The government spends some $400 million a year on the program’s 41 contractors (QIOs) – which cover all 50 states plus Washington D.C., Puerto Rico and the Virgin Islands – expecting them to assist health care providers improve the care delivered to Medicare beneficiaries, to respond to beneficiaries’ complaints by investigating evidence of poor quality care, and to review claims patterns and suspicious cases for inappropriate use of services or incorrect billing codes.

Despite the government’s ongoing investment in the QIO program, there is scant evidence that QIO interventions drive quality improvement. Critics have charged that QIOs meet their beneficiary complaint handling and case review obligations poorly, while their board members may have conflicts of interest, and some have been engaged in fiscal improprieties. This wave of criticism began last summer with a series of scathing Washington Post articles, was joined by a Congressional investigation spearheaded by U.S. Senate Finance Committee Chairman Charles E. Grassley (R-Iowa), and was largely affirmed by an in-depth investigation of QIOs conducted by a committee of the Institute of Medicine (IOM).

This March, the IOM committee released a 383-page report, Medicare’s Quality Improvement Organization Program: Maximizing Potential, detailing its findings and reform recommendations. Centers for Medicare & Medicaid Services (CMS) Chief Medical Officer Barry Straube, M.D., says the administration agrees with many of those recommendations and will report to Congress in June its specific QIO program reform proposals, some of which he says can be implemented immediately through modification of current contracts, while others require regulatory and legislative changes.

QIO structural reform is of critical importance to physicians, some experts maintain, because incipient changes will shape the way in which QIOs interact with physicians for the next decade or more. While QIOs and their predecessors – Peer Review Organizations – have focused most of their activities on hospitals and other institutional provider settings, their latest contracts place more emphasis on quality improvement in physician practices – a trend that Straube says will grow in future QIO contracts.

As Medicare expands its quality improvement expectations and pay-for-performance reimbursement incentive programs, and efforts advance to develop a national system for performance measurement and reporting, health care providers will require strong national- and community-level infrastructures to support their efforts to plug into new performance measurement, data collection and reporting processes, according to the IOM report.

Hospitals now "voluntarily" report 21 clinical care measures to CMS to avoid having their reimbursement updates reduced, and that "pay for reporting" could soon happen to physicians, says George T. DiFerdinando, Jr., M.D., MPH, adjunct professor of Epidemiology at UMDNJ School of Public Health, and former director of medical quality improvement for PRONJ, New Jersey’s QIO. "Most primary care physicians don’t yet accept that what is happening to hospitals and nursing homes will happen to them, but it is inevitable that it will happen," and "QIOs are the experts at what’s expected for CMS goals," DiFerdinando adds.

A possible first step in that direction began this January, when CMS launched the Physician Voluntary Reporting Program, in which physicians report quality data – eventually to include 36 evidence-based clinical measures – and receive feedback on their performance.

Says the IOM report, "The committee expects that many providers, particularly physicians in small and solo practices, will need assistance both with the collection and use of the new measures, and with the adoption and implementation of electronic systems to facilitate record keeping and processes for the improvement of health care." A free resource currently present in all states, QIOs could become increasingly attractive consultants for physicians.

If an infrastructure like the IOM program were not already in place nationally, the report says, "It would be necessary to create one, because the private market has not fulfilled providers’ widespread need for assistance in improving quality" – a perspective that served as the foundation of the IOM committee’s investigation and recommendations. The QIO program has the potential to play an important role in this new environment, but a major restructuring is essential to enhance the program’s effectiveness, the report maintains.

QIO Duties Evolve

From its beginning a few years after the creation of Medicare in 1965 through the first 20 years of its existence, Medicare’s quality assurance program focused largely on utilization control by identifying hospital and physician outliers that provided unnecessary or substandard care, notes the IOM report. From 1970 to 1975, Experimental Medical Care Review Organizations (EMCROs) – composed of voluntary groups of physicians – retrospectively reviewed Medicare patient cases and engaged in research and educational efforts to reduce unnecessary utilization in inpatient and ambulatory care settings.

