Statement by
Carolyn Clancy
Agency for Healthcare Research and Quality
Department of Health and Human Services

Health Care Quality Initiatives
before the
The Subcommittee on Health of The House Committee on Ways and Means

March 18, 2004

Chairman Johnson, Congressman Stark, distinguished Subcommittee members, thank you for inviting me to this important hearing on initiatives to improve the quality of health care in America. Quality health care for all people is a high priority for President Bush and the Department of Health and Human Services (HHS). Quality health care is a statutory responsibility for my agency, the Agency for Healthcare Research and Quality (AHRQ), and it is a key area of emphasis for the Centers for Medicare & Medicaid Services (CMS).

My testimony today will address three areas: first, current activities of the Department to improve the quality of care, including the use of health information technology; second, the significant provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) that both build upon and advance our efforts to improve the quality of health care; and finally, I will provide a brief overview of private sector quality initiatives.


Under Secretary Thompson's leadership, the Department has developed a variety of quality initiatives involving hospitals, doctors, skilled nursing facilities, and other providers. The Secretary has also placed great emphasis on our different agencies functioning as "one Department"; as my testimony will outline, this has meant that AHRQ is increasingly serving as a science partner to CMS in its many quality initiatives.


AHRQ's specific mission is to improve the quality, safety, and effectiveness of health care for all Americans. To fulfill our role as a science partner for CMS and State initiatives to improve quality, I believe that AHRQ must become a true "problem solver". We must marshall existing and develop new scientific evidence that targets the critical challenges these programs face in improving the quality of health care they provide and the efficiency with which they operate. My goal as Director is to ensure that AHRQ's work is useful to those who manage these programs so that the taxpayers receive true value for their tax dollars and to those who rely upon these programs so that they receive appropriate, high quality care. There are four aspects of AHRQ's work that I will discuss: research to support evidence-based decision-making, using data to drive quality, accelerating the pace of quality improvement, and improving the infrastructure for quality health care.

Research to Support Evidence-based Decision-making

AHRQ's research seeks to improve quality by developing and synthesizing scientific evidence regarding two aspects of health care: the effectiveness and quality of clinical services and the effectiveness and efficiency of the ways in which we organize, manage, deliver and finance health care. With respect to clinical services, we assess the effectiveness of health care interventions; for example, do Medicare beneficiaries with multiple chronic illnesses benefit as much in daily practice from a new intervention or drug as those in the clinical trial who usually have only one problem? We also look at comparative effectiveness: how effective is a given intervention versus the alternatives and what are the comparative risks and side effects? These are critical issues for physicians making treatment recommendations and for patients who are in the best position to assess the risks they are willing to take. For example, cholesterol lowering drugs -- commonly called "statins" -- have different safety and effectiveness profiles. Comparative studies with statins could have revealed that some are more likely to cause a serious life threatening adverse event instead of relying upon adverse event reports that eventually caused one of them to be taken off the market.

In addition, every aspect of the financing and delivery systems for health care can matter. Our research asks similar questions in those areas: what is effective, how does it compare with other strategies, what is most efficient and what are the risks of unintended consequences. Currently, we are completing two research syntheses that focus on what research tells us needs to be taken into account in implementing an insurance drug benefit and how employers have responded and could respond to increases in health insurance costs.

Our work in patient safety is an excellent example of how improving the quality and safety of health care involves both health care services and the systems through which care is received. Our research is addressing key unanswered questions about when and how medical errors occur and how science-based information can make the health care system safer. We know, for example, that medication errors are a major issue and have made research on the safe and appropriate use of pharmaceuticals a significant focus of our research agenda. For example, a recent research finding has identified a disturbingly large number of pregnant patients receiving prescriptions for drugs that are contra-indicated during pregnancy. We are working with the FDA and other HHS agencies to develop collaborative strategies for addressing this problem. At the same time, medication errors also result from faulty work flow procedures or unnecessarily complicated equipment. Once again, we are working closely with the FDA on research on the processes related to medication prescribing and delivery, the use of information technology, development of an effective bar coding system, and "human factors research." This is a field of science that can inform the design of health care equipment, like infusion pumps, to ensure that busy, distracted, and tired health care workers are less likely to make an error in entering the information for delivery of an intravenous drug.

