applicable hospital
(2) Applicable hospitals (A) In general For purposes of this subsection, the term “applicable hospital” means a subsection (d) hospital that meets the criteria described in subparagraph (B). (B) Criteria described (i) In general The criteria described in this subparagraph, with respect to a subsection (d) hospital, is that the subsection (d) hospital is in the top quartile of all subsection (d) hospitals, relative to the national average, of hospital acquired conditions during the applicable period, as determined by the Secretary. (ii) Risk adjustment In carrying out clause (i), the Secretary shall establish and apply an appropriate risk adjustment methodology. (C) Exemption In the case of a hospital that is paid under section 1395f(b)(3) of this title , the Secretary may exempt such hospital from the application of this subsection if the State which is paid under such section submits an annual report to the Secretary describing how a similar program in the State for a participating hospital or hospitals achieves or surpasses the measured results in terms of patient health outcomes and cost savings established under this subsection.