Secretary may use data regarding drug 
                        claims submitted for purposes of 
                        section 1860D-15 that are necessary for 
                        purposes of clause (iii), paragraph 
                        (2)(B)(ii), and paragraph (5)(G).
                          (v) Standards for electronic 
                        prescribing.--To the extent 
                        practicable, in determining whether 
                        eligible professionals meet the 
                        requirements under clauses (ii) and 
                        (iii) for purposes of clause (i), the 
                        Secretary shall ensure that eligible 
                        professionals utilize electronic 
                        prescribing systems in compliance with 
                        standards established for such systems 
                        pursuant to the Part D Electronic 
                        Prescribing Program under section 
                        1860D-4(e).
                  (C) Satisfactory reporting measures for group 
                practices.--
                          (i) In general.--By January 1, 2010, 
                        the Secretary shall establish and have 
                        in place a process under which eligible 
                        professionals in a group practice (as 
                        defined by the Secretary) shall be 
                        treated as satisfactorily submitting 
                        data on quality measures under 
                        subparagraph (A) and as meeting the 
                        requirement described in subparagraph 
                        (B)(ii) for covered professional 
                        services for a reporting period (or, 
                        for purposes of subsection (a)(5), for 
                        a reporting period for a year, or, for 
                        purposes of subsection (a)(8), for a 
                        quality reporting period for the year) 
                        if, in lieu of reporting measures under 
                        subsection (k)(2)(C), the group 
                        practice reports measures determined 
                        appropriate by the Secretary, such as 
                        measures that target high-cost chronic 
                        conditions and preventive care, in a 
                        form and manner, and at a time, 
                        specified by the Secretary.
                          (ii) Statistical sampling model.--The 
                        process under clause (i) shall provide 
                        for the use of a statistical sampling 
                        model to submit data on measures, such 
                        as the model used under the Physician 
                        Group Practice demonstration project 
                        under section 1866A.
                          (iii) No double payments.--Payments 
                        to a group practice under this 
                        subsection by reason of the process 
                        under clause (i) shall be in lieu of 
                        the payments that would otherwise be 
                        made under this subsection to eligible 
                        professionals in the group practice for 
                        satisfactorily submitting data on 
                        quality measures.
                  (D) Satisfactory reporting measures through 
                participation in a qualified clinical data 
                registry.--For 2014 and subsequent years, the 
                Secretary shall treat an eligible professional 
                as satisfactorily submitting data on quality 
                measures under subparagraph (A) if, in lieu of 
                reporting measures under subsection (k)(2)(C), 
                the eligible professional is satisfactorily 
                participating, as determined by the Secretary, 
                in a qualified clinical data registry (as 
                described in subparagraph (E)) for the year.
                  (E) Qualified clinical data registry.--
                          (i) In general.--The Secretary shall 
                        establish requirements for an entity to 
                        be considered a qualified clinical data 
                        registry. Such requirements shall 
                        include a requirement that the entity 
                        provide the Secretary with such 
                        information, at such times, and in such 
                        manner, as the Secretary determines 
                        necessary to carry out this subsection.
                          (ii) Considerations.--In establishing 
                        the requirements under clause (i), the 
                        Secretary shall consider whether an 
                        entity--
                                  (I) has in place mechanisms 
                                for the transparency of data 
                                elements and specifications, 
                                risk models, and measures;
                                  (II) requires the submission 
                                of data from participants with 
                                respect to multiple payers;
                                  (III) provides timely 
                                performance reports to 
                                participants at the individual 
                                participant level; and
                                  (IV) supports quality 
                                improvement initiatives for 
                                participants.
                          (iii) Measures.--With respect to 
                        measures used by a qualified clinical 
                        data registry--
                                  (I) sections 1890(b)(7) and 
                                1890A(a) shall not apply; and
                                  (II) measures endorsed by the 
                                entity with a contract with the 
                                Secretary under section 1890(a) 
                                may be used.
                          (iv) Consultation.--In carrying out 
                        this subparagraph, the Secretary shall 
                        consult with interested parties.
                          (v) Determination.--The Secretary 
                        shall establish a process to determine 
                        whether or not an entity meets the 
                        requirements established under clause 
                        (i). Such process may involve one or 
                        both of the following:
                                  (I) A determination by the 
                                Secretary.
                                  (II) A designation by the 
                                Secretary of one or more 
                                independent organizations to 
                                make such determination.
                  (F) Authority to revise satisfactorily 
                reporting data.--For years after 2009, the 
                Secretary, in consultation with stakeholders 
                and experts, may revise the criteria under this 
                subsection for satisfactorily submitting data 
                on quality measures under subparagraph (A) and 
                the criteria for submitting data on electronic 
                prescribing quality measures under subparagraph 
                (B)(ii).
          (4) Form of payment.--The payment under this 
        subsection shall be in the form of a single 
        consolidated payment.
          (5) Application.--
                  (A) Physician reporting system rules.--
                Paragraphs (5), (6),and (8) of subsection (k) 
                shall apply for purposes of this subsection in 
                the same manner as they apply for purposes of 
                such subsection.