Health care decision-makers need a synthesis of the best evidence that is understandable, objective, and places the ever-increasing number of scientific studies in context. AHRQ is committed to accelerating the adoption of science into practice so that all Americans benefit from advances in biomedical science. An example in the patient safety area is our evidence report, titled Making Health Care Safer, A Critical Analysis of Patient Safety Practices. This report highlighted 73 proven patient safety practices which would help health care administrators, medical directors, clinicians, and others improve quality by reducing medical errors. Specifically, the report identified 11 practices that are proven to work but not used routinely in the Nation's hospitals and nursing homes.

It is also critical that we foster ongoing learning from experts in the field to expedite quality improvement. For example, a critical challenge in making health care safer is that providers do not share lessons learned from errors and near misses due to fear of liability. To help health care professionals benefit from insights beyond their home institutions, AHRQ is sponsoring a monthly, Web-based medical journal that showcases patient safety lessons drawn from actual cases of near-errors. This unique online journal allows health care professionals to learn about avoidable errors made in other institutions, as well as effective strategies for preventing their recurrence. One case each month is expanded into a "Spotlight Case" that includes an interactive learning module that features readers' polls, quizzes, and other multimedia elements. Practicing physicians may obtain continuing medical education credit by successfully completing the spotlight case and its questions, and trainees can receive certification credits for doing so.

Using Data to Drive Quality

To improve quality, you need strong measures, good data, and somebody with strong reason to use them. Responding to user needs, AHRQ has played a fundamental role in creating the measures and the data. I'll give you two examples. The first focuses on hospital care. In response to requests by state hospital associations, state data organizations and others, AHRQ developed a set of Quality Indicators can be used in conjunction with any hospital discharge data to let a hospital know how it is doing in terms of safety and quality. A subset of these indicators also lets us use information about hospital admissions to assess the performance of the health system of the community. At the same time, employers, CMS and others who wish to reward good-quality hospitals can use these measures with data from particular hospitals or regions. Or they can use the module on preventable admissions to target and launch major health improvement efforts on a community-wide scale. These indicators have been used by a number of states and communities to improve care and to determine how their own hospital or health system's performance compares to other hospitals in key areas. We have a support contract to make this easy for all users.

A second example has to do with improving the patient experience of care, a widely recognized component of overall quality. Several years ago, AHRQ created a survey , CAHPS, which health plans could use to question patients about their care experience. CAHPS is now an easy to use kit of survey and reporting tools that provides reliable information to help consumers and purchasers assess and choose among health plans, providers and other health facilities. The first CAHPS surveys, which assessed consumers' perceptions of the quality of health plans, are used by more than 100 million Americans, including those in Medicare managed care plans, enrollees in the Federal Employees Health Benefits Program, and participants in the Department of Defense's health programs.

An H-CAHPS survey built on AHRQ's earlier work in establishing surveys and will measure the hospital care of those patients' involved in the pilot. The survey is being considered by CMS as part of the National Voluntary Hospital Reporting Initiative. CMS has received comments and has lessons learned from the pilots, which could be helpful in working with AHRQ to develop a standardized H-CAHPS.

AHRQ is stepping up its efforts to provide assistance, often web-based, for those who are seeking to improve the quality of patient care. For example:

  • AHRQ recently launched a web-based clearinghouse [QualityToolsTM.gov] providing practical tools for assessing, measuring, promoting and improving the quality Americans' health care. The site's purpose is to provide health care providers, policymakers, purchasers, patients, and consumers an accessible mechanism to implement quality improvement recommendations and easily educate individuals regarding their own health care needs.

  • In addition, AHRQ is helping patients and their families improve the quality of the health care they receive and play an important role in preventing medical errors. AHRQ and CMS collaborated on a campaign to promote new "5 Steps to Safer Health Care" posters. In addition, campaigns with the American Hospital Association, the American Academy of Pediatrics, American Medical Association, and AARP are working to implement evidence-based information that help patients know how talk to clinicians about safe health care.

  • While the text of AHRQ's recent reports, National Healthcare Quality Report and the National Healthcare Disparities Report, are currently available on the web, AHRQ is developing a more sophisticated search engine that will enable those seeking to improve the quality of care at the local or state level to link to the myriad of charts and data that are summarized in the report. Over time we expect this to be an indispensable tool for those seeking to develop a "road map" for their own quality improvement efforts.