EMCROs were replaced in the early 70s by locally-based, physician-sponsored Professional Standards Review Organizations (PSROs), which continued to target outlier providers and present them with local standards of care and practice patterns – and which the IOM report says forged an adversarial relationship with physicians who resented "cost containment enforcers" practicing "cookbook medicine." PRSOs, like QIOs today, could recommend sanctions by the Office of Inspector General ranging from fines to exclusion from Medicare. The IOM notes that studies conducted in the late 1970s and 1980s showed little if any impact by PRSOs on quality of care, or on cost containment.

PSROs were in turn replaced in 1982 with Utilization and Quality Control Peer Review Organizations (PROs), which continued to target unnecessary services and cost containment, as well as potential underuse of necessary services after the implementation in 1983 of the hospital prospective payment system and the development in the late 1990s of Medicare managed care plans, according to the IOM report.

In 1990, the IOM released a report on quality in Medicare which included recommendations that PROs become more proactive in their data collection activities and shift their focus away from utilization and cost control, toward quality assurance collaborations with providers. The 1990 report also noted that – once again – neither the PSRO nor PRO programs had conducted a comprehensive self-evaluation or been able to demonstrate its impact on the quality of care for Medicare beneficiaries.

From the late 1980s to the early 1990s, PROs expanded beyond solely identifying and sanctioning outliers, and began to engage in more collaborative quality improvement activities with providers, for which reliance on retrospective case data and peer review proved inadequate, and during which time Medicare began to launch national efforts to identify quality care standards themselves, the 2006 IOM report notes.

In the mid- to late 1990s, PROs continued to evolve by undertaking nationwide quality improvement projects, improving data collection methods and dropping some case review activities. PROs were renamed QIOs in 1999 and continued to work on quality improvement projects chosen by CMS because they accounted for significant amounts of morbidity and mortality, and because specific consensus- and evidence-based guidelines promised improved outcomes – in areas including acute myocardial infarction, breast cancer, stroke, diabetes, heart failure and pneumonia. QIO projects also expanded beyond hospitals, into health care settings including home health agencies, nursing homes, managed care plans and physician offices – the latter encompassing diabetes care, mammography screening and adult immunizations.

Under the current Medicare contract cycle (2005-2008) QIOs are directed to work more intensively with a subset of individual providers, while statewide activities are given less emphasis. The current thrust of the QIO program represents a new philosophy: instead of targeting individual episodes of care, the program focuses on helping providers redesign care delivery systems and care processes with the goal of promoting more rapid quality improvement. That evolution of focus, the IOM report says, has been propelled by increasing interest in public reports of quality and performance measures, and programs that offer financial reward to providers rendering better quality care.

The physician office setting is the "focal point for major changes," the IOM report notes, with a particular emphasis on small practices and those caring for underserved populations. QIOs are spearheading the Doctor’s Office Quality-Information Technology (DOQ-IT) program, and their current contracts direct them to help five percent of primary care physician practices in each state adopt and use health information technology .

Criticisms and Recommendations

While the QIO program’s focus has adapted to changing conceptions of quality improvement in health care, the program’s actual efficacy has never been conclusively demonstrated. That issue was thrust into the public spotlight last July by a series of articles in the Washington Post, which cited research by the Johns Hopkins Bloomberg School of Public Health concluding that hospitals working with QIOs were no more likely to show improvement than hospitals that did not take part, and which charged that "secrecy" surrounding QIOs makes it difficult for the public to assess their work. The articles also revealed data from the Inspector General’s Office that QIOs rarely investigate patients’ complaints or uphold allegations of substandard care, noting that from 1986 to 1994, QIOs recommended 278 sanctions against all providers – mostly doctors – and from 1995 to 2003, they recommended 12 sanctions – with no sanctions at all in four of the nine years. The Post also documented lavish salaries and perks paid to some QIO executives and board members, including a nonprofit contractor in New Jersey that paid its trustees more than $500,000 in 2003.

In August, the Senate Finance Committee Chairman Charles E. Grassley – whose committee has jurisdiction over the Medicare program and is responsible for oversight of matters that affect federal health care program beneficiaries – began scrutinizing QIOs, sending letters to several, and requesting from CMS documents covering QIOs’ contracts and performance audits, finances and policies for preventing conflicts of interest.

