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Testimony on HCFA's Role in Ensuring Health Care Quality by Nancy-Ann Min DeParle
Administrator, Health Care Financing Administration
U.S. Department of Health and Human Services

Before the Bipartisan Congressional Health Care Task Force
March 3, 1998


Mr. Chairman and Members of this bipartisan Task Force, I am very pleased to be here to describe how the Health Care Financing Administration (HCFA) is working to ensure that Medicare and Medicaid beneficiaries receive high quality health care services. This is a priority for the President and the Administration as a whole. Our goal is to become a value-based, beneficiary-centered, quality focused purchaser. We are striving to enhance performance and accountability in a quality health care delivery system -- one that is affordable, effective and safe, while protecting and improving enrollee health and satisfaction, and responding to the specific health needs of individuals.

As the nation's largest purchaser of health care, we want to effectively use market forces to obtain the best value for our beneficiaries. We have developed a unified approach in regard to quality measurement and improvement for both Medicare and Medicaid. We know through our participation in a variety of public private partnerships that this approach is consistent with the strategy of many of the large private and public purchasers. In addition to discussing our quality initiatives, I want to begin by highlighting some of the quality- related consumer protection provisions in the Medicare and Medicaid program.


Last fall, the Advisory Commission on Consumer Protection and Quality in the Health Care Industry presented the President with a Consumer Bill of Rights and Responsibilities. On November 20, the President directed the Secretaries of Defense, Labor, Health and Human Services, Veterans Affairs, and the Director of the Office of Personnel Management to assess the extent of current compliance with the Bill of Rights, consistent with the missions of our agencies, and to identify the process for resolving any impediments to further compliance.

Just last week, these agencies reported back to the President, through the Vice President, on the degree to which they are currently in compliance, administrative steps that could be taken to come into compliance, and statutory barriers to prevent these Federally-administered health plans from coming into compliance. HCFA reported to the Vice President that both Medicare and Medicaid are largely in compliance with the Consumer Bill of Rights.

With the Consumer Bill of Rights and Responsibilities in mind, let me briefly highlight some of Medicare's and Medicaid's quality-related consumer protections.

Unrestricted Medical Communication: The Medicare statute requires that contracting health plans must make all covered services available and accessible to each beneficiary as determined by the individual's medical condition. In fee-for-service, Medicare beneficiaries are made aware of the full range of treatment options by their physicians. In November of 1996, we sent a policy letter stating that managed care enrollees are entitled to the same advise and consultation. In February 1997, we sent a similar letter to States pertaining to Medicaid beneficiaries. The Medicare+Choice provisions and Medicaid managed care provisions of the BBA included such a so-called "anti-gag clause" provision.

Beneficiary Appeals: In this area, Medicare's and Medicaid's protections are significantly beyond those generally available to managed care enrollees in the private sector.

Under the BBA, Medicare+Choice plans must have a procedure for making determinations regarding whether an enrollee is entitled to receive services and the amount the individual is required to pay for such services. Reconsiderations of coverage denials based on lack of medical necessity must be made by a physician with expertise in the relevant field of medicine. Plans are also required to have an expedited review process in cases for which the normal time frame for making a determination or reconsideration could seriously jeopardize the life or health of the enrollee or the enrollee's ability to regain maximum function. Either the beneficiary or the physician may request an expedited review. Requests for expedited reviews made by physicians (even those not affiliated with the organization) must be granted by the plan. Expedited determinations and reconsiderations must be made within time periods specified by the Secretary, but not later than 72 hours after the request for expedited review, or such longer period as the Secretary may permit in specified cases.

In regard to Medicaid, the BBA requires each Medicaid managed care organization to establish an internal grievance procedure under which eligible enrollees can challenge denials of coverage of or payment for medical assistance. In implementing regulations, HCFA plans to specify requirements of such internal processes.

With regard to an independent system of external review, the relevant Medicaid law simply says that the state plan must provide for granting an opportunity for a fair hearing before the State agency to any individual whose claim for medical assistance under the plan is denied or is not acted upon with reasonable promptness. The implementing regulations, although written for a fee-for-service program, have been applied to managed care programs.

The system referenced in this statute and regulation is commonly referred to as the "State fair hearing process" and is the State vehicle that Medicaid beneficiaries may use when their claims for medical assistance (i.e., payment of claims) are denied or are not acted upon promptly. The State fair hearing process in the Medicaid program gives beneficiaries the right to a hearing before an impartial decision maker. The process includes hearing procedures when Medicaid agencies take actions to suspend, terminate or reduce services to beneficiaries. If he or she loses, a beneficiary can appeal to State court.