Accelerating the Pace of Quality Improvement

To accelerate the pace of quality improvement, AHRQ has launched a program called Partnerships for Quality. The purpose of the Partnerships program is to support models or prototypes of change led by organizations or groups with the immediate capacity to influence the organization and delivery of health care as well as measure and evaluate the impact of their improvement efforts. For example, AHRQ has awarded a grant to The Leapfrog Group, which is a consortium of more than 135 large private and public health care purchasers buying health benefits for more than 33 million Americans. Leapfrog has devised a plan for conducting and rigorously evaluating financial incentive or reward pilots in up to 6 U.S. healthcare markets in two waves over the next three years.

Another approach to accelerating quality improvement is to involve health care system leaders in the research enterprise itself from the outset. AHRQ currently has three delivery-based networks that follow this approach. The Primary Care-Based Research Network is a group of 19 primary care networks across the country that do research collaboratively on ways to improve preventive care and other issues of interest to primary care providers. The HIV Research Network is a network of 22 large and sophisticated HIV care providers around the country who share information and data so that they can learn from each other what can work to improve quality. They also provide timely aggregate information to policy-makers and other providers interested in improving quality and answering other questions about access and cost of care for people with HIV. Through the work of this network and other large HIV care providers, for example, AHRQ is looking to identify and remedy major causes of prescribing errors for patients with HIV.

A third network, the Integrated Delivery System Research Network (IDSRN), is a field-based research network that tests ways to improve quality within some of the most sophisticated health plans, systems, hospitals, nursing homes, and other provider sites in the country. In the past year for example, provider-researcher teams have been working on ways to reduce falls in nursing homes, and ways to limit medication errors. Often we partner with others in the Department on these efforts. For example, CMS asked us for a handbook on ways to improve cultural competency of health care providers, and is now using this handbook as the key part of their training for Medicare and Medicaid providers. One of our contractors developed a tool to help hospitals prepare for bioterrorist events and other emergencies, and the American Hospital Association has since shared this tool with all of their members and in fact provide technical assistance on how to use it.

Improving the Infrastructure for Quality Health Care

Two critical elements for improving the quality and safety of patient care are expanding the use of information technology (IT) and investing in human capital. The most recent report from the Institute of Medicine's quality chasm series emphasizes the need for improved information at the point of care and the deployment of the still developing National Health Information Infrastructure (NHII) to improve patient safety and quality of care, for which HHS has the lead Federal role working with the private sector. Both AHRQ and ASPE have several initiatives underway to advance the adoption and appropriate use of IT tools and enable the secure and private exchange of information within and across communities.

In FY 2004, AHRQ has launched a new initiative to improve health care quality and reduce medical errors through the use of information technology. AHRQ will award $50 million to help hospitals and other health care providers invest in information technology designed to improve patient safety, with an emphasis on small communities and rural hospitals and systems, which don't often have the resources or information needed to implement cutting-edge technology. An important aspect of this program is that it will foster the implementation of proven technology through the health care system and establish important building blocks for the NHII.

As the NHII is developed, it will enable appropriate access to important patient information and evidence to assist clinicians in making diagnostic and treatment decisions that are based on the best available science. If a Medicare beneficiary typically receives care from an internist and specialist in Connecticut for 6 months of the year and but has different physicians in Florida during the winter, their medications, labs, x-rays and other important health information would be available to all their physicians at any point in time. This will allow clinicians to provide continuous high quality of care regardless of where a beneficiary accesses the health care system. While the intention of HHS is to facilitate the development of the NHII, we recognize that the most realistic strategy is to foster and support community-based health information exchanges with the ability to share information within and across communities nationally over time. In addition, the FY 2005 Budget requests a new $50 million within the Office of the Secretary to support communities with the development of these health information exchanges in FY 2005 and disseminating lessons learned to ensure the success and long-term viability of these local efforts across the country.

Another infrastructure issue is the ability to share health information in ways that enable us to make significant strides towards improving patient safety, reducing error rates, lowering administrative costs, and strengthening national public health and disaster preparedness. To share health data, agencies need to adopt the same clinical vocabularies and the same ways of transmitting that information. This sharing information within and between agencies establishes "interoperability." Public and private groups have emphasized how interoperability through standards will enable us to share a common electronic patient medical record and in turn greatly improve the quality of health care. The Consolidated Health Informatics (CHI) initiative will establish a portfolio of existing clinical vocabularies and messaging standards enabling federal agencies to build interoperable federal health data systems. This commonality will enable all federal agencies to "speak the same language" and share that information without the high cost of translation or data re-entry. Federal agencies could then pursue projects meeting their individual business needs aimed at initiatives such as sharing electronic medical records and electronic patient identification. CHI standards will work in conjunction with the Health Insurance Portability and Accountability Act (HIPAA) transaction records and code sets and HIPAA security and privacy provisions. Many departments and agencies including HHS, VA, DOD, SSA, GSA, and NIST are active in the CHI governance process.