                  (B) Coordination with other bonus payments.--
                The provisions of this subsection shall not be 
                taken into account in applying subsections (m) 
                and (u) of section 1833 and any payment under 
                such subsections shall not be taken into 
                account in computing allowable charges under 
                this subsection.
                  (C) Implementation.--Notwithstanding any 
                other provision of law, for 2007, 2008, and 
                2009, the Secretary may implement by program 
                instruction or otherwise this subsection.
                  (D) Validation.--
                          (i) In general.--Subject to the 
                        succeeding provisions of this 
                        subparagraph, for purposes of 
                        determining whether a measure is 
                        applicable to the covered professional 
                        services of an eligible professional 
                        under this subsection for 2007 and 288, 
                        the Secretary shall presume that if an 
                        eligible professional submits data for 
                        a measure, such measure is applicable 
                        to such professional.
                          (ii) Method.--The Secretary may 
                        establish procedures to validate (by 
                        sampling or other means as the 
                        Secretary determines to be appropriate) 
                        whether measures applicable to covered 
                        professional services of an eligible 
                        professional have been reported.
                          (iii) Denial of payment authority.--
                        If the Secretary determines that an 
                        eligible professional (or, in the case 
                        of a group practice under paragraph 
                        (3)(C), the group practice) has not 
                        reported measures applicable to covered 
                        professional services of such 
                        professional, the Secretary shall not 
                        pay the incentive payment under this 
                        subsection. If such payments for such 
                        period have already been made, the 
                        Secretary shall recoup such payments 
                        from the eligible professional (or the 
                        group practice).
                  (E) Limitations on review.--
                          Except as provided in subparagraph 
                        (I), there shall be no administrative 
                        or judicial review under 1869, section 
                        1878, or otherwise of
                          (i) the determination of measures 
                        applicable to services furnished by 
                        eligible professionals under this 
                        subsection;
                          (ii) the determination of 
                        satisfactory reporting under this 
                        subsection;
                          (iii) the determination of a 
                        successful electronic prescriber under 
                        paragraph (3), the limitation under 
                        paragraph (2)(B), and the exception 
                        under subsection (a)(5)(B); and
                          (iv) the determination of any 
                        incentive payment under this subsection 
                        and the payment adjustment under 
                        paragraphs (5)(A) and (8)(A) of 
                        subsection (a).
                  (F) Extension.--For 2008 and subsequent 
                years, the Secretary shall establish 
                alternative criteria for satisfactorily 
                reporting under this subsection and alternative 
                reporting periods under paragraph (6)(C) for 
                reporting groups of measures under subsection 
                (k)(2)(B) and for reporting using the method 
                specified in subsection (k)(4).
                  (G) Posting on website.--The Secretary shall 
                post on the Internet website of the Centers for 
                Medicare & Medicaid Services, in an easily 
                understandable format, a list of the names of 
                the following:
                          (i) The eligible professionals (or, 
                        in the case of reporting under 
                        paragraph (3)(C), the group practices) 
                        who satisfactorily submitted data on 
                        quality measures under this subsection.
                          (ii) The eligible professionals (or, 
                        in the case of reporting under 
                        paragraph (3)(C), the group practices) 
                        who are successful electronic 
                        prescribers.
                  (H) Feedback.--The Secretary shall provide 
                timely feedback to eligible professionals on 
                the performance of the eligible professional 
                with respect to satisfactorily submitting data 
                on quality measures under this subsection.
                  (I) Informal appeals process.--The Secretary 
                shall, by not later than January 1, 2011, 
                establish and have in place an informal process 
                for eligible professionals to seek a review of 
                the determination that an eligible professional 
                did not satisfactorily submit data on quality 
                measures under this subsection.
          (6) Definitions.--For purposes of this subsection:
                  (A) Eligible professional; covered 
                professional services.--The terms ``eligible 
                professional'' and ``covered professional 
                services'' have the meanings given such termsin 
                subsection (k)(3).
                  (B) Physician reporting system.--The term 
                ``physician reporting system'' means the system 
                established under subsection (k).
                  (C) Reporting period.--
                          (i) In general.--Subject to clauses 
                        (ii) and (iii), the term ``reporting 
                        period'' means--
                                  (I) for 2007, the period 
                                beginning on July 1, 2007, and 
                                ending on December 31, 2007; 
                                and
                                  (II) for 2008 and subsequent 
                                years, the entire year.
                          (ii) Authority to revise reporting 
                        period.--For years after 2009, the 
                        Secretary may revise the reporting 
                        period under clause (i) if the 
                        Secretary determines such revision is 
                        appropriate, produces valid results on 
                        measures reported, and is consistent 
                        with the goals of maximizing scientific 
                        validity and reducing administrative 
                        burden. If the Secretary revises such 
                        period pursuant to the preceding 
                        sentence, the term ``reporting period'' 
                        shall mean such revised period.
                          (iii) Reference.--Any reference in 
                        this subsection to a reporting period 
                        with respect to the application of 
                        subsection (a)(5) (a)(8) shall be 
                        deemed a reference to the reporting 
                        period under subsection (a)(5)(D)(iii) 
                        or the quality reporting period under 
                        subsection (a)(8)(D)(iii), 
                        respectively.
