1
Introduction

CHAPTER SUMMARY

This report is a product of the Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs project, established by the Institute of Medicine in 2004. This 3-year project is producing a series of reports on various aspects of health insurance, including performance measurement, performance improvement activities, and payment policies. This introductory chapter provides an overview of the entire series of reports, as well as background on the rationale for the project.

In 2001, the Institute of Medicine (IOM) released the report Crossing the Quality Chasm: A New Health System for the 21st Century (IOM, 2001). That report identified six aims for the health care system—health care should be safe, effective, patient-centered, timely, efficient, and equitable—and challenged the health care sector to achieve substantial improvements in each of these dimensions of quality over the coming decade. The report acknowledged that achieving significant improvement in quality across all six dimensions would necessitate behavioral and structural change at many levels, including patient–clinician relationships, small practice settings, health care organizations (e.g., hospitals and health plans), and the environment of care (e.g., regulatory processes and payment policies) (Berwick, 2002).

The IOM project Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs, initiated in 2004, is focused at the environmental level. It addresses the redesign of public and private health insurance programs, with an initial emphasis on the Medicare system. The committee impaneled by the IOM to carry out the project is producing a series of three reports (see Table 1-1):

  • Performance measurement report. This first report lays the groundwork for the subsequent two reports on payment incentives and Quality Im-



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Performance Measurement: Accelerating Improvement 1 Introduction CHAPTER SUMMARY This report is a product of the Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs project, established by the Institute of Medicine in 2004. This 3-year project is producing a series of reports on various aspects of health insurance, including performance measurement, performance improvement activities, and payment policies. This introductory chapter provides an overview of the entire series of reports, as well as background on the rationale for the project. In 2001, the Institute of Medicine (IOM) released the report Crossing the Quality Chasm: A New Health System for the 21st Century (IOM, 2001). That report identified six aims for the health care system—health care should be safe, effective, patient-centered, timely, efficient, and equitable—and challenged the health care sector to achieve substantial improvements in each of these dimensions of quality over the coming decade. The report acknowledged that achieving significant improvement in quality across all six dimensions would necessitate behavioral and structural change at many levels, including patient–clinician relationships, small practice settings, health care organizations (e.g., hospitals and health plans), and the environment of care (e.g., regulatory processes and payment policies) (Berwick, 2002). The IOM project Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs, initiated in 2004, is focused at the environmental level. It addresses the redesign of public and private health insurance programs, with an initial emphasis on the Medicare system. The committee impaneled by the IOM to carry out the project is producing a series of three reports (see Table 1-1): Performance measurement report. This first report lays the groundwork for the subsequent two reports on payment incentives and Quality Im-

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Performance Measurement: Accelerating Improvement TABLE 1-1 Mapping of IOM Reports of the Committee on Redesigning Health Insurance to Congressional Mandates P.L. 108-173 Section 238   EVALUATION-     (1) IN GENERAL-Not later than the date that is 2 months after the date of the enactment of this Act, the Secretary shall enter into an arrangement under which the Institute of Medicine of the National Academy of Sciences (in this section referred to as the ‘Institute’) shall conduct an evaluation of leading health care performance measures in the public and private sectors and options to implement policies that align performance with payment under the Medicare program under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.). (2) SPECIFIC MATTERS EVALUATED-In conducting the evaluation under paragraph (1), the Institute shall—       (A) catalogue, review, and evaluate the validity of leading health care performance measures; (B) catalogue and evaluate the success and utility of alternative performance incentive programs in public or private sector settings; and (C) identify and prioritize options to implement policies that align performance with payment under the medicare program that indicate—         (i) the performance measurement set to be used and how that measurement set will be updated; (ii) the payment policy that will reward performance; and (iii) the key implementation issues (such as data and information technology requirements) that must be addressed.     (3) SCOPE OF HEALTH CARE PERFORMANCE MEASURES-The health care performance measures described in paragraph (2)(A) shall encompass a variety of perspectives, including physicians, hospitals, other health care providers, health plans, purchasers, and patients. P.L. 108-173 Section 109   IOM STUDY OF QIOs-     (1) IN GENERAL-The Secretary shall request the Institute of Medicine of the National Academy of Sciences to conduct an evaluation of the program under part B of title XI of the Social Security Act. The study shall include a review of the following:       (A) An overview of the program under such part. (B) The duties of organizations with contracts with the Secretary under such part. (C) The extent to which quality improvement organizations improve the quality of care for Medicare beneficiaries. (D) The extent to which other entities could perform such quality improvement functions as well as, or better than, quality improvement organizations. (E) The effectiveness of reviews and other actions conducted by such organizations in carrying out those duties. (F) The source and amount of funding for such organizations. (G) The conduct of oversight of such organizations.