Physician Incentive Plans: Effective January 1, 1997, the Physician Incentive Plan Final Rule required managed care plans with Medicare or Medicaid contracts to disclose information about their physician incentive plans to HCFA or the State Medicaid agencies, before a new or renewed contract receives final approval. Plans whose compensation arrangements place physicians or physician groups at substantial financial risk must provide adequate stop-loss protection and conduct beneficiary surveys. Current law requirements for physician incentive plans are maintained in the BBA.

Emergency Services: The BBA clarified the obligation of Medicare and Medicaid managed care plans to pay for emergency services rendered to their enrollees. "Emergency services" are defined from a "prudent layperson" perspective. Medicare+Choice plans and Medicaid managed care organizations are required to pay for emergency services without regard to prior authorization or whether the provider has a contractual relationship with the plan. These provisions will be implemented for Medicare when the BBA regulations are issued this summer. In addition, HCFA recently sent a letter to State Medicaid directors to clarify this new policy and will provide greater clarification in regulations to be promulgated later this year.

There are, however, a few rights for which HCFA has determined that additional appropriate administrative actions could be taken to bring the program into compliance with all of the major elements of the Consumer Bill of Rights. Last week, the President directed the Department to bring Medicare and Medicaid into compliance in these few areas. The administrative changes we intend to make will bring Medicare and Medicaid into compliance with the Advisory Commission's recommendations. This will ensure that patients with complex and serious medical needs have access to specialists and to some of the rights regarding participation in treatment decisions.

Additional statutory authority is needed to bring both Medicare and Medicaid into full compliance with regard to confidentiality, transitional care, and choice of provider for women for their routine and preventive women's health services. The Department has already released a report that outlined new privacy protections that are needed to ensure appropriate confidentiality of medical records.


The argument for the potential of managed care to improve quality is well known. The capitated prepayment made to managed care allows plans to organize care and re-allocate resources to address, in a coordinated and systematic way, the needs of each patient. In managed care, the organization is accountable for improving the well-being of the patient. This provides both an opportunity and an incentive to improve the quality of care being furnished and emphasizes preventive care rather than acute care.

The flip side to the argument is also well known. In managed care, there is the potential for "under-service" and poor quality, if plans try to maximize short-term profits by not delivering appropriate care. The goals of our quality initiatives are to measure performance and to hold plans accountable for their performance and for quality improvement.

Performance Measurement

We have two approaches towards performance measurement. The first approach is to identify those clinical intervention processes (tests, medications, procedures, surgeries) that, based on scientific evidence, we know are linked to desired health outcomes. Examples of these processes are mammograms for breast cancer screening, childhood immunizations, flu shots, use of beta-blockers after myocardial infarction.

Some, not all, of the measures of these clinical processes can come from plan administrative or encounter systems. While this approach has limitations (good outcomes is not the sum of known clinical processes), process measures provide significant insight into the quality of care and provide opportunities for measurement and improvement.

The second, preferred and potentially the most efficient strategy for clinical performance measures, is to move toward outcome measures, which reflect the health status of the beneficiary. The problem is that the science of health outcomes measures is in its infancy. The movement towards better outcomes measures is critical for HCFA, like-minded purchasers, and beneficiaries in order to hold plans and providers accountable for the care they deliver. HCFA and the Agency for Health Care Policy Research (AHCPR) have been active in promoting research to identify these measures. With such measurements in hand, HCFA and the public will be able to objectively compare managed care plans as well as fee-for-service, and to determine whether managed care plans are living up to their potential to improve the quality of care.

HCFA Quality Council

In June of 1996, a Quality Initiative Team was commissioned within HCFA to develop a comprehensive quality strategy that would transform HCFA's efforts from that of carrying out a group of quality-related functions to that of operating an integrated quality program that is accountable for the health and satisfaction of its beneficiaries. The goal of this strategy is to improve care consistently across the Medicare and Medicaid programs, for managed care as well as fee-for-service, and for special populations as well as the beneficiary population as a whole. Based on the recommendations of the Quality Initiative Team, a permanent Quality Council was created within HCFA to coordinate implementation of the quality strategy.

In the Medicaid program, we have been working through "The Medicaid Purchasing Group" to implement our quality strategy. The group was created in August, 1997, and consists of five HCFA representatives and five representatives of the National Association of State Medicaid Directors (NASMD). The group will identify purchasing strategies that define health related goals, contract arrangements that will support and enhance achievement of those goals, support strategies that have worked to achieve those goals, and assure ongoing consumer input regarding performance measures and overall assessment of quality.