          (7) Integration of physician quality reporting and 
        ehr reporting.--Not later than January 1, 2012, the 
        Secretary shall develop a plan to integrate reporting 
        on quality measures under this subsection with 
        reporting requirements under subsection (o) relating to 
        the meaningful use of electronic health records. Such 
        integration shall consist of the following:
                  (A) The selection of measures, the reporting 
                of which would both demonstrate--
                          (i) meaningful use of an electronic 
                        health record for purposes of 
                        subsection (o); and
                          (ii) quality of care furnished to an 
                        individual.
                  (B) Such other activities as specified by the 
                Secretary.
          (7) Additional incentive payment.--
                  (A) In general.--For 2011 through 2014, if an 
                eligible professional meets the requirements 
                described in subparagraph (B), the applicable 
                quality percent for such year, as described in 
                clauses (iii) and (iv) of paragraph (1)(B), 
                shall be increased by 0.5 percentage points.
                  (B) Requirements described.--In order to 
                qualify for the additional incentive payment 
                described in subparagraph (A), an eligible 
                professional shall meet the following 
                requirements:
                          (i) The eligible professional shall--
                                  (I) satisfactorily submit 
                                data on quality measures for 
                                purposes of paragraph (1) for a 
                                year; and
                                  (II) have such data submitted 
                                on their behalf through a 
                                Maintenance of Certification 
                                Program (as defined in 
                                subparagraph (C)(i)) that 
                                meets--
                                          (aa) the criteria for 
                                        a registry (as 
                                        described in subsection 
                                        (k)(4)); or
                                          (bb) an alternative 
                                        form and manner 
                                        determined appropriate 
                                        by the Secretary.
                          (ii) The eligible professional, more 
                        frequently than is required to qualify 
                        for or maintain board certification 
                        status--
                                  (I) participates in such a 
                                Maintenance of Certification 
                                program for a year; and
                                  (II) successfully completes a 
                                qualified Maintenance of 
                                Certification Program practice 
                                assessment (as defined in 
                                subparagraph (C)(ii)) for such 
                                year.
                          (iii) A Maintenance of Certification 
                        program submits to the Secretary, on 
                        behalf of the eligible professional, 
                        information--
                                  (I) in a form and manner 
                                specified by the Secretary, 
                                that the eligible professional 
                                has successfully met the 
                                requirements of clause (ii) 
                                (which may be in the form of a 
                                structural measure);
                                  (II) if requested by the 
                                Secretary, on the survey of 
                                patient experience with care 
                                (as described in subparagraph 
                                (C)(ii)(II)); and
                                  (III) as the Secretary may 
                                require, on the methods, 
                                measures, and data used under 
                                the Maintenance of 
                                Certification Program and the 
                                qualified Maintenance of 
                                Certification Program practice 
                                assessment.
                  (C) Definitions.--For purposes of this 
                paragraph:
                          (i) The term ``Maintenance of 
                        Certification Program'' means a 
                        continuous assessment program, such as 
                        qualified American Board of Medical 
                        Specialties Maintenance of 
                        Certification program or an equivalent 
                        program (as determined by the 
                        Secretary), that advances quality and 
                        the lifelong learning and self-
                        assessment of board certified specialty 
                        physicians by focusing on the 
                        competencies of patient care, medical 
                        knowledge, practice-based learning, 
                        interpersonal and communication skills 
                        and professionalism. Such a program 
                        shall include the following:
                                  (I) The program requires the 
                                physician to maintain a valid, 
                                unrestricted medical license in 
                                the United States.
                                  (II) The program requires a 
                                physician to participate in 
                                educational and self-assessment 
                                programs that require an 
                                assessment of what was learned.
                                  (III) The program requires a 
                                physician to demonstrate, 
                                through a formalized, secure 
                                examination, that the physician 
                                has the fundamental diagnostic 
                                skills, medical knowledge, and 
                                clinical judgment to provide 
                                quality care in their 
                                respective specialty.
                                  (IV) The program requires 
                                successful completion of a 
                                qualified Maintenance of 
                                Certification Program practice 
                                assessment as described in 
                                clause (ii).
                          (ii) The term ``qualified Maintenance 
                        of Certification Program practice 
                        assessment'' means an assessment of a 
                        physician's practice that--
                                  (I) includes an initial 
                                assessment of an eligible 
                                professional's practice that is 
                                designed to demonstrate the 
                                physician's use of evidence-
                                based medicine;
                                  (II) includes a survey of 
                                patient experience with care; 
                                and
                                  (III) requires a physician to 
                                implement a quality improvement 
                                intervention to address a 
                                practice weakness identified in 
                                the initial assessment under 
                                subclause (I) and then to 
                                remeasure to assess performance 
                                improvement after such 
                                intervention.
  (n) Physician Feedback Program.--
          (1) Establishment.--
                  (A) In general.--
                          (i) Establishment.--The Secretary 
                        shall establish a Physician Feedback 
                        Program (in this subsection referred to 
                        as the ``Program'').
                          (ii) Reports on resources.--The 
                        Secretary shall use claims data under 
                        this title (and may use other data) to 
                        provide confidential reports to 
                        physicians (and, as determined 
                        appropriate by the Secretary, to groups 
                        of physicians) that measure the 
                        resources involved in furnishing care 
                        to individuals under this title.