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Performance Measurement: Accelerating Improvement Performance Measurement Report This report will address issues related to the promulgation and use of standardized performance measures for payment, public reporting, and performance improvement. Specifically, it will do the following:     Catalogue, review, and evaluate the validity of leading health care performance measures. Recommend a process for the ongoing promulgation and maintenance of performance measures, the submission of data by providers, and public reporting of performance information. Payment Incentives Report This report will identify and analyze options for aligning Medicare payment policies with provider performance in the original fee-for-service program (under parts A and B of Title XVIII of the Social Security Act), the new Medicare Advantage program (under Part C), and other programs (under Title XVIII). Specifically, it will do the following:     Select and weight of health care performance measures for use in payment programs. Catalogue and evaluate the success and utility of alternative performance incentive programs in public- and private-sector settings. Identify and prioritize options for implementing policies that align performance with payment under the Medicare program, indicating:       The performance measurement set to be used and how that measurement set will be updated. The payment policy that will reward performance. The key implementation issues (such as data and information technology requirements) that must be addressed. Performance Improvement Report This report will provide an evaluation of Medicare’s quality improvement program (under Part B of Title XI of the Social Security Act). Specifically, it will provide the following:     An overview of the quality improvement program, including a description of the duties of private-sector organizations (known as quality improvement organizations, or QIOs) that have contracts with the Secretary under this program, and the source and amount of funding for QIOs. An assessment of the effectiveness of reviews and other actions conducted by QIOs, and the extent to which QIOs improve the quality of care for Medicare beneficiaries. An assessment of the extent to which other entities could perform such quality improvement functions as well as, or better than, QIOs. An assessment of the conduct of CMS oversight of QIOs.

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Performance Measurement: Accelerating Improvement provement Organizations (QIOs). It analyzes leading health care performance measures and the current measurement landscape. In addition to meeting the minimum requirements of its charge, as outlined in Table 1-1, the committee recommends how to develop a system from current fragmented efforts that builds upon existing assets, is responsive to key stakeholder groups, but is also more capable of aligning performance measures with national health care goals and serving the needs of Medicare beneficiaries. Payment incentives report. Building upon the first report, the payment incentives report will articulate design principles for better linking payment incentives within Medicare, identify a subset of measures to be used for payment incentives, and propose a strategy for implementation. Performance improvement report. This report will provide an evaluation of the QIO program, including a review of its previous efforts and recommendations for its future roles. This first report and the subsequent payment incentives report are responsive to a congressional request for an IOM study on how to link payment to performance under Medicare (Public Law 108-173, Section 238). The study of Medicare’s QIOs was mandated under that same legislation (section 109) and will be addressed primarily by the performance improvement report. The production of all three reports is sponsored by the Centers for Medicare and Medicaid Services (CMS). The series of reports is intended to provide guidance to public and private purchasers on how changes in insurance programs can lead to improvements in the quality of health care and increase the value derived from health care investments. Before proceeding, however, the committee notes that while much of the interest in enhancing the quality of health care is driven by a desire to reduce the costs associated with unnecessary or wasteful practices, the rate of increase in health care costs cannot be slowed by enhancements to health insurance programs alone. Many other factors contribute to rapidly rising health care costs, most notably advances in medical knowledge and technology, as well as an aging population eager to take advantage of these advances to extend and improve the quality of life. Moreover, savings that accrue through some quality improvements, such as elimination of unnecessary or risky services that potentially expose patients to more harm than good, may be offset by the cost of others, such as that associated with the institution of provider reminder systems to ensure that patients receive recommended services. And even if significant savings were produced by redesigning health insurance and effecting other quality enhancements, these savings might be applied to other national health goals, such as coverage of the uninsured. With these caveats in mind, we provide in the remainder of this chapter the context and rationale for the development of the national performance