Even when the best tools available are used appropriately, achieving consistent high quality care requires a solid understanding of the delivery process and inherent risks in the system that will never be mitigated through automation. In recognizing the importance of intellectual component of quality improvement, AHRQ recently established the AHRQ-VA Patient Safety Improvement Corps, a training program for state health officials and their selected hospital partners. During the first annual program, 50 participants will complete coursework in three 1-week sessions at AHRQ's offices in Rockville, MD. Participants will analyze adverse medical events and close calls-sometimes known as "near misses"-to identify the root causes of these events and correct and prevent them. Anticipating that the growing demand for patient safety expertise will exceed the capacity of this intensive program, one aspect of this initiative will be to develop web-based training modules. These will be in the public domain and could be used independently or by private sector training programs that would provide additional "hands on" experiences.


In November 2001, Secretary Thompson announced the Quality Initiative, a commitment to assure quality health care for all Americans through published consumer information coupled with health care quality improvement support through Medicare's Quality Improvement Organizations (QIOs). The Quality Initiative was launched nationally in 2002 as the Nursing Home Quality Initiative and expanded in 2003 with the Home Health Quality Initiative and the National Voluntary Hospital Quality Reporting Initiative. The CMS Physician Focused Quality Initiative (PFQI) began its implementation this year. Most leaders in health care recognize that achieving the safest and highest quality of care will require significant enhancements in the use of health information technology and strategies to permit sharing of patient data within communities. In FY04 and FY05 the Department will invest $150 million. In addition, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) includes a variety of provisions designed to encourage the delivery of quality care, including demonstrations to focus effort on improving chronic illness care and identifying effective approaches for rewarding superlative performance.

Nursing Homes

About 3 million elderly and disabled Americans received care in our nation's nearly 17,000 Medicare and Medicaid-certified nursing homes in 2001. Slightly more than half of these were long-term nursing home residents, but nearly as many had shorter stays for rehabilitation care after an acute hospitalization. About 75 percent were age 75 or older. As part of an effort to improve nursing home quality nationwide, the Administration has taken a number of steps, including the Nursing Home Quality Initiative. Working with measurement experts, the National Quality Forum, and a broad group of nursing home industry stakeholders - consumer groups, unions, patient groups and nursing homes - CMS adopted a set of nursing home quality measures and launched a six-state pilot. Encouraged by the success of the pilot, CMS expanded the Nursing Home Quality Initiative to all 50 States in November 2002. This quality initiative is a four-pronged effort including, regulation and enforcement efforts conducted by CMS and State survey agencies; continual, community-based quality improvement programs; collaboration and partnership with stakeholders to leverage knowledge and resources; and improved consumer information on the quality of care in nursing homes.

As part of the effort, consumers may compare quality data, deficiency survey results and staffing information about the nation's Medicare and Medicaid-certified nursing homes through the Nursing Home Compare website, which is updated quarterly. The quality measures included on the site help consumers make informed decisions involving nursing homes. The Nursing Home Compare tool received 9.3 million page views in 2003 and was the most popular tool on www.medicare.gov.

Home Health

In 2001, about 3.5 million Americans received care from nearly 7,000 Medicare certified home health agencies. These agencies offer health care and personal care to patients in their own home, often teaching them to care for themselves. Launched nationwide in November 2003, the Home Health Quality Initiative aims to further improve the quality of care given to the millions of Americans who use home health care services. The initiative combines new information for consumers about the quality of care provided by home health agencies with important resources available to improve the quality of home health care. Like the Nursing Home Quality Initiative, the Home Health Quality Initiative uses the same "four-pronged" approach to regulate the industry, ensure consumers have improved access to information, utilize community-based quality improvement programs, and collaborate with the relevant stakeholders to access resources and knowledge for home health agencies. CMS' regulation and enforcement activities will assure that home health agencies comply with Federal standards for patient health, safety, and quality of care. In March 2004, CMS updated the eleven home health quality measures on every Medicare-certified home health agency to give consumers the ability to compare the quality of care provided by the agencies. To access the information, consumers can call 1-800-Medicare or use the Home Health Compare tool at www.medicare.gov. Over the past six months, the tool has been viewed about 780,000 times.