Accountability -- Quality Improvement System for Managed Care

Historically, HCFA's review of Medicare and Medicaid managed care plans has focused on structural standards that looked at a plan's infrastructure and capacity to improve care, as opposed to looking at whether the plan actually improved care. The trend among purchasers of managed care, however, is to demand performance measures in order to hold managed care organizations "accountable." In Medicaid, many States, such as Arizona and Massachusetts, have been innovators in providing incentives for high quality plan performance. To provide for this accountability within Medicare and Medicaid, HCFA, working through the National Academy of State Health Policy in consultation with State Medicaid agencies and regulators, quality measurement experts, managed care plans and beneficiary groups has developed the Quality Improvement System for Managed Care (QISMC). QISMC will help us to assure that care is improving and that plans are accountable in regard to objective, measurable standards.

QISMC adds two major changes to the quality assurance standards that exist in Medicare and Medicaid managed care.

First, plans will be required to meet minimum performance levels on standardized measures (see HEDIS and CAHPS below). Such minimum performance levels, to be set by HCFA in Medicare and States in Medicaid, will be updated annually and will be based on local or national observed historical experience.

Second, plans will be required to show demonstrable and measurable improvement in specified broad clinical areas (e.g., preventive services, acute ambulatory care, chronic care, hospital care, etc.) based on performance improvement projects that each plan will identify.

With QISMC, we will shift from looking at whether plans have the infrastructure to improve care to whether plans demonstrate measurable improvement. The question is not whether plans are able to improve, but rather did they improve. QISMC will define in advance for plans what is acceptable, demonstrable, and measurable improvement. These definitions will also serve as the basis for HCFA reviewers to monitor plan performance and compliance based on data.

The current draft of QISMC has been sent out for comment. NASHP will then incorporate those comments and give us a completed report by June. This will serve as the basis for HCFA to have further discussions with the various stakeholders.


One of the sources for standardized measures under QISMC will be the Health Plan Employer Data and Information Set (HEDIS) 3.0. This choice, in part, is an effort to move toward standardization with other purchasers. HEDIS 3.0 reflects a joint effort of public and private purchasers, consumers, labor unions, health plans, and measurement experts, to develop a comprehensive set of measures for Medicare, Medicaid, and commercial populations enrolled in managed care plans. HEDIS 3.0 will facilitate comparison of plan performance measures. It will also permit HCFA to establish minimum performance levels for these standardized measures, thus, holding plans accountable for the quality of the care they provide. Last year, HCFA directed all Medicare managed care plans to report date for 1996 on 32 HEDIS 3.0 measures to the National Committee for Quality Assurance (NCQA) by June 30, 1997.

HCFA, working with the HEDIS Committee on Performance Management, was instrumental in adding functional status for enrollees over age 65 as a measure in the "effectiveness of care" category in HEDIS 3.0. The "Health of Seniors" functional status survey will be the first outcome measure in HEDIS that will longitudinally track and measure functional status. It addresses both physical and mental status through a self-administered instrument which determines whether the beneficiary perceives that his or her health status has improved, stayed the same, or deteriorated. This measure will be administered by independent venders beginning in May of this year.

HEDIS 3.0 data is self-reported to NCQA by plans and is unaudited. Many purchasers and consumers are making judgements and comparisons based on this data. Given the importance of the data and HCFA's leadership role as the largest purchaser of managed care in the country, HCFA, as have some individual States, contracted for an independent audit of the HEDIS data with the Island Peer Review Organization (IPRO, which serves the state of New York). The purpose of the audit was to ensure that valid, accurate, and comparable HEDIS summary data for services provided in 1996 were obtained.

Last December, IPRO discussed its preliminary audit findings with HCFA staff. The final IPRO report is due to HCFA within a few weeks. We do know that there were serious problems with data accuracy due to immature plan information systems and ambiguous measurement specifications. HCFA is conducting its analysis of 1996 HEDIS data based on the preliminary audit findings. We are committed to making the HEDIS data and the results of the IPRO audit publicly available as rapidly as possible. However, such a release must be consistent with our public responsibility and the competing interests to make data widely available, be fair and accurate to plans, and to inform the public. In the meantime, HCFA is working to receive more accurate HEDIS data in the future. Accurate HEDIS data is necessary but not sufficient for the effective use of quality information. HCFA, like many purchasers and consumer groups, continues to struggle with how particular measures should be used for plan comparison. Much work remains to prepare Medicare and Medicaid beneficiaries to use plan comparison data, as well as quality of care and satisfaction data as these become available.

Consumer Assessment of Health Plans Study (CAHPS)

In cooperation with HCFA, AHCPR designed the Consumer Assessment of Health Plans Study (CAHPS) to design a Medicare beneficiary survey and a Medicaid module. The Medicare survey quantifies Medicare enrollees' evaluation of key elements of their health plans, including how easy it is to get access to appropriate care, how well the clinicians communicate with them about their health status and treatment options, and the quality of care provided. Survey results, which will provide extensive information about every Medicare managed care plan, will be available this fall and will help beneficiaries make informed decisions about their health plans. We are pleased that OPM will work with us to have FEHBP enrollees participate in this initiative. HCFA plans to administer the survey through an objective single third party vendor in order to ensure comparability. The survey was just mailed out for the first time earlier this month, and results are expected to be available to consumers for use in their decision-making this fall.