                          (iii) Inclusion of certain 
                        information.--If determined appropriate 
                        by the Secretary, the Secretary may 
                        include information on the quality of 
                        care furnished to individuals under 
                        this title by the physician (or group 
                        of physicians) in such reports.
                  (B) Resource use.--The resources described in 
                subparagraph (A)(ii) may be measured--
                          (i) on an episode basis;
                          (ii) on a per capita basis; or
                          (iii) on both an episode and a per 
                        capita basis.
          (2) Implementation.--The Secretary shall implement 
        the Program by not later than January 1, 2009.
          (3) Data for reports.--To the extent practicable, 
        reports under the Program shall be based on the most 
        recent data available.
          (4) Authority to focus initial application.--The 
        Secretary may focus the initial application of the 
        Program as appropriate, such as focusing the Program 
        on--
                  (A) physician specialties that account for a 
                certain percentage of all spending for 
                physicians' services under this title;
                  (B) physicians who treat conditions that have 
                a high cost or a high volume, or both, under 
                this title;
                  (C) physicians who use a high amount of 
                resources compared to other physicians;
                  (D) physicians practicing in certain 
                geographic areas; or
                  (E) physicians who treat a minimum number of 
                individuals under this title.
          (5) Authority to exclude certain information if 
        insufficient information.--The Secretary may exclude 
        certain information regarding a service from a report 
        under the Program with respect to a physician (or group 
        of physicians) if the Secretary determines that there 
        is insufficient information relating to that service to 
        provide a valid report on that service.
          (6) Adjustment of data.--To the extent practicable, 
        the Secretary shall make appropriate adjustments to the 
        data used in preparing reports under the Program, such 
        as adjustments to take into account variations in 
        health status and other patient characteristics. For 
        adjustments for reports on utilization under paragraph 
        (9), see subparagraph (D) of such paragraph.
          (7) Education and outreach.--The Secretary shall 
        provide for education and outreach activities to 
        physicians on the operation of, and methodologies 
        employed under, the Program.
          (8) Disclosure exemption.--Reports under the Program 
        shall be exempt from disclosure under section 552 of 
        title 5, United States Code.
          (9) Reports on utilization.--
                  (A) Development of episode grouper.--
                          (i) In general.--The Secretary shall 
                        develop an episode grouper that 
                        combines separate but clinically 
                        related items and services into an 
                        episode of care for an individual, as 
                        appropriate.
                          (ii) Timeline for development.--The 
                        episode grouper described in 
                        subparagraph (A) shall be developed by 
                        not later than January 1, 2012.
                          (iii) Public availability.--The 
                        Secretary shall make the details of the 
                        episode grouper described in 
                        subparagraph (A) available to the 
                        public.
                          (iv) Endorsement.--The Secretary 
                        shall seek endorsement of the episode 
                        grouper described in subparagraph (A) 
                        by the entity with a contract under 
                        section 1890(a).
                  (B) Reports on utilization.--Effective 
                beginning with 2012, the Secretary shall 
                provide reports to physicians that compare, as 
                determined appropriate by the Secretary, 
                patterns of resource use of the individual 
                physician to such patterns of other physicians.
                  (C) Analysis of data.--The Secretary shall, 
                for purposes of preparing reports under this 
                paragraph, establish methodologies as 
                appropriate, such as to--
                          (i) attribute episodes of care, in 
                        whole or in part, to physicians;
                          (ii) identify appropriate physicians 
                        for purposes of comparison under 
                        subparagraph (B); and
                          (iii) aggregate episodes of care 
                        attributed to a physician under clause 
                        (i) into a composite measure per 
                        individual.
                  (D) Data adjustment.--In preparing reports 
                under this paragraph, the Secretary shall make 
                appropriate adjustments, including 
                adjustments--
                          (i) to account for differences in 
                        socioeconomic and demographic 
                        characteristics, ethnicity, and health 
                        status of individuals (such as to 
                        recognize that less healthy individuals 
                        may require more intensive 
                        interventions); and
                          (ii) to eliminate the effect of 
                        geographic adjustments in payment rates 
                        (as described in subsection (e)).
                  (E) Public availability of methodology.--The 
                Secretary shall make available to the public--
                          (i) the methodologies established 
                        under subparagraph (C);
                          (ii) information regarding any 
                        adjustments made to data under 
                        subparagraph (D); and
                          (iii) aggregate reports with respect 
                        to physicians.
                  (F) Definition of physician.--In this 
                paragraph:
                          (i) In general.--The term 
                        ``physician'' has the meaning given 
                        that term in section 1861(r)(1).
                          (ii) Treatment of groups.--Such term 
                        includes, as the Secretary determines 
                        appropriate, a group of physicians.
                  (G) Limitations on review.--There shall be no 
                administrative or judicial review under section 
                1869, section 1878, or otherwise of the 
                establishment of the methodology under 
                subparagraph (C), including the determination 
                of an episode of care under such methodology.
          (10) Coordination with other value-based purchasing 
        reforms.--The Secretary shall coordinate the Program 
        with the value-based payment modifier established under 
        subsection (p) and, as the Secretary determines 
        appropriate, other similar provisions of this title.