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Performance Measurement: Accelerating Improvement measurement and reporting system proposed in this report as an essential element of the redesign of health insurance programs to enhance health care quality. We emphasize here, as throughout the report, the importance of preserving and building on the many strengths of the existing system while striving to address its shortcomings. THE CURRENT HEALTH CARE LANDSCAPE The U.S. health care system provides some of the most scientifically advanced care in the world. Sizable public- and private-sector investments in clinical research have led to tremendous growth in knowledge, technology, and pharmaceuticals. In fiscal year 2005, for example, $27.9 billion was provided through congressional appropriations to fund the National Institutes of Health, while $49.9 billion was invested by the pharmaceutical and biotechnology industries (Cutler and McClellan, 2001; U.S. DHHS, 2005; U.S. FDA, 2004b). Recent medical advances in the areas of cancer treatment, organ transplantation, and joint replacement continue to improve survival and dramatically increase the quality of life. The number of survivors from all cancers combined increased from 3 million Americans living with cancer in 1971 (1.5 percent of the U.S. population) to an estimated 9.8 million in 2001 (3.5 percent of the population) (CDC, 2004). The 336,359 organ transplants performed to date (National Organ Procurement and Transplantation Network, 2005) have enabled survival and productivity for many patients for whom no other treatment was available. And total joint replacement now allows hundreds of thousands of people to live fuller, more active lives (U.S. FDA, 2004a). Numerous other advances have been achieved as well. Advances in cell restoration, prosthetic devices, and rehabilitation, for example, have improved the health and functioning of many people with disabilities, while genomics and other new technologies on the horizon hold great promise for improving health and longevity and alleviating pain and suffering (U.S. DOE Office of Science, 2004). The application of these medical advances would not be feasible without sustained investments in biomedical research, as well as the formal education and training of the health care workforce (U.S. DOL, 2004). Despite these remarkable achievements, however, the health care system does not consistently provide safe and effective care. A large body of evidence substantiates shortcomings in the safety and effectiveness of health care in the United States (Commonwealth Fund, 2002; IOM, 2000, 2001; Leape and Berwick, 2005; Leatherman and McCarthy, 2004, 2005; McGlynn et al., 2003). The typical American adult receives only 54.9 percent of recommended care; many people do not receive the services they need, while others receive services that expose them to more potential harm than good (McGlynn et al., 2003). Safety problems have been documented

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Performance Measurement: Accelerating Improvement in all health care settings, including hospitals, nursing homes, and care in the community (Gurwitz et al., 2000, 2003; IOM, 2000). Fortunately, some progress has been made toward reducing these gaps in safety and quality. The Agency for Healthcare Research and Quality (AHRQ), which maintains a national health care quality tracking system, reported improvement in performance between 2003 and 2004 for most of the system’s 98 quality measures (AHRQ, 2004a). Yet the quality chasm in health care persists. The U.S. health care system is also very costly, and many Americans may not receive good value for the dollars invested in their health care services. Per capita health spending in the United States exceeds that of other industrialized countries by huge margins. The United States spent $4,887 per person on health care in 2001, compared with $2,792 in neighboring Canada, $1,992 in the United Kingdom, and $2,131 in Japan (Reinhardt et al., 2004). Nonetheless, while the United States performs on par with other industrialized countries across a range of quality indicators (e.g., cervical cancer screening rate, influenza vaccination rate, suicide, asthma mortality, smoking rates, survival rates for kidney and liver transplants), it does not exhibit superior performance overall (Hussey et al., 2004). Cross-national surveys of patients’ reports on care experiences and ratings of various dimensions of care indicate that, except for a few ratings of access, the U.S. health care system often performs relatively poorly from the patient perspective (Davis et al., 2004). The United States also ranks in the bottom quartile of industrialized countries in terms of life expectancy at birth and infant mortality (Reinhardt et al., 2002). Across geographic regions within the United States, moreover, higher spending is not consistently associated with higher quality of care and better patient outcomes (Wennberg, 2005). Population-based studies of Medicare beneficiaries residing in communities with nearly two-fold differences in per capita health spending have found that the additional spending was associated with the use of “supply-sensitive” services (i.e., increased use of specialists and hospitals), but no improvement on measures of quality and access (Fisher et al., 2003a). In addition, large regional differences in end-of-life spending are not associated with better health outcomes (i.e., 5-year mortality and change in functional status) or satisfaction with care (Fisher et al., 2003b). And a study assessing patients treated in academic health centers for acute myocardial infarction, colorectal cancer, and hip fracture found that the centers differed in intensity of services delivered by up to 60 percent, but that higher-intensity practice was associated with either no difference or, for some conditions, a small decrement in care quality and patient outcomes (Fisher et al., 2004). These findings suggest that multiple opportunities exist to reduce per capita spending through the elimination of services that do not improve health. Moreover, process reengineering has the potential to deliver health-improving services at a lower cost per unit.

