ment programs, state governments, and private-sector groups also contract with QIOs. External review focuses on measurement of care processes and patient outcomes through such means as abstraction of samples of medical records (conducted by QIO staff or the providers); screening of hospital discharge abstracts and claims data to identify such events as nosocomial infections, unscheduled returns to surgery, and deaths; and conduct of a wealth of focused studies in selected clinical areas (discussed further in Chapter 4).

Under Medicare fee-for-service (FFS), QIO review is mandatory for hospitals and other institutions, and there are some QIO activities for ambulatory care in which physicians may voluntarily choose to participate. Starting in 1985, quality review (by QIOs or QIO-like entities) became mandatory for health plans (Consolidated Omnibus Budget Resolution Act [COBRA] 1985); today, the review processes for M+C plans are more extensive than those conducted for FFS Medicare.

During the late 1970s and 1980s, quality review programs were developed and applied within state Medicaid programs. These efforts are difficult to characterize because federal quality requirements and activities differ by type of health care program, which include FFS programs, primary care case management programs, capitated full-risk managed care, Section 1915(b) waiver programs, Section 1115 waiver demonstrations, home and community-based services waiver programs, and programs of all-inclusive care for elderly beneficiaries (Shalala, 2000).

Federal law pertaining to the Medicaid program requires that states adopt procedures to evaluate the utilization of care and services and establish a plan for reviewing the appropriateness and quality of care. The federal government pays states an enhanced federal financial participation rate of 75 percent (as opposed to an average closer to 50 percent) to help cover the costs of reviews conducted by QIOs or QIO-like entities, and most states have pursued this option (Verdier and Dodge, 2002). States, however, have considerable latitude in how they choose to define, implement, and enforce quality review; the level and degree of external review vary widely among the states.

With the growth of Medicare and Medicaid managed care options in the 1990s and in response to concerns about burden and conflicting quality requirements, CMS developed the Quality Improvement System for Managed Care (QISMC), which is based on technical performance measurement (Centers for Medicare and Medicaid Services, 2001a). The system is mandatory for M+C plans and voluntary for Medicaid managed care. QISMC relies to a great extent on measures in the Health Plan Employer Data and Information Set (HEDIS); the standardized quality measurement set of the NCQA; and the Consumer Assessment of Health Plans (CAHPS), a survey instrument and reporting system developed to help



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