Based upon his committee staff investigation – some details of which he included in a letter to CMS this March, and some of which the Post reported – Grassley noted that little of the money paid to the QIOs is based on their performance, and that few contracts are subject to competitive bids: only six contracts in the current cycle were bid, and only one was not renewed. Almost all QIO funding and contract renewals are contingent on how well they fulfill their contract terms, rather than on how much they have improved the quality of health care, Grassley said, and he recommended that CMS consider making all QIO contracts competitive in the future.

Grassley noted that some QIO trustees have traveled to retreats at expensive resorts and that some QIOs have financial arrangements with board members that appear to pose conflicts of interest. Grassley also said that his committee staff found that QIOs completed 2,891 beneficiary complaint cases between August 2004 and August 2005 – a disproportionately low number, he said, considering there are 43 million Medicare beneficiaries.

Grassley’s findings were largely corroborated by the IOM committee’s QIO report, released on March 9, and commended by Grassley for adding to the public discourse regarding the effectiveness and future role of QIOs. Grassley asked CMS to respond to the specific issues, findings and recommendations presented in the IOM report.

The IOM committee investigating QIOs included a broad-based panel of members chosen for their expertise and objectivity, who reviewed over 600 studies of quality issues and who contacted executives from every QIO in the U.S. – through surveys, telephone interviews and person-to-person visits, according to IOM’s QIO Subcommittee Chair Stephen M. Shortell, Ph.D., who is also dean, School of Public Health, University of California at Berkley. IOM committee members also conducted telephone and person-to-person visits with hospital and physician users of QIOs, had access to QIO data from the CMS, and held a three-day briefing with the CMS, he adds

In its report, the IOM committee recommended several areas of reform, including the following.

Board reform. The report recommends a number of changes to improve accountability of QIO board functions, such as requiring broader representation of all stakeholders – i.e., more consumers and non-physician representatives, implementing board member performance evaluation, strengthening the oversight role of QIO boards and publicly listing the names of board members and executives, along with their compensation.

Program evaluation. The IOM committee noted that the quality of health care received by Medicare beneficiaries has improved over time, but its literature review revealed a lack of any conclusive evidence to determine the extent to which the QIO program has contributed directly to those improvements. QIO assessment is largely contract performance assessment, for which CMS uses complex formulas and calculations for each task, but which the IOM says does not reflect patterns of effective technical assistance and does not help QIOs prioritize how best to approach the provision of technical assistance. The IOM committee also found no correlation between evaluation scores on a given intervention task and QIO spending per beneficiary on that task.

To validate QIO activities as data-based, the IOM committee recommends that CMS overhaul its evaluation approach by conducting an extensive evaluation of QIO program effectiveness as a whole, of individual QIOs, and of selected quality improvement interventions implemented by the QIOs. Periodic evaluations of the QIO program should be performed by an external entity to provide an independent point of view, as well as information to CMS on systems design and operations management aspects of the program that need improvement.

The report acknowledges methodological obstacles to producing valid impact studies – including the overarching limitation of selection bias caused by the voluntary nature of participation with QIO assistance – and suggests that combined approaches might compensate for challenges and weaknesses of individual study types, including case-control study design, randomized controlled trial, nonequivalent control group study design, crossover study design, and qualitative research and analysis. "Three to five years from now, we want to see more evidence of QIOs doing good," says Shortell.

The IOM report also says CMS should change QIO contract structure to provide strong incentives that reward high performance and penalize poor performance, and to grant more flexibility to QIOs in their intervention methods. All future QIO contracts should be put up for bid, the report says, and private sector quality improvement organizations might complement, augment, or in some cases replace current organizations holding QIO contracts.

Focus on providers. The report concludes that QIOs do not currently see the Medicare beneficiary as their primary customer and that a QIO’s incompatible dual role – collaborator with providers on quality improvement and regulator on beneficiary complaints – dilutes its resources and hinders its ability to perform both functions well, particularly given its range of mandated technical assistance activities, and the possible conflict of interest that could limit QIOs’ aggressive pursuit of beneficiary complaints.