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Performance Measurement: Accelerating Improvement In addition to geographic variations, racial and ethnic disparities in health care are pervasive (IOM, 2002c). An extensive body of research documents that racial and ethnic minorities receive lower-quality care—both routine and specialty—than nonminorities, and these variations persist after accounting for the patient’s insurance status and income level (Ayanian et al., 1993, 1999; Barker-Cummings et al., 1995; Epstein et al., 2000; Gaylin et al., 1993; Hannan et al., 1999; Herholz et al., 1996; Johnson et al., 1993; Petersen et al., 2002; Williams et al., 1995). The escalating cost of health insurance not only consumes a sizable proportion of gross national product, but also contributes to rising numbers of uninsured—nearly 45 million people in 2003, or about one in seven Americans (Fronstin, 2004; Kaiser Family Foundation, 2004c). Many other Americans have only minimal insurance coverage and a limited ability to pay for services out of pocket (Collins et al., 2004; Kaiser Family Foundation, 2004a,b). Some of the uninsured and underinsured receive services through safety net providers, such as public and critical access hospitals, community health centers, and rural health clinics, and some providers, such as academic health centers, provide a sizable share of uncompensated services to the uninsured (Moy et al., 1996; Reuter and Gaskin, 1998). But a large gap remains between the services that are available and those that are needed by the uninsured. On the whole, the uninsured are less likely than those with insurance to receive services from which they would likely benefit, and the services that are provided are less timely (IOM, 2002a). This is also the case for insured individuals with high deductibles and copayments and modest financial resources (Rice and Matsuoka, 2004). The lack of insurance for so many Americans results in serious health consequences and economic costs not only for the uninsured, but also for their families, the communities in which they live, and the entire nation (IOM, 2004b). Most families with one or more uninsured members have lower incomes and are more likely to spend a high proportion of family income on health relative to insured families (IOM, 2002b). In communities with high uninsurance rates, even those with insurance may encounter reduced access to clinic-based primary care, specialty services, and hospital-based care, particularly emergency medical services and trauma care (IOM, 2003b). Society as a whole incurs other costs for gaps in health insurance, including lost health and longevity and lost workforce productivity (IOM, 2003c). The United States is among the few industrialized countries in the world that does not guarantee access to health care and health insurance coverage for its population (IOM, 2004b). Although many factors likely contribute to the nation’s high rates of uninsurance, there is little doubt that rapidly rising health care costs, driven in part by waste in the current health system, hamper efforts to expand coverage.

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Performance Measurement: Accelerating Improvement Among those populations with limited access to high-quality care are those living in rural communities, representing approximately 20 percent of the American population (IOM, 2005). Associated with rural as compared with urban communities are single providers, lower rates of health insurance, poorer health behaviors, higher infant mortality, and greater incidence of chronic diseases (Kaiser Family Foundation, 2004c). The unique factors surrounding discrepancies in rural health perpetuate the inequalities of the health care system. Americans are concerned about the state of health care. Their primary concern is health care costs: a 2002 survey indicated that 38 percent of respondents were worried about overall costs, and 31 percent were particularly troubled by prescription drug costs (Kaiser Family Foundation, 2002). At the same time, however, concerns regarding quality and safety within the health care sector are attracting increasing attention. Between 2000 and 2004, the proportion of respondents to another survey who were dissatisfied with the quality of their health care grew from 44 to 55 percent (Kaiser Family Foundation et al., 2004); 40 percent of the respondents to this survey also reported that the quality of care had deteriorated during this period. NEED TO ACCELERATE THE PACE OF IMPROVEMENT The primary purpose of the IOM project on Redesigning Health Insurance is to accelerate the pace of change in the health system. In the 5 years since the publication of the Quality Chasm report (IOM, 2001), virtually every stakeholder group has taken important steps to improve quality in a range of areas (Leape and Berwick, 2005): Information technology—The federal government has assumed a leadership role in the development of the National Health Information Network with the appointment of a National Coordinator for Health Information Technology (The White House, 2004) and the promulgation of an initial set of national data standards to facilitate the meaningful exchange of data among authorized users (U.S. DHHS, 2003a,b). In October 2004, AHRQ awarded $139 million in contracts and grants to communities and health systems to enhance information technology capabilities (AHRQ, 2004b). Knowledge and tools—AHRQ has sponsored applied research projects aimed at enhancing and transferring knowledge and tools to improve quality; however, funding levels for health services research remain very low compared with those for clinical research (AHRQ, 2005; U.S. DHHS, 2005). Six states (Florida, Maryland, Massachusetts, New York, Oregon, and Pennsylvania) have established patient safety research centers

