Chapter 1

Introduction

Objectives, Scope, and
Methodology

Objectives

The federal government currently spends over $70 billion annually on behalf of about 31 million Americans enrolled in the Medicare program. Since the program was established in 1965, the Congress and Medicare officials have faced difficult decisions about whether the quality of care beneficiaries receive properly reflects the level of Medicare reimbursement, or whether, conversely, the level of Medicare reimbursement can support medical services of adequate quality.

Prior to 1983, Medicare reimbursed most physicians, other practitioners,
and suppliers on a fee-for-service basis, and most institutionally-based
providers on a cost basis. Medical review activities have therefore
focused primarily on determining the necessity of services provided,
since fee-for-service and cost-based reimbursement incentives were
thought to promote overutilization of services, rather than underutiliza-
tion. More recent efforts to contain program expenditures have altered
the incentives for many participating health care providers. Medicare
now pays for most hospital care using a system based on prospectively
determined fixed payments. In addition, the program is encouraging
participation in prepaid health care plans, health maintenance organiza-
tions (HMOS) and competitive medical plans (CMPS), in which a fixed fee
is paid to a health care organization offering the full range of Medicare-
covered services to enrollees. Under these arrangements the financial
incentives could lead to underserving beneficiaries. Thus, Medicare has
created a mixed set of incentives that could lead to underserving benefi-
ciaries in some health care settings such as hospitals, while maintaining
payment arrangements which could lead to overuse of services in
others, such as physicians' offices.

This mixed set of reimbursement incentives complicates the task of quality assurance. Medicare needs to organize quality of care reviews to guard against potentially negative effects of all program incentives. At the same time, the review system should be comprehensive and flexible enough to adapt to new sets of circumstances brought about by future changes in program policies.

Two broad study objectives were posed in a request received from the
Subcommittee on Health of the House Committee on Ways and Means on

Introduction

March 3, 1986. (See appendix I.) First, we were asked to describe what current Medicare systems for measuring and monitoring quality of care are intended to do, what data and methods for assessing quality are available, and whether more could be done with existing data, in the relatively short term, to provide better information on quality of care. Second, we were asked to review the focus and direction of HHS quality review research and evaluation activities, their relationship to ongoing quality assessment functions, and whether longer term changes are needed.

Scope

We examined all quality-related activities performed by the Health Care Financing Administration (HCFA) for all Medicare-covered services. This includes all activities performed by HCFA or its contractors to ensure that care provided to program beneficiaries meets professionally recognized standards, as reflected by the structure of care (physical plant and equipment, staffing, professional training, organization, use of technology), the process of care (the provision of care itself, including the diagnostic information gathered, procedures used, therapies), and health care outcomes (recovery rates, complications, mortality or morbidity rates).

In distinguishing among structural, process-oriented, and outcome-based approaches to assessing quality of care, we followed the quality of care constructs typically found in the published literature.1 However, there is no straightforward formula that the Medicare program, health care providers, or program beneficiaries can use in deciding how different approaches to measuring quality should be combined in an overall assessment of quality. Each approach provides different types of information: structural measures indicate whether the resources necessary to provide quality care are available; process measures, whether the care provided reflects sound medical practice; outcome measures, whether the results of care are good, bad, or indifferent. Each, moreover, allows different levels of direct involvement and control by practitioners, patients, and third-party payors or regulators. One challenge for the Medicare program is determining the optimal allocation of resources to these various approaches to quality assessment.

'See, for example, A. Donabedian, Explorations in Quality Assessment and Monitoring, vol. 1, The
Definition of Quality and Approaches to Its Assessment (Ann Arbor, Mich: Health Administration
Press, 1980); K. N. Lohr and R. H. Brook, Quality Assurance in Medicine: Experience in the Public
Sector (Santa Monica, Calif.: The Rand Corporation, October 1984); G. T. Hammons, R. H. Brook, and
J. P. Newhouse, Selected Alternatives for Paying Physicians Under the Medicare Program (Santa
Monica, Calif.: The Rand Corporation, 1986).

Introduction

Further, we addressed both quality assessment and quality assurance activities. Quality assessment involves the application of measures of quality using either implicit or explicit criteria to the structure, process, or outcomes of care and the monitoring of levels of quality over time. Quality assurance extends the concept of assessment to include the formal organization of activities designed to identify problems in the quality of medical care, determine solutions to them, monitor the effectiveness of the solutions, and institute additional change and monitoring where warranted. The critical distinction between quality assessment and quality assurance is that the latter includes information feedback and improvement, intended to assure enhanced levels of quality in the future.

Methodology

Medicare quality assessment and assurance activities. We conducted interviews, literature reviews, and surveys of Medicare contractors to determine what is currently being done by the Department of Health and Human Services (HHS), and in particular by HCFA, to monitor the quality of care in Medicare services. Data collection was completed in fall 1987.

We interviewed HCFA program officials and staff and obtained support-
ing materials (copies of project plans, data system documentation, and
so forth). We examined information systems closely, reviewing the
existing literature and documentation related to the structure, organiza-
tion, and technical adequacy (accuracy, validity, comparability, and
interpretability) of HCFA data files and information reporting systems as
they pertain to quality assessment and quality assurance. In addition,
we met with professional staff of several Utilization and Quality Control
Peer Review Organizations (PROS), the organizations responsible for
reviewing the quality of inpatient hospital care, and Medicare
intermediaries and carriers (Medicare's claims processing contractors).

We formally requested descriptions and points of contact for additional information on HHS research, evaluation, and related activities focusing

2These definitions follow closely those developed by R. H. Brook and K. N. Lohr in “Efficacy, Effectiveness, Variations, and Quality: Boundary-crossing Research," Medical Care (May 1985) p. 711; A. Donabedian, Explorations in Quality Assessment and Monitoring, vol. 3, The Methods and Findings of Quality Assessment and Monitoring: An Illustrated Analysis (Ann Arbor, Mich: Health Administration Press, 1985) pp. 451-4; and F. Baker, “Quality Assurance and Program Evaluation," Evaluation and the Health Professions (June 1983), pp. 152-3.