consumers and purchasers choose among health plans (see Chapters 4 and 6). QISMC also includes fairly extensive requirements pertaining to the internal quality assurance and improvement processes of health plans.

In addition to Medicare and Medicaid, other government health care programs rely to varying degrees on external review to safeguard quality. The DOD TRICARE program contracts with the Keystone Peer Review Organization to review the appropriateness of care for about 1,500 medical, surgical, and mental health cases per month; to certify mental health facilities; and to handle patient and provider appeals. VHA has traditional regulatory programs, including an external peer review program. But in these government programs that own and operate their own delivery systems, external review activities are overshadowed by the quality management and improvement programs embedded in the health care delivery function (discussed below) (Institute of Medicine, 2001c).

While external review in all the programs relies on performance measurement of various types to assess the quality of care being delivered, these assessments are necessarily limited by the absence of supportive tools and infrastructure. In the absence of computer-based record keeping on elements of care, quality-of-care studies are confined to manual extractions from paper medical records, resulting in time-consuming analysis of small samples, or to the sparse clinical information available on claims. Moreover, the lack of consistent standards among states and review organizations, the lack of consistent datasets, and the inadequacy of the data in general create substantial obstacles to establishing quality benchmarks or making valid cross-program comparisons of the quality of care received. As discussed in Chapter 5, some progress has been made in addressing these issues in recent years, but the pace of progress is too slow in light of the gravity of the quality and safety shortcomings.


There have been very few attempts to expand upon traditional purchasing regulatory mechanisms and engage in what is called “value-based purchasing.” Two different strategies are at the heart of value-based purchasing: (1) disclosure of comparative quality information to encourage consumers and purchasers to choose the highest-quality providers, and (2) selective purchasing or payment incentives to providers and beneficiaries. The purpose of value-based purchasing is to promote market forces that encourage and reward (through higher market share and/or higher payments) providers that achieve higher levels of quality. Both information disclosure and payment incentives, however, are dependent upon the availability of comparative quality data on providers and few such data are available. Moreover, some comparisons of performance require

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