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Performance Measurement: Accelerating Improvement whose activities include educational programs for providers and patients, reporting systems, and clearinghouses for best practices in safety (Rosenthal and Booth, 2004). Education and technical assistance—The Institute for Healthcare Improvement has developed many quality improvement programs, including breakthrough series collaboratives, IMPACT networks, forums, and Calls to Action, along with the recently launched 100,000 Lives Campaign. These efforts now reach tens of thousands of people in 50 countries (IHI, 2004). Between 2000 and 2003, the Medicare Quality Improvement Organization Program supported quality improvement projects in all states, often reaching all hospitals, nursing homes, home health agencies, and outpatient physicians in the state, with varying degrees of involvement (AMA, 2000; U.S. DHHS, 2003c). Informed purchasing—Private and public purchasers have launched national initiatives to drive quality through purchasing decisions. The Leapfrog Group and Bridges to Excellence are two large national efforts aimed at encouraging and rewarding quality improvement in both hospital and ambulatory settings (DeBrantes et al., 2003; Galvin and Milstein, 2002). The Consumer-Purchaser Disclosure Project is an alliance of more than 25 consumer, employer, and labor organizations working to ensure that comparative performance data are available in all geographic areas and to all population groups (Consumer-Purchaser Disclosure Project, 2005). Many other purchaser-driven efforts exist at the local and regional levels (Rosenthal et al., 2004). Quality oversight—Major accreditation organizations have strengthened requirements and programs, especially in the area of patient safety (JCAHO, 2004; NCQA, 2000; Wachter, 2004). Professional certification programs, such as those of the Accreditation Council for Graduate Medical Education and the American Board of Medical Specialties, have adopted new standards requiring health professionals to demonstrate quality-related competencies (ACGME, 2002; American Board of Medical Specialties, 2005). Despite these many worthwhile efforts, major changes in the health care delivery system are difficult to discern. Investment in information technology has expanded, but the pace of penetration and modernization in the overall health care system has been slow. Of the nearly 70 percent of physicians who operate in small practice settings, only 8 percent use electronic prescribing, and fewer than one in four providers use some form of computer-generated treatment reminders (Reed and Grossman, 2004). Pockets of innovation have emerged, with some health systems making sizable investments in electronic health records (EHRs) (Garrido et al., 2005; Health Data Management, 2003; HealthPartners, 2004; NYC Health and

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Performance Measurement: Accelerating Improvement Hospitals Corporation, 2003; Sutter Health, 2004; U.S. VA, 2003). But the United States continues to rank in the bottom quartile of industrialized countries in the use of EHRs in ambulatory settings: only about 18 percent of U.S. physicians use EHRs, compared with nearly 90 percent in Sweden and the Netherlands (Harris Interactive Health News, 2002). Other countries, such as the United Kingdom, are making far greater investments in the expansion of electronic supports to practice settings (Audet et al., 2004; Virtual Medical Worlds Monthly, 2001). The pace of modernization has been impeded by financial barriers, as well as cultural and technical barriers to the adoption of information technology (IOM, 2003d). Disruptions in practice and loss of practice revenue are frequently associated with the initial implementation of such reforms. Moreover, while the introduction of new technology can reduce many medical errors, it can also introduce new types of errors (Leape and Berwick, 2005; Werner and Asch, 2005). Yet despite the complexity, fragmentation, and individualism that characterize the health care system and the field of medicine, health professionals must adapt to changes in care processes and in methods of communication between patients and clinicians and among clinicians (Leape and Berwick, 2005). The lack of organizational supports in so many ambulatory practice settings has major implications for patient care. Large, tightly organized multispecialty groups are significantly more likely to use evidence-based management processes, such as disease registries, reminder systems, guidelines, and case management systems (Audet et al., 2005), than are more loosely organized practice settings (Shortell and Schmittdiel, 2004). A recent comparison of the quality of care provided to patients served by the Veterans Health Administration through a highly integrated health system found that adherence to science-based processes of care typically exceeded that received by a comparable national sample of patients in 12 communities (Asch et al., 2004). In a survey of California physicians, those affiliated with Kaiser Permanente, which consists of large prepaid group practices, were much more likely to report the enrollment of their patients in disease management programs than were other physicians in the state (Rittenhouse et al., 2004). Many factors undoubtedly contribute to the slow pace of change at the delivery system level, but a growing consensus has emerged among both the public and private sectors that the environment in which care is provided impedes efforts to improve quality (IOM, 2004a). This environment, which is shaped to a great extent by the design of public and private health insurance programs, fails to produce incentives or structures that encourage and reward high-quality care (Nichols et al., 2004).