  (o) Incentives for Adoption and Meaningful Use of Certified 
EHR Technology.--
          (1) Incentive payments.--
                  (A) In general.--
                          (i) In general.--Subject to the 
                        succeeding subparagraphs of this 
                        paragraph, with respect to covered 
                        professional services furnished by an 
                        eligible professional during a payment 
                        year (as defined in subparagraph (E)), 
                        if the eligible professional is a 
                        meaningful EHR user (as determined 
                        under paragraph (2)) for the EHR 
                        reporting period with respect to such 
                        year, in addition to the amount 
                        otherwise paid under this part, there 
                        also shall be paid to the eligible 
                        professional (or to an employer or 
                        facility in the cases described in 
                        clause (A) of section 1842(b)(6)), from 
                        the Federal Supplementary Medical 
                        Insurance Trust Fund established under 
                        section 1841 an amount equal to 75 
                        percent of the Secretary's estimate 
                        (based on claims submitted not later 
                        than 2 months after the end of the 
                        payment year) of the allowed charges 
                        under this part for all such covered 
                        professional services furnished by the 
                        eligible professional during such year.
                          (ii) No incentive payments with 
                        respect to years after 2016.--No 
                        incentive payments may be made under 
                        this subsection with respect to a year 
                        after 2016.
                  (B) Limitations on amounts of incentive 
                payments.--
                          (i) In general.--In no case shall the 
                        amount of the incentive payment 
                        provided under this paragraph for an 
                        eligible professional for a payment 
                        year exceed the applicable amount 
                        specified under this subparagraph with 
                        respect to such eligible professional 
                        and such year.
                          (ii) Amount.--Subject to clauses 
                        (iii) through (v), the applicable 
                        amount specified in this subparagraph 
                        for an eligible professional is as 
                        follows:
                                  (I) For the first payment 
                                year for such professional, 
                                $15,000 (or, if the first 
                                payment year for such eligible 
                                professional is 2011 or 2012, 
                                $18,000).
                                  (II) For the second payment 
                                year for such professional, 
                                $12,000.
                                  (III) For the third payment 
                                year for such professional, 
                                $8,000.
                                  (IV) For the fourth payment 
                                year for such professional, 
                                $4,000.
                                  (V) For the fifth payment 
                                year for such professional, 
                                $2,000.
                                  (VI) For any succeeding 
                                payment year for such 
                                professional, $0.
                          (iii) Phase down for eligible 
                        professionals first adopting ehr after 
                        2013.--If the first payment year for an 
                        eligible professional is after 2013, 
                        then the amount specified in this 
                        subparagraph for a payment year for 
                        such professional is the same as the 
                        amount specified in clause (ii) for 
                        such payment year for an eligible 
                        professional whose first payment year 
                        is 2013.
                          (iv) Increase for certain eligible 
                        professionals.--In the case of an 
                        eligible professional who predominantly 
                        furnishes services under this part in 
                        an area that is designated by the 
                        Secretary (under section 332(a)(1)(A) 
                        of the Public Health Service Act) as a 
                        health professional shortage area, the 
                        amount that would otherwise apply for a 
                        payment year for such professional 
                        under subclauses (I) through (V) of 
                        clause (ii) shall be increased by 10 
                        percent. In implementing the preceding 
                        sentence, the Secretary may, as 
                        determined appropriate, apply 
                        provisions of subsections (m) and (u) 
                        of section 1833 in a similar manner as 
                        such provisions apply under such 
                        subsection.
                          (v) No incentive payment if first 
                        adopting after 2014.--If the first 
                        payment year for an eligible 
                        professional is after 2014 then the 
                        applicable amount specified in this 
                        subparagraph for such professional for 
                        such year and any subsequent year shall 
                        be $0.
                  (C) Non-application to hospital-based 
                eligible professionals.--
                          (i) In general.--No incentive payment 
                        may be made under this paragraph in the 
                        case of a hospital-based eligible 
                        professional.
                          (ii) Hospital-based eligible 
                        professional.--For purposes of clause 
                        (i), the term ``hospital-based eligible 
                        professional'' means, with respect to 
                        covered professional services furnished 
                        by an eligible professional during the 
                        EHR reporting period for a payment 
                        year, an eligible professional, such as 
                        a pathologist, anesthesiologist, or 
                        emergency physician, who furnishes 
                        substantially all of such services in a 
                        hospital inpatient or emergency room 
                        setting and through the use of the 
                        facilities and equipment, including 
                        qualified electronic health records, of 
                        the hospital. The determination of 
                        whether an eligible professional is a 
                        hospital-based eligible professional 
                        shall be made on the basis of the site 
                        of service (as defined by the 
                        Secretary) and without regard to any 
                        employment or billing arrangement 
                        between the eligible professional and 
                        any other provider.
                  (D) Payment.--
                          (i) Form of payment.--The payment 
                        under this paragraph may be in the form 
                        of a single consolidated payment or in 
                        the form of such periodic installments 
                        as the Secretary may specify.