AHCPR has designed both a Medicaid fee-for-service and managed care module. It has been tested by New Jersey's Medicaid program. HCFA is also working with AHCPR and their contracts on consumer survey modules for pediatrics, adolescents, and SSI recipients.

Accountability and Quality Improvement In Fee-for-service Medicare and Medicaid

The movement toward performance measurement and accountability for quality improvement is not limited to managed care. We are currently revising our Medicare conditions of participation for hospitals, end-stage renal disease facilities (ESRD), home health agencies, hospices and ambulatory surgical centers in order to move away from process requirements and instead require that providers monitor the quality of care that they provide, improve that quality and document that improvement. The new requirements do not mandate the structure or processes that must be used to accomplish the expected outcome, unless those requirements are predictive of quality and patient safety (i.e. infection control, life safety code standards).

In order to evaluate and improve quality, health care organizations must have data that will inform them about the quality of care that they provide. Our standards will require the collection of quality indicator data in those areas where the science is available and consensus exists on the value of the information. The state of quality indicator development varies by provider type. We are requiring collection of OASIS data that supports outcome measures in home health, indicators of the efficacy of dialysis for ESRD facilities, and MDS data in skilled nursing facilities. Providers such as hospitals, hospices and ambulatory surgical centers do not yet have quality indicators that are supported by science and industry consensus. For those providers, our standards will require that they select a set of the many measures available to them.

HCFA is working with other public and private partners to develop measures in those areas that need them and to improve and converge the quality indicators already developed. For example, HCFA is participating in NCQA's pediatric medical advisory panel to identify, develop, and test performance measurement tools that States can use to assure health plan accountability in both their Medicaid and CHIPS programs. As the health care environment continues to change and the science evolves, our standards will be modified to reflect and support our continuous efforts to improve the way we improve quality.

Foundation for Accountability

The Foundation for Accountability (FAcct) is a non-profit organization dedicated to helping purchasers and consumers obtain the information they need to make better decisions about their health care. As Federal Liaisons to the FAcct Board of Trustees, HCFA is joined by other public and private sector partners, including the American Association for Retired Persons, the AFL-CIO, the Department of Defense, the Office of Personnel Management, Ameritech, and American Express. FAcct is uniquely situated to integrate the perspectives of purchaser and consumers of health care in regard to quality measurement. Specifically, FAcct endorses and promotes a common set of patient-oriented measures of health care quality.

Last August, President Clinton announced a major collaboration between FAcct, NCQA, ADA, HCFA and several other organizations to develop a common set of performance measures for person with diabetes. This important initiative should lead to improved quality of care. We anticipate that HEDIS will include some of the measures coming out of this collaboration for implementation in 1999.

PRO Activities

From January 1994 to present, PROs have initiated 1044 cooperative improvement projects and completed 359 of these. Of the projects initiated during the 4th PRO contract cycle (1993-1996), eighty-seven percent resulted in improvements in care that have been documented. One example of an improvement project is the Cooperative Cardiovascular Project (CCP), a national effort to improve the quality of care for Medicare beneficiaries who have had heart attacks. The project began as a pilot program in 1992 in four States using quality indicators based on guidelines published by the American College of Cardiology and the American Heart Association. In 1995, CCP was expanded to a national project focusing on quality indicators when a patient arrived in the hospital and at discharge. Results in the pilot States showed: a significant improvement in all indicators; a 10 percent drop in 30-day mortality and reduced length of stay.

The Medicare Managed Care Quality Improvement Project (MMCQIP) is designed to enhance HCFA's ability to assess how well the ambulatory care process in managed care is meeting the needs of beneficiaries. At this time, we are evaluating the care received by Medicare managed care plan enrollees diagnosed with diabetes mellitus, and the incidence of screening mammography in a sample of enrolled beneficiaries. The PROs in five states (California, Florida, New York, Pennsylvania and Minnesota) and 23 Medicare-contracting HMOs are collaborating on MMCQIP. In addition, an on-going sister project, utilizing the PROs in Maryland, Iowa and Alabama, will analyze the same measures in the fee-for-service setting. The initial finding is that there is room for improvement in both managed care and fee-for-service in these two areas.


We are well aware that there is still much work to be done to ensure that Medicare and Medicaid beneficiaries receive high quality care. With advancements in quality measurement, our strategy will change from monitoring processes to assuring minimum quality performance along with measurable quality improvement. Our work with managed care will assist us in addressing the question of quality in original fee-for-service Medicare. We look forward to continuing to work with Congress, especially Members of the Task Force, on this vital issue.

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