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Performance Measurement: Accelerating Improvement THE HEALTH CARE ENTERPRISE The health care enterprise can be viewed as a complex but decentralized system in which multiple providers, consumers, and purchasers are connected by services, information systems, and financial transactions. Much of the data that emerges from the enterprise is related to documentation of specific health conditions, services, and financial reimbursements. Chart review and administrative data are coded as part of individual transactions, and their use is constrained by issues of privacy and confidentiality; information about the overall performance of the health care enterprise is difficult to obtain or develop. In theory, a marketplace achieves desired performance levels by appealing to consumer choice and fostering competition among providers. In both areas, the U.S. health care marketplace faces fundamental challenges. Health care consumers make several types of decisions: the selection of a health plan, the selection of providers (e.g., primary care providers, specialists, and hospitals), choices among different treatment programs, and the pursuit of health-related behaviors (e.g., diet, exercise, and smoking). Although health care consumers have these choices in theory, the reality is different. The options from which they can choose are often limited; the information available to inform their decision making is usually constrained; some are not well equipped, cognitively or emotionally, to make such decisions; and the health system provides few useful decision supports to assist them. In most communities, some degree of competition exists among health plans, but such considerations as price and proximity of services and familiarity with a particular provider are more likely to drive decision making than is the quality of care or the value of services. Most Medicare beneficiaries are able to choose between a Medicare Advantage Plan(s) or traditional, fee-for-service Medicare. CMS does make comparative data for clinical quality available to Medicare Advantage Plans (CMS, 2005c), but no such data are provided under traditional Medicare, which accounts for almost 90 percent of beneficiaries (National Health Policy Forum and California Healthcare Foundation, 2004). For most of the working population, the selection of a health plan is a decision made jointly by the employer and the employee, with the employee choosing from a plan or plans offered by the employer. The availability of information on the quality of commercial or self-insured health plans is variable. Many health plans report performance information on a set of standardized quality measures. For example, Health Plan Employer Data and Information Set measures are reported to the National Committee for Quality Assurance or directly to large employers or employer coalitions (NCQA, 2005). But as the provider networks of health insurance plans

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Performance Measurement: Accelerating Improvement In recent years, this situation has started to change. In July 2003, CMS announced a demonstration project to provide bonuses to hospitals in the Premier, Inc. system based on performance in five clinical areas (CMS, 2005b). Many private purchasers and health plans are also implementing pay for performance programs that generally link a modest amount of provider payments to performance across a number of measures (Rosenthal et al., 2004). Piecemeal payment—Many insurance programs employ piecemeal provider payment systems that compensate individual physicians for face-to-face visits and procedures according to a fee schedule and hospitals for patient episodes by diagnosis-related group. This type of microlevel payment system offers little incentive for investment in information technology (e.g., chronic care registries and EHRs), organizational supports (e.g., quality measurement and improvement programs), population health (e.g., healthy lifestyle programs aimed at tobacco cessation and weight loss), or multidisciplinary team-based approaches to care delivery, all of which have been shown to improve health care quality and patient outcomes (Batalden et al., 2003; Coffield et al., 2001; Ellerbeck et al., 2000; Fitzmaurice et al., 2002; IOM, 2003a,e; Jencks et al., 2000; Robert Wood Johnson Foundation, 2001). These types of health system changes, which require collective decision making and investment on the part of many providers, are difficult to accomplish in a highly decentralized delivery system where revenues flow directly to the component parts. These types of investments also generally do not yield a positive financial return at the individual provider level under current payment systems (Leatherman et al., 2003), and may even reduce revenues for certain components of the system. Thus piecemeal payment does not support efficiency in the health care system and may promote overuse of unnecessary services and underuse of services that can improve health outcomes. Accountability void—Individual providers, whether physicians or hospitals, frequently focus on providing quality care within their own setting. For most chronically ill patients, whose outcomes depend on the receipt of services from many different providers over an extended period of time, no health care professional or organization assumes responsibility for ensuring that all appropriate services (and only those services) are received. This accountability void is particularly evident at the community level, since no provider or group of providers accepts responsibility for ensuring that the entire population of the community has access to appropriate care. These characteristics are not independent of each other, but rather tightly interwoven. For example, the lack of care coordination as a benefit can be attributed to the piecemeal payment system, which does not reward integrating a patient’s care across multiple providers. However, a system devoid of accountability for all the care delivered to a patient, as well as