The Hospital Quality Initiative consists of the National Voluntary Hospital Reporting Initiative (NVHRI), a public-private collaboration that reports hospital quality performance information, a three state pilot of the Hospital Patient Perspectives on Care Survey (HCAHPS), and the Premier Hospital Quality Incentive Demonstration. The Hospital Quality Initiative, is more complex, and consists of more developmental parts than the nursing home and home heath quality initiatives. The initiative uses a variety of tools to stimulate and support a significant improvement in the quality of hospital care. The initiative aims to refine and standardize hospital data, data transmission, and performance measures in order to construct a single robust, prioritized and standard quality measure set for hospitals. The ultimate goal is that all private and public purchasers, oversight and accrediting entities, and payers and providers of hospital care would use the same measures in their public reporting activities. The initiative is intended to make critical information about hospital performance accessible to the public and to inform and invigorate efforts to improve quality. Among the tools used to achieve this objective are collaborations with providers, purchasers and consumers, technical support from Quality Improvement Organizations, research and development of standardized measures, and commitment to assuring compliance with our conditions of participation.

National Voluntary Hospital Reporting Initiative

The National Voluntary Hospital Reporting Initiative (NVRI) was launched in 2003 in conjunction with the American Hospital Association, Federation of American Hospitals, American Association of Medical Colleges, and other stakeholders (AARP, AFL-CIO). The NVRI was established to provide useful and valid information about hospital quality to the public, standardize data and data collection, and foster hospital quality improvement. For the previous initiatives, CMS had well-studied and validated clinical data sets and standardized data transmission infrastructure from which to draw a number of pertinent quality measures for public reporting. Hospitals do not have a similar comprehensive data set from which to develop the pertinent quality measures. Thus, the American Hospital Association, the Federation of American Hospitals and the Association of American Medical Colleges approached the Joint Commission on Accreditation of Healthcare Organizations, the Agency for Healthcare Research and Quality, the National Quality Forum and CMS to explore voluntary public reporting of hospital performance measures. CMS contracted with the National Quality Forum (NQF) to develop such a consensus-derived set of hospital quality measures appropriate for public reporting. We selected 10 measures from the NQF consensus-derived set as a starter set for public reporting and quality improvement efforts and an additional 24 measures from the set for the hospital quality incentive demonstration. CMS has worked with the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) and the QIOs to align their hospital quality measures to ease the data transmission process for hospitals. This information is currently displayed on the CMSI website and updated quarterly.

Hospital Patient Perspectives on Care Survey (HCAHPS)

Although many hospitals already collect information on their patients' satisfaction with care, there currently is no national standard for measuring and collecting such information that would allow consumers to compare patient perspectives at different hospitals. CMS worked with the Agency for Healthcare Research and Quality (AHRQ) to pilot test Hospital Patient Perspectives on Care Survey, known as HCAHPS. The HCAHPS survey built on AHRQ's success in establishing surveys measuring patient perspectives on care in the United States health care system through the development of CAHPS for health plans. CMS has received comments and has lessons learned from the pilots, which could be helpful in working with AHRQ to develop a standardized H-CAHPS.

Premier Hospital Quality Incentive

The Premier Hospital Quality Incentive demonstration project also is part of the Hospital Quality Initiative. This three-year demonstration project recognizes and provides financial rewards to hospitals that demonstrate high quality performance in a number of areas of acute care. The demonstration involves a CMS partnership with Premier Inc., a nationwide purchasing alliance of not-for-profit hospitals, and rewards the hospitals with the best performance by increasing their payment for Medicare patients. There are approximately 280 hospitals participating in the project. Under the demonstration, top performing hospitals will receive bonuses based on their performance on evidence-based quality measures for inpatients with heart attacks, heart failure, pneumonia, coronary artery bypass graft, and hip and knee replacements. The 34 quality measures used in the demonstration have an extensive record of validation through research.

