HEAT oil in large skillet on medium-high heat. Add chicken, peppers and mushrooms; cook 3 min. or until chicken is evenly browned, stirring frequently.
ADD spaghetti sauce and water; stir. Bring to boil. Stir in pasta; cover. Simmer on medium heat 6 min.; stir. Cook, covered, on medium-low heat 6 min. or until pasta is tender. Stir in 1 cup cheese; cook, uncovered, 2 min. or until cheese is melted, stirring occasionally.
SPRINKLE with remaining cheese and basil. Remove from heat. Let stand, covered, 5 min. or until cheese is melted.