                          (ii) Coordination of application of 
                        limitation for professionals in 
                        different practices.--In the case of an 
                        eligible professional furnishing 
                        covered professional services in more 
                        than one practice (as specified by the 
                        Secretary), the Secretary shall 
                        establish rules to coordinate the 
                        incentive payments, including the 
                        application of the limitation on 
                        amounts of such incentive payments 
                        under this paragraph, among such 
                        practices.
                          (iii) Coordination with medicaid.--
                        The Secretary shall seek, to the 
                        maximum extent practicable, to avoid 
                        duplicative requirements from Federal 
                        and State governments to demonstrate 
                        meaningful use of certified EHR 
                        technology under this title and title 
                        XIX. The Secretary may also adjust the 
                        reporting periods under such title and 
                        such subsections in order to carry out 
                        this clause.
                  (E) Payment year defined.--
                          (i) In general.--For purposes of this 
                        subsection, the term ``payment year'' 
                        means a year beginning with 2011.
                          (ii) First, second, etc. payment 
                        year.--The term ``first payment year'' 
                        means, with respect to covered 
                        professional services furnished by an 
                        eligible professional, the first year 
                        for which an incentive payment is made 
                        for such services under this 
                        subsection. The terms ``second payment 
                        year'', ``third payment year'', 
                        ``fourth payment year'', and ``fifth 
                        payment year'' mean, with respect to 
                        covered professional services furnished 
                        by such eligible professional, each 
                        successive year immediately following 
                        the first payment year for such 
                        professional.
          (2) Meaningful ehr user.--
                  (A) In general.--For purposes of paragraph 
                (1), an eligible professional shall be treated 
                as a meaningful EHR user for an EHR reporting 
                period for a payment year (or, for purposes of 
                subsection (a)(7), for an EHR reporting period 
                under such subsection for a year) if each of 
                the following requirements is met:
                          (i) Meaningful use of certified ehr 
                        technology.--The eligible professional 
                        demonstrates to the satisfaction of the 
                        Secretary, in accordance with 
                        subparagraph (C)(i), that during such 
                        period the professional is using 
                        certified EHR technology in a 
                        meaningful manner, which shall include 
                        the use of electronic prescribing as 
                        determined to be appropriate by the 
                        Secretary.
                          (ii) Information exchange.--The 
                        eligible professional demonstrates to 
                        the satisfaction of the Secretary, in 
                        accordance with subparagraph (C)(i), 
                        that during such period such certified 
                        EHR technology is connected in a manner 
                        that provides, in accordance with law 
                        and standards applicable to the 
                        exchange of information, for the 
                        electronic exchange of health 
                        information to improve the quality of 
                        health care, such as promoting care 
                        coordination.
                          (iii) Reporting on measures using 
                        ehr.--Subject to subparagraph (B)(ii) 
                        and using such certified EHR 
                        technology, the eligible professional 
                        submits information for such period, in 
                        a form and manner specified by the 
                        Secretary, on such clinical quality 
                        measures and such other measures as 
                        selected by the Secretary under 
                        subparagraph (B)(i).
                The Secretary may provide for the use of 
                alternative means for meeting the requirements 
                of clauses (i), (ii), and (iii) in the case of 
                an eligible professional furnishing covered 
                professional services in a group practice (as 
                defined by the Secretary). The Secretary shall 
                seek to improve the use of electronic health 
                records and health care quality over time by 
                requiring more stringent measures of meaningful 
                use selected under this paragraph.
                  (B) Reporting on measures.--
                          (i) Selection.--The Secretary shall 
                        select measures for purposes of 
                        subparagraph (A)(iii) but only 
                        consistent with the following:
                                  (I) The Secretary shall 
                                provide preference to clinical 
                                quality measures that have been 
                                endorsed by the entity with a 
                                contract with the Secretary 
                                under section 1890(a).
                                  (II) Prior to any measure 
                                being selected under this 
                                subparagraph, the Secretary 
                                shall publish in the Federal 
                                Register such measure and 
                                provide for a period of public 
                                comment on such measure.
                          (ii) Limitation.--The Secretary may 
                        not require the electronic reporting of 
                        information on clinical quality 
                        measures under subparagraph (A)(iii) 
                        unless the Secretary has the capacity 
                        to accept the information 
                        electronically, which may be on a pilot 
                        basis.
                          (iii) Coordination of reporting of 
                        information.--In selecting such 
                        measures, and in establishing the form 
                        and manner for reporting measures under 
                        subparagraph (A)(iii), the Secretary 
                        shall seek to avoid redundant or 
                        duplicative reporting otherwise 
                        required, including reporting under 
                        subsection (k)(2)(C).
                  (C) Demonstration of meaningful use of 
                certified ehr technology and information 
                exchange.--
                          (i) In general.--A professional may 
                        satisfy the demonstration requirement 
                        of clauses (i) and (ii) of subparagraph 
                        (A) through means specified by the 
                        Secretary, which may include--
                                  (I) an attestation;
                                  (II) the submission of claims 
                                with appropriate coding (such 
                                as a code indicating that a 
                                patient encounter was 
                                documented using certified EHR 
                                technology);
                                  (III) a survey response;
                                  (IV) reporting under 
                                subparagraph (A)(iii); and
                                  (V) other means specified by 
                                the Secretary.