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Performance Measurement: Accelerating Improvement incentives to provide better care, perpetuates the piecemeal payment approach. Efforts addressing all these integrated characteristics are necessary to promote better quality of care. Many proposals have been offered to improve and reform the functioning of the health care marketplace. Some of these proposals rely on an inherent ability of markets to transform the health care system, some on social planning or government regulatory approaches, some on stronger self-regulation by the health professions, and some on consumer-driven approaches. While each of these proposals is based on a different set of assumptions and values with regard to the fundamental processes and interactions that would best foster the common good, all would require performance measures to achieve their goals. This IOM report proposes a set of measures, derived from an evidentiary base, that the committee believes can be used for multiple purposes: data collection and analysis, public reporting, development of professional standards, payment and benefit design, governmental oversight, and purchasing benchmarks. Implementation of this measure set must be carefully considered, however, since the measures will leverage each other when initially used to improve and reform health care services. Additionally, the value of current measures is limited because they cannot always attribute responsibility for improvements to those being measured. Therefore, the report also proposes a coordinating entity to guide and inform the judgments required to align standards and measures with the appropriate purposes within the complex health care enterprise. After reviewing the research literature, the committee did not take a position on which types of health care reform strategies offer the most promise for achieving quality improvement and better health outcomes. Market-based incentives are one approach to enhancing quality, but they are far from perfect. Government regulation may be necessary in some situations, but this option also has inherent limitations. Vigorous efforts on the part of the health professions or consumer advocates to improve quality through professional and public education, self-monitoring, and robust public planning and regulatory processes also merit consideration. As noted, however, all approaches—market incentives, regulation, professional education and monitoring, and consumer advocacy—will benefit from a well-designed and operational performance measurement and reporting system. Thus, the committee is united in issuing a strong call for improvements in performance measurement and transparency of its results. THE NEED FOR A NATIONAL SYSTEM FOR PERFORMANCE MEASUREMENT AND REPORTING Public and private purchasers have powerful levers at their disposal to facilitate change in the health care delivery system. Three overall

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Performance Measurement: Accelerating Improvement approaches—public disclosure of performance data, payment policies, and performance improvement processes—can all provide strong incentives for change to providers (both clinicians and institutions), purchasers, and beneficiaries. Yet to do so, all three approaches depend upon the availability of accurate, reliable, and valid performance measures. These measures can serve as the foundation for public reporting programs intended to promote accountability among providers and aid consumers in making informed choices. They can also provide the basis for initiatives that create incentives for providers to deliver more effective and efficient care. Public disclosure and payment policies are then presumed to work in tandem to motivate quality improvement efforts that affect the actual processes of care delivery. However, such synchronicity is not always achieved, and as a result, potential improvements are not fully realized. Taken together, these three approaches offer a continuum of options for influencing provider and patient behaviors in ways that can produce improvements in health and health care. For example, diabetic patients who receive care from multiple providers in numerous settings often fail to receive services from which they would likely benefit, such as testing for hemoglobin A1c and cholesterol levels. Measuring these processes can reveal such shortcomings and thereby result in better-quality care and improved health outcomes (Harris Interactive, 2001). Potential options for addressing such failures and ensuring they are not continued include (1) bonus payments to primary care providers whose performance profiles indicate high levels of compliance with practice guidelines (a payment policy option); (2) disclosure of comparative performance reports on providers to assist consumers in selecting the highest-quality providers (a public disclosure option); (3) reduced levels of regulatory burden for primary care providers with exemplary performance (a performance improvement option); and (4) the establishment of communitywide diabetes registries by Medicare’s QIOs to assist all providers in monitoring beneficiaries’ receipt of effective services (a performance improvement option). To drive change in the status quo of measurement, all such levers should reinforce achievement of the six aims of the Quality Chasm report cited earlier—safe, effective, patient-centered, timely, efficient, and equitable care. Together, the effects of multiple changes at different levels of the health care system—patient and community, microsystem, organizational context, and environmental context—must be sufficient to encourage and enable payers, providers, and patients to close the quality gap (IOM, 2001). Although performance data are integral to the success of efforts targeting public disclosure of performance data, payment policies, and performance improvement processes, currently available performance data on many types of providers are quite limited. Most performance measurement projects to date have relied on a small set of technical quality measures (i.e., medical care process measures) derived from administrative data produced