Using these measures, CMS will identify hospitals in the demonstration with the highest clinical quality performance for each of the five clinical areas. Hospitals in the top 20 percent of quality for those clinical areas will be given a financial payment as a reward for the quality of their care. Hospitals in the top decile of hospitals for a given diagnosis will be provided a 2 percent bonus for the measured condition, while hospitals in the second decile will be paid a 1 percent bonus. In year three, hospitals that do not achieve performance improvements above the demonstration baseline will have their payment reduced. The demonstration baseline is set during the first year of the demonstration. Hospitals will receive a 1 percent reduction in their DRG payment for clinical conditions that score below the ninth decile baseline level and 2 percent less if they score below the tenth decile baseline level.

Physician Focused Quality Initiative

Similar to the Hospital Quality Initiative, the CMS Physician Focused Quality Initiative (PFQI) has several components with multiple approaches to stimulating the adoption of quality strategies and potentially reporting quality measures for physician services. The Physician Focused Quality Initiative builds upon ongoing CMS strategies and programs in other health care settings in order to: (1) assess the quality of care for key illnesses and clinical conditions that affect many Medicare beneficiaries, (2) support clinicians in providing appropriate treatment of the conditions identified, (3) prevent health problems that are avoidable, and (4) investigate the concept of payment for performance.

Doctors' Office Quality (DOQ) Project

The DOQ Project is designed to develop and test a comprehensive, integrated approach to measuring and improving the quality of care for chronic diseases and preventive services in the outpatient setting. CMS is working closely with key stakeholders such as nationally recognized physicians associations, consumer advocacy groups, philanthropic foundations, purchasers, and quality accreditation or quality assessment organizations to develop and test the DOQ measurement set. The DOQ measurement set has three components including a clinical performance measurement set, a practice system assessment survey, and a patient experience of care survey.

Doctors' Office Quality - Information Technology (DOQ-IT) Project

CMS recognizes the potential for information technology to improve the quality, safety and efficiency of health care services. Through the DOQ-IT project, CMS is working to support the adoption and effective use of information technology by physicians' offices to improve the quality and safety for Medicare beneficiaries. DOQ-IT seeks to accomplish this by promoting greater availability of high quality affordable health information technology and by providing assistance to physician offices in adopting and using such technology.

Payment Demonstration Projects

CMS continues to examine financial incentives for physicians that demonstrate higher quality performance. This approach includes the Physician Group Practice demonstration that tests a hybrid methodology for paying physician - driven organizations that combine Medicare fee-for-service payments with a bonus pool derived from savings achieved through improvements in the management of care and services.

ESRD Quality Activities

BBA required CMS to develop and implement, by January 1, 2000, a method to measure and report the quality of renal dialysis services provided under the Medicare program. To implement this legislation, CMS funded the development of clinical performance measures (CPMs) based on the National Kidney Foundation's Dialysis Outcome Quality Initiative Clinical Practice Guidelines. Sixteen ESRD CPMs (five for hemodialysis adequacy, three for peritoneal dialysis adequacy, and four for anemia management) were developed and are used for quality improvement purposes through the ESRD Networks.


The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) includes a variety of provisions designed to encourage the delivery of quality care, including demonstrations to focus effort on improving chronic illness care and identifying effective approaches for rewarding superlative performance.

The law includes a number of quality provisions such as demonstrations, electronic-prescribing, medication therapy management, and background-checks on long-term care facility employees. In addition, the law expands the responsibilities of QIOs and develops a closer working relationship between AHRQ and the Medicare, Medicaid, and SCHIP programs.

Medicare Health Care Quality Demonstration Programs

The MMA authorizes a 5-year demonstration program that expands CMS' current Physician Group Practice (PGP) demonstration and evaluates the effect of various factors such as the appropriate use of culturally and ethnically sensitive health care delivery, on quality of patient care. This demonstration defines "health care groups" as regional coalitions, integrated delivery systems, and physician groups and allows "health care groups" to incorporate approved alternative payment systems and modifications to the Medicare FFS and Medicare Advantage benefit packages. This demonstration covers both FFS and Medicare Advantage eligible individuals and must be budget neutral.

Medicare Care Management Performance Demonstration

The MMA also authorizes a Care Management Performance Demonstration Program in Medicare FFS. Eligible Medicare beneficiaries will include those enrolled in Medicare Parts A and B who have one or more chronic medical conditions, to be specified by CMS (one of which may be a cognitive impairment). The goals of this demonstration are to promote continuity of care, help stabilize medical conditions, prevent or minimize acute exacerbations of chronic conditions, and reduce adverse health outcomes, such as adverse drug interactions. This is a pay-for-performance 3-year demonstration program with physicians. Physicians will be required to use information technology (such as email and clinical alerts and reminders) and evidence-based medicine to meet beneficiaries' needs. Physicians who meet or exceed performance standards established by CMS will receive a per beneficiary payment. This payment amount can vary based on different levels of performance. CMS will designate no more than 4 sites for this demonstration program, which must also be budget neutral.