                          (ii) Use of part d data.--
                        Notwithstanding sections 1860D-
                        15(d)(2)(B) and 1860D-15(f)(2), the 
                        Secretary may use data regarding drug 
                        claims submitted for purposes of 
                        section 1860D-15 that are necessary for 
                        purposes of subparagraph (A).
                  (D) Treatment of patient encounters at 
                ambulatory surgical centers.--
                          (i) In general.--Subject to clause 
                        (ii), for a payment year after 2015 any 
                        patient encounter of an eligible 
                        professional occurring at an ambulatory 
                        surgical center (described in section 
                        1833(i)(1)(A)) shall not be treated as 
                        a patient encounter in determining 
                        whether an eligible professional 
                        qualifies as a meaningful EHR user. 
                        Notwithstanding any other provision of 
                        law, the Secretary may implement this 
                        clause by program instruction or 
                        otherwise.
                          (ii) Sunset.--Clause (i) shall no 
                        longer apply as of the first payment 
                        year that begins more than 3 years 
                        after the date the Secretary 
                        determines, through notice and comment 
                        rulemaking, that certified EHR 
                        technology is applicable to the 
                        ambulatory surgical center setting.
          (3) Application.--
                  (A) Physician reporting system rules.--
                Paragraphs (5), (6), and (8) of subsection (k) 
                shall apply for purposes of this subsection in 
                the same manner as they apply for purposes of 
                such subsection.
                  (B) Coordination with other payments.--The 
                provisions of this subsection shall not be 
                taken into account in applying the provisions 
                of subsection (m) of this section and of 
                section 1833(m) and any payment under such 
                provisions shall not be taken into account in 
                computing allowable charges under this 
                subsection.
                  (C) Limitations on review.--There shall be no 
                administrative or judicial review under section 
                1869, section 1878, or otherwise, of--
                          (i) the methodology and standards for 
                        determining payment amounts under this 
                        subsection and payment adjustments 
                        under subsection (a)(7)(A), including 
                        the limitation under paragraph (1)(B) 
                        and coordination under clauses (ii) and 
                        (iii) of paragraph (1)(D);
                          (ii) the methodology and standards 
                        for determining a meaningful EHR user 
                        under paragraph (2), including 
                        selection of measures under paragraph 
                        (2)(B), specification of the means of 
                        demonstrating meaningful EHR use under 
                        paragraph (2)(C), and the hardship 
                        exception under subsection (a)(7)(B);
                          (iii) the methodology and standards 
                        for determining a hospital-based 
                        eligible professional under paragraph 
                        (1)(C); and
                          (iv) the specification of reporting 
                        periods under paragraph (5) and the 
                        selection of the form of payment under 
                        paragraph (1)(D)(i).
                  (D) Posting on website.--The Secretary shall 
                post on the Internet website of the Centers for 
                Medicare & Medicaid Services, in an easily 
                understandable format, a list of the names, 
                business addresses, and business phone numbers 
                of the eligible professionals who are 
                meaningful EHR users and, as determined 
                appropriate by the Secretary, of group 
                practices receiving incentive payments under 
                paragraph (1).
          (4) Certified ehr technology defined.--For purposes 
        of this section, the term ``certified EHR technology'' 
        means a qualified electronic health record (as defined 
        in section 3000(13) of the Public Health Service Act) 
        that is certified pursuant to section 3001(c)(5) of 
        such Act as meeting standards adopted under section 
        3004 of such Act that are applicable to the type of 
        record involved (as determined by the Secretary, such 
        as an ambulatory electronic health record for office-
        based physicians or an inpatient hospital electronic 
        health record for hospitals).
          (5) Definitions.--For purposes of this subsection:
                  (A) Covered professional services.--The term 
                ``covered professional services'' has the 
                meaning given such term in subsection (k)(3).
                  (B) EHR reporting period.--The term ``EHR 
                reporting period'' means, with respect to a 
                payment year, any period (or periods) as 
                specified by the Secretary.
                  (C) Eligible professional.--The term 
                ``eligible professional'' means a physician, as 
                defined in section 1861(r).
  (p) Establishment of Value-based Payment Modifier.--
          (1) In general.--The Secretary shall establish a 
        payment modifier that provides for differential payment 
        to a physician or a group of physicians under the fee 
        schedule established under subsection (b) based upon 
        the quality of care furnished compared to cost (as 
        determined under paragraphs (2) and (3), respectively) 
        during a performance period. Such payment modifier 
        shall be separate from the geographic adjustment 
        factors established under subsection (e).
          (2) Quality.--
                  (A) In general.--For purposes of paragraph 
                (1), quality of care shall be evaluated, to the 
                extent practicable, based on a composite of 
                measures of the quality of care furnished (as 
                established by the Secretary under subparagraph 
                (B)).
                  (B) Measures.--
                          (i) The Secretary shall establish 
                        appropriate measures of the quality of 
                        care furnished by a physician or group 
                        of physicians to individuals enrolled 
                        under this part, such as measures that 
                        reflect health outcomes. Such measures 
                        shall be risk adjusted as determined 
                        appropriate by the Secretary.