The report recommends that the role of QIOs should be to improve health care practice rather than to supervise or regulate it – specifically, that QIOs concentrate their resources and efforts solely on providing technical assistance to providers to improve their delivery of care and their organizational cultures and information systems, and that beneficiary complaint handling and case reviews should be transferred to other entities such as fiscal intermediaries. Relieved of the "police dog" inspection burden, says Shortell, QIOs can encourage more physicians and hospitals, especially those in rural and underserved areas – which may lack the resources to hire private consultants – to tap their federally funded technical consulting expertise. The report also recommended that Congress remove CMS restrictions preventing QIOs from being retained directly by providers who want to purchase help to improve.

There is no data on how receptive physicians are to the technical assistance of QIOs, which have historically worked more with hospitals than with physicians, and while physicians have the ability to use QIOs’ technical assistance, most probably don’t, says Steven A. Schroeder, M.D., chair of the IOM’s Committee on Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs. He hopes that physicians will see QIOs – especially if shorn of the complaint review function – as a valuable and friendly resource for data collection and analysis expertise, and believes QIOs should be more assertive in outreach to physicians – particularly those in need of quality improvement. "CMS and QIOs have to figure out how to track low-scorers in an era of increasing transparency, and as CMS and the private sector move to pay-for-performance for physician practices," says Schroeder.

Data processing and transparency. The QIO program should revise its data processing and management practices to speed up data feedback to providers and to integrate more patient record data across various provider and payor settings – which the report says could also help the QIO program reach a wider audience.

The report concludes that current confidentiality restrictions constrain QIOs from sharing data on quality improvement, and that confidentiality protections afforded providers by the QIOs are not well suited to broader trends in the health care environment which emphasize transparency, public reporting and consumer access. The report recommends that the Health and Human Services Secretary set new regulations relaxing QIO data confidentiality restrictions to facilitate data sharing and transparency, while balancing concerns about discoverability of QIO data in malpractice lawsuits.

Program priorities and strategic planning. As more providers gear up their delivery systems to comply with emerging pay-for-performance and public reporting programs, many more providers – particularly small physician offices – will require hands-on assistance in adopting health information technology and redesigning their offices to improve the quality of care they deliver. Shortell says there are currently some 107 pay-for-performance programs in the private sector, in addition to those being piloted by CMS. In the event that provider demand for assistance exceeds available resources, Shortell says QIO budgets will need to be increased commensurate with demand, while CMS should establish priorities to guide QIOs in selecting providers to participate in technical assistance interventions and should consider identifying those characteristics of providers that make them more receptive to and successful in QIO quality improvement interventions.

Planning should also focus on QIO collaboration with various types of providers to improve the coordination of patient care across multiple provider settings – e.g., hospitals, physician practices and nursing homes – and should develop quality and efficiency measures for use across those settings, the report says.

Reactions to IOM Report

The American Health Quality Association, the QIO trade group, calls the IOM report "a strong endorsement of the value of the QIO program and its core work of quality improvement technical assistance," and is in agreement with most of the IOM’s recommendations, including those calling for broader-based QIO governance, expansion of technical assistance, more competition, better management by CMS, more timely data processing, rigorous evaluation and scrutiny of the program, and increased funding for the core contract, according to David Schulke, the association’s executive vice president.

The association does not, however, support the IOM’s call for separating the responsibility for handling beneficiary complaints and other case review functions from QIOs’ core contracts, arguing that that consumer concerns are important indicators of quality breakdowns, and that providers must learn to actively welcome consumer concerns and take timely action to improve care.

The association instead proposed to Congress reform proposals for the beneficiary complaint program that it said would address many of the IOM’s concerns about responsiveness and transparency for patients, and for which Congress would need to revise the law governing operation of the QIO program – as QIOs are currently prohibited from telling beneficiaries the details of investigations involving physicians without permission from those physicians. The association proposes that Congress allow the findings of QIO complaint investigations, along with information about actions taken, to be given to Medicare beneficiaries who file complaints, while prohibiting the use of QIO complaint inquiry findings in any form in a malpractice case. The proposals would also:

· Assist providers in remedying problems reported by patients and confirmed by QIOs, and offer training to teach providers best practices for welcoming feedback about care problems and promptly resolving them.

· Instruct QIOs to publish annual quality reports in each state, including aggregate data on complaints, provider performance on standardized quality measures, and names of providers which have been referred by the QIO for enforcement action.