Voluntary Chronic Care Improvement under Traditional FFS

The MMA requires that CMS phase-in chronic care improvement programs in Medicare FFS. These programs must begin no later than 1 year after enactment of MMA. Eligible beneficiaries will be those with chronic diseases such as congestive heart failure and diabetes. Chronic care improvement programs will help beneficiaries manage their self-care and will provide physicians and other providers with technical support to manage beneficiaries' clinical care. The goal of these programs is to improve quality of life and quality of care for beneficiaries without increasing Medicare program costs. This program will be particularly valuable in rural areas and among populations who encounter barriers to care by ensuring that nurses and other professionals will be available to help chronically ill beneficiaries manage their illnesses between office visits. CMS will identify beneficiaries who may benefit from these programs, but participation will be voluntary. Participating organizations must meet performance standards and will be required to refund fees CMS paid to them if these fees exceed estimated savings.

Incentives for Reporting

MMA provides a strong incentive for eligible hospitals to submit data for 10 clinical quality measures. For fiscal years 2005 through 2007, hospitals will receive the full market basket payment update if they submit the 10 hospital quality measures to CMS. If hospitals do not submit the 10 quality measures, then they receive an update of market basket minus 0.4 percentage points.

Electronic Prescribing

Medication errors caused by poor handwriting and other mishaps will be sharply reduced by the electronic prescribing provisions in the MMA. Under MMA, the Secretary of Health and Human Services is directed to develop a national standard for electronic prescriptions with the National Committee on Vital and Health Statistics and in consultation with health care providers including hospitals, physicians, pharmacists and other experts. With a national standard in place, doctors, hospitals, and pharmacies nationwide can be sure their computer systems are compatible. This will allow providers to share information on what medications a patient is taking and to be alerted for possible adverse drug interactions. A seamless computer system also will provide information about a patient's drug plan and any prescription formularies. This information would let the doctor know whether a therapeutically appropriate switch to a different drug might save the patient some money.

A one-year pilot project in 2006 will test how well the proposed national standard works, and the Secretary may revise the standard based on the industry's experience. Once the final standard is set (and no later than April 2008), any prescriptions that are written electronically for Medicare beneficiaries will have to conform to the standard. There is, however, no requirement that prescriptions be written electronically. Electronic prescribing is entirely voluntary for doctors. However, MMA authorizes the federal government to give grants to doctors to help them buy computers, software, and training to get ready for electronic prescribing. The grants will cover up to half of the doctor's cost of converting to electronic prescribing, and they may be targeted to rural physicians and those who treat a large share of Medicare patients. The first public meeting on this initiative will take place next week.

Medicare Therapy Management

MMA requires plans offering the new Medicare drug benefit to have a program that will ensure the appropriate use of prescription drugs in order to improve outcomes and reduce adverse drug interactions. MMA also contains a provision that allows plans to pay pharmacists to spend time counseling patients and will be targeted at patients who have multiple chronic conditions (such as asthma, diabetes, hypertension, high cholesterol and congestive heart failure), are taking multiple medications, and are likely to have high drug expenses. The therapy management program also will be coordinated with other chronic care management and disease management programs operating in other parts of Medicare. Medication management was identified by the Institute of Medicine as one of 20 priority areas for transforming the health care system.

Medication therapy management will be a new service for Medicare plans. In Medicare, the amount and structure of payment will be set by the plans offering the new Medicare Part D, according to requirements established by the Secretary of Health and Human Services in the coming years.

Research on Health Care Items and Services

The bill requires AHRQ to serve as a science partner for the Medicare, Medicaid, and S-CHIP programs. The Secretary is required to establish a priority-setting process to identify the most critical information needs of these three programs regarding health care items or services (including prescription drugs). An initial list of priority research is required by early June with the initial research completed 18 months later.