                          (ii) The Secretary shall seek 
                        endorsement of the measures established 
                        under this subparagraph by the entity 
                        with a contract under section 1890(a).
          (3) Costs.--For purposes of paragraph (1), costs 
        shall be evaluated, to the extent practicable, based on 
        a composite of appropriate measures of costs 
        established by the Secretary (such as the composite 
        measure under the methodology established under 
        subsection (n)(9)(C)(iii)) that eliminate the effect of 
        geographic adjustments in payment rates (as described 
        in subsection (e)), and take into account risk factors 
        (such as socioeconomic and demographic characteristics, 
        ethnicity, and health status of individuals (such as to 
        recognize that less healthy individuals may require 
        more intensive interventions) and other factors 
        determined appropriate by the Secretary.
          (4) Implementation.--
                  (A) Publication of measures, dates of 
                implementation, performance period.--Not later 
                than January 1, 2012, the Secretary shall 
                publish the following:
                          (i) The measures of quality of care 
                        and costs established under paragraphs 
                        (2) and (3), respectively.
                          (ii) The dates for implementation of 
                        the payment modifier (as determined 
                        under subparagraph (B)).
                          (iii) The initial performance period 
                        (as specified under subparagraph 
                        (B)(ii)).
                  (B) Deadlines for implementation.--
                          (i) Initial implementation.--Subject 
                        to the preceding provisions of this 
                        subparagraph, the Secretary shall begin 
                        implementing the payment modifier 
                        established under this subsection 
                        through the rulemaking process during 
                        2013 for the physician fee schedule 
                        established under subsection (b).
                          (ii) Initial performance period.--
                                  (I) In general.--The 
                                Secretary shall specify an 
                                initial performance period for 
                                application of the payment 
                                modifier established under this 
                                subsection with respect to 
                                2015.
                                  (II) Provision of information 
                                during initial performance 
                                period.--During the initial 
                                performance period, the 
                                Secretary shall, to the extent 
                                practicable, provide 
                                information to physicians and 
                                groups of physicians about the 
                                quality of care furnished by 
                                the physician or group of 
                                physicians to individuals 
                                enrolled under this part 
                                compared to cost (as determined 
                                under paragraphs (2) and (3), 
                                respectively) with respect to 
                                the performance period.
                          (iii) Application.--The Secretary 
                        shall apply the payment modifier 
                        established under this subsection for 
                        items and services furnished--
                                  (I) beginning on January 1, 
                                2015, with respect to specific 
                                physicians and groups of 
                                physicians the Secretary 
                                determines appropriate; and
                                  (II) beginning not later than 
                                January 1, 2017, with respect 
                                to all physicians and groups of 
                                physicians.
                  (C) Budget neutrality.--The payment modifier 
                established under this subsection shall be 
                implemented in a budget neutral manner.
          (5) Systems-based care.--The Secretary shall, as 
        appropriate, apply the payment modifier established 
        under this subsection in a manner that promotes 
        systems-based care.
          (6) Consideration of special circumstances of certain 
        providers.--In applying the payment modifier under this 
        subsection, the Secretary shall, as appropriate, take 
        into account the special circumstances of physicians or 
        groups of physicians in rural areas and other 
        underserved communities.
          (7) Application.--For purposes of the initial 
        application of the payment modifier established under 
        this subsection during the period beginning on January 
        1, 2015, and ending on December 31, 2016, the term 
        ``physician'' has the meaning given such term in 
        section 1861(r). On or after January 1, 2017, the 
        Secretary may apply this subsection to eligible 
        professionals (as defined in subsection (k)(3)(B)) as 
        the Secretary determines appropriate.
          (8) Definitions.--For purposes of this subsection:
                  (A) Costs.--The term ``costs'' means 
                expenditures per individual as determined 
                appropriate by the Secretary. In making the 
                determination under the preceding sentence, the 
                Secretary may take into account the amount of 
                growth in expenditures per individual for a 
                physician compared to the amount of such growth 
                for other physicians.
                  (B) Performance period.--The term 
                ``performance period'' means a period specified 
                by the Secretary.
          (9) Coordination with other value-based purchasing 
        reforms.--The Secretary shall coordinate the value-
        based payment modifier established under this 
        subsection with the Physician Feedback Program under 
        subsection (n) and, as the Secretary determines 
        appropriate, other similar provisions of this title.
          (10) Limitations on review.--There shall be no 
        administrative or judicial review under section 1869, 
        section 1878, or otherwise of--
                  (A) the establishment of the value-based 
                payment modifier under this subsection;
                  (B) the evaluation of quality of care under 
                paragraph (2), including the establishment of 
                appropriate measures of the quality of care 
                under paragraph (2)(B);
                  (C) the evaluation of costs under paragraph 
                (3), including the establishment of appropriate 
                measures of costs under such paragraph;
                  (D) the dates for implementation of the 
                value-based payment modifier;
                  (E) the specification of the initial 
                performance period and any other performance 
                period under paragraphs (4)(B)(ii) and (8)(B), 
                respectively;
                  (F) the application of the value-based 
                payment modifier under paragraph (7); and
                  (G) the determination of costs under 
                paragraph (8)(A).

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