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Performance Measurement: Accelerating Improvement by particular types of provider settings and patient surveys. These measure sets do not answer key questions, such as whether patients received the full set of services, and only those services, from which they would likely benefit; whether services were provided in a timely and efficient manner; and whether patients achieved the desired short- and long-term outcomes. A common performance measurement infrastructure is necessary to support the efforts of public and private insurance plans to realign incentives. Developing this infrastructure involves such tasks as specifying the criteria or rules that performance measure sets should satisfy, identifying and specifying the measures to be included in standardized measure sets, and implementing the information technologies (e.g., EHRs and secure platforms for interconnectivity) required to monitor and improve performance. The absence of a carefully crafted, comprehensive approach to performance measurement and realignment of incentives across all purchasers and all three approaches to change (public disclosure of performance data, payment policies, and performance improvement processes) results in an excessive burden on providers and weakens the impact of incentives for quality improvement. In sum, a national strategy for the measurement and reporting of provider performance is a fundamental building block in the efforts of all stakeholders to improve health care quality through public reporting, ongoing quality improvement, pay for performance programs, quality-based benefit design, and health insurance purchasing benchmarks. Through the identification of improvement goals and the selection of specific measures, this national strategy should focus provider attention on areas and activities that will lead to a fundamental redesign of the health care delivery system. SCOPE AND ORGANIZATION OF THIS REPORT This first report in the Redesigning Health Insurance series addresses requirements for a common performance measurement infrastructure: Chapter 2 provides an overview of the accomplishments to date of many stakeholder groups that have advanced the field of performance measurement. It also reviews the limitations of current efforts and argues for a national system for performance measurement and reporting. Chapter 3 presents the committee’s recommendations for an entity—working collaboratively with existing stakeholders groups—to oversee and coordinate the key functions of a national system for performance measurement and reporting. Chapter 4 describes the analytic framework used by the committee to aid in the selection of a starter set of performance measures and the

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Performance Measurement: Accelerating Improvement identification of gaps in existing measures. Approaches to address these gaps are also proposed. Chapter 5 recommends a multifaceted research agenda to address four areas: development of new measures to address the performance measurement gaps articulated in Chapter 4, methodological barriers, usability of public reports, and evaluation of the performance measurement and reporting system. REFERENCES ACGME (Accreditation Council for Graduate Medical Education). 2002. Report of the ACGME Work Group on Resident Duty Hours. [Online]. Available: http://www.acgme.org/new/wkgreport602.pdf [accessed March 22, 2005]. AHRQ (Agency for Healthcare Research and Quality). 2004a. National Healthcare Quality Report. Rockville, MD: AHRQ. AHRQ. 2004b. HHS Awards $139 Million to Drive Adoption of Health Information Technology. [Online]. Available: http://www.ahrq.gov/news/press/pr2004/hhshitpr.htm [accessed October 19, 2004]. AHRQ. 2005. Fiscal Year 2006. [Online]. Available: http://www.ahrq.gov/about/cj2006/cj2006.pdf [accessed March 22, 2005]. AMA (American Medical Association). 2000. A Study of the Quality of Care Beneficiaries Get in Traditional Medicare Shows Wide Performance Variation among the States. [Online]. Available: http://www.ama-assn.org/amednews/2000/10/23/gvsb1023.htm [accessed March 23, 2005]. American Board of Medical Specialties. 2005. Medical Specialty Board Certification. [Online]. Available: http://www.abpm.org/about/news/board_certification.html [accessed March 22, 2005]. Asch SM, McGlynn EA, Hogan MM, Hayward RA, Shekelle P, Rubenstein L, Keesey J, Adams J, Kerr EA. 2004. Comparison of quality of care for patients in the Veterans Health Administration and patients in a national sample. Annals of Internal Medicine 141(12):938–945. Audet AM, Doty MM, Peugh J, Shamasdin J, Zapert K, Schoenbaum S. 2004. Information Technologies: When Will They Make It into Physicians’ Black Bags? [Online]. Available: http://www.cmwf.org/publications/publications_show.htm?doc_id=251984 [accessed March 28, 2005]. Audet AM, Doty MM, Shamasdin J, Schoenbaum S. 2005. Measure, learn, and improve: Have physicians begun to engage in the quality improvement cycle? Health Affairs 24(3):843–853. Ayanian JZ, Udvarhelyi IS, Gatsonis CA, Pashos CL, Epstein AM. 1993. Racial differences in the use of revascularization procedures after coronary angiography. Journal of the American Medical Association 269(20):2642–2646. Ayanian JZ, Weissman JS, Chasan-Taber S, Epstein AM. 1999. Quality of care by race and gender for congestive heart failure and pneumonia. Medical Care 37(12):1260–1269. Barker-Cummings C, McClellan W, Soucie JM, Krisher J. 1995. Ethnic differences in the use of peritoneal dialysis as initial treatment for end-stage renal disease. Journal of the American Medical Association 274(23):1858–1862. Batalden PB, Nelson EC, Edwards WH, Godfrey MM, Mohr JJ. 2003. Microsystems in health care: Part 9. Developing small clinical units to attain peak performance. Joint Commission Journal on Quality and Safety 29(11):575–585.

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