In the past few years, the private sector has become very involved in the issue of healthcare quality, particularly for hospitals. Several well-publicized landmark studies identify significant gaps and variations in the quality and safety of health care, at a time of rapidly escalating health costs. These reports have accelerated efforts by accrediting bodies, large purchasers and employer coalitions, and others to track quality at the national, state, and provider level, publish comparative quality reports, launch quality improvement efforts, and use public and private purchasing power to reward better quality.

AHRQ has been an important partner in these efforts, providing tools and data, lending technical assistance, and helping all of the players learn from these efforts. For example, with respect to accreditation, our research and tools have provided the basis for measures used by HEDIS and JCAHO.

To facilitate internal quality improvement, AHRQ's Quality Indicators (QIs) have been used by hospitals and state hospital associations for benchmarking. Statewide hospital associations run the indicators for all hospitals in their state and then share the information with hospitals that can not only track their own performance but also compare it with that of their peers. This use of our indicators takes place in New York, Georgia, Montana, Missouri, West Virginia, Illinois, Kentucky, Oregon, and Wisconsin. In Texas, the Dallas-Fort Worth Hospital Council uses our indicators to target and direct interventions to improve care diabetes in the community and thereby prevent the need for many hospitalizations. In Illinois, Blue Cross Blue Shield profiles hospitals uses 10 of our measures and expects to add more shortly.

A major change in the past several years has been an acceleration of public reporting efforts, particularly for hospitals, and this has brought a tremendous amount of interest in AHRQ's Quality Indicators. Two large states now have comparative quality data for all hospitals using AHRQ's Inpatient Quality Indicators. In New York, the Niagara Business Coalition has published statewide comparative data for two consecutive years. The Texas Health Care Information Council also published public scores for all 400 Texas hospitals using all 25 of AHRQ's Inpatient Quality Indicators. The reports are posted on their web site and a Readers' Guide is available to help consumers understand the information. This is a new use of the Quality Indicators - one we had not even anticipated in our original work, which was more focused on quality improvement. To inform these public reporting efforts, AHRQ is finalizing a guidance document for states, purchasing coalitions and others wishing to use AHRQ's Quality Indicators for this purpose.

Another way we facilitate the private sector's reporting efforts is to work with those using the data to find ways we can improve it. For example, many in the private sector favor use of administrative data because it is readily available and inexpensive. But the value of this information can be improved by selectively linking in clinical data. For example, the Pennsylvania Health Care Cost Containment Council already requires that hospitals collect and submit selected clinical data elements to supplement the administrative data and the UB-02 committee is considering adding some of these to the minimum data set. AHRQ has funded a project to describe the value of administrative data and is anticipating future projects focused on integrating clinical data elements into administrative data.

Several private sector organizations are already using quality information to guide their provider selection and payments. For example, an increasing number of large employers and coalitions are using a common Request for Information (eValue8) to solicit information about quality from health plans seeking to do business with them. Through the Leapfrog Initiative, alliances of large employers and business coalitions are asking hospitals to provide data on three safety practices: computer physician order entry, evidence-based hospital referral and ICU physician staffing. In addition, both private and public purchasers are establishing programs basing payment amounts and/or contractual referral relationships on provider quality information. In some cases payment is linked to mere provision of the quality data, whereas in others it is linked to the score itself. For example, Anthem Blue Cross in Virginia rewards hospitals for reporting performance on several indicators, including AHRQ's Patient safety measures. Several of AHRQ's Patient Safety measures are being used in the CMS demonstration with Premier and, in fact, Premier is now tracking their performance against all of these indicators as part of an over-all quality improvement effort.

AHRQ also is working closely with employers, business coalitions and others involved in pay-for-performance initiatives. For example, at the suggestion of Alliance Healthcare Coalition in Wisconsin, we have done a review of what the evidence shows about the impact of financial incentives on quality. In addition, AHRQ is doing an evaluation of seven large pay-for-performance demonstrations involved in the Robert Wood Johnson's Rewarding Results program, which should help purchasers and others in the future as they design pay-for-performance schemes.


Chairwoman Johnson, Congressman Stark, distinguished Subcommittee members, thank you again for inviting me to discuss the health quality initiatives that the Department of Health and Human Services is undertaking to improve the quality of care delivered by the health care systems across the nation. This Administration is committed to working with the health care industry and the various stakeholders to improve the quality of care, while also ensuring patients have access to the information they need to make educated decisions involving their health care. Thank you again for this opportunity, and I look forward to answering any questions you may have.

Last Revised: March 19, 2004