· Restore active QIO outreach to educate beneficiaries of their right to bring quality concerns to QIOs, and their responsibility to directly inform providers of their concerns.

The association’s beneficiary complaint program reform proposals follow its adoption late last year of a new organizational integrity code to assure that all QIOs conform to high standards for business practices, governance and public accountability. The new code of conduct – which the association says has been formally adopted by over two-thirds of QIOs – sets standards for board and executive compensation, diversity, travel expenses and conflicts of interest.

Quality Insights of Pennsylvania – an affiliate of a QIO organization also covering West Virginia and Delaware – endorses the policy proposals of the national QIO association and has signed on to its transparency standards, according to Quality Insights CEO John Wiesendanger. He also believes that QIOs’ case review functions should be retained because of the expertise of their staff, which he says are "trusted, neutral facilitators, well-versed in the rules and regulations of privacy and information confidentiality." Quality Insights’ staff includes two medical director physicians; five nurse task director nurses; 28 project coordinator nurses; seven case review manager nurses; and 22 support staff, which include information technology professionals and data analysts. Wiesendanger says he would like QIOs to be permitted to do consulting work outside of CMS contracts, as per IOM recommendations.

The dwindling number of QIO complaint investigations, says Wiesendanger, is indicative of the cultural shift away from case review and toward quality improvement, and the vast majority of telephone calls to its complaint line turn out to be about billing issues.

Wiesendanger acknowledges the difficulty of evaluating universal impacts of QIO interventions, but he says that Quality Insights has earned the satisfaction of some 90 percent of providers utilizing its interventions, and he cites the following results from its previous contract interval (2002 to 2005). In the hospital setting, smoking cessation counseling improved from 29.2 percent to 41.7 percent for heart failure patients, and improved from 27.6 percent to 76.9 percent for acute myocardial infarction (AMI) patients. The number of AMI patients receiving beta blockers upon discharge from the hospital improved from 74.7 percent to 96.7 percent, while the number of patients with pneumonia who received the pneumonia vaccine upon discharge from the hospital increased from 13.0 percent to 32.5 percent. In the long-term nursing home setting, chronic pain in residents dropped from 8.7 percent to 5.5 percent, a 36.8 percent reduction.

Wiesendanger says physician perceptions of QIO effectiveness matter greatly, and he recounts feedback by a Pittsburgh physician who said he would not have discovered breast cancer in a patient – whose visit was unrelated to mammography screening – if he had not used an Outpatient Rapid Assessment tool provided by Quality Insights.

Most Pa. hospitals are quite satisfied with Quality Insights’ technical assistance, according to Lynn Leighton, vice president of professional and clinical services, Hospital & Healthsystem Association of Pennsylvania (HAP). While Pa. hospitals have several quality improvement agencies from which to select – including two VHA offices in the state, Medicare’s Premier Hospital Quality Incentive Demonstration project, and the network resources of a Tenet or Catholic Health system – QIOs’ cost-free assistance is particularly enticing for hospitals with tight margins, says Leighton.

In order for hospitals to get Medicare’s full 3.4 percent "market basket increase" this year – an inflation-adjusted reimbursement factor – they must submit 21 CMS-defined quality measures to the Hospital Quality Alliance public report. Hospitals that fail to report the full set of measures only receive a 1.4 percent increase, and Leighton says many more hospitals could be driven to request QIO technical assistance when "pay-for-reporting" becomes pay-for-performance.

HAP does not believe that regulatory functions should be removed from QIOs’ duties, as hospitals have become familiar and comfortable with their QIO’s personnel and would find it burdensome to have to deal with yet another regulatory entity for case review, says Leighton. A wall between QIO regulatory and educational functions already exists, she adds, as separate and distinct Quality Insights personnel handle those two tasks.

Other than that issue, HAP believes the IOM recommendations are worth exploring as ways of making QIOs stronger, says Leighton.

Credibility of QIO assistance may vary, however. "Our QIO is spread too thin, is trying too many things, and has not gained the widespread support of our hospitals’ administrators or medical staff," says Aline Holmes, senior vice president of clinical affairs, New Jersey Hospital Association. QIOs need to do a better job dealing with professional culture barriers, in particular by supplementing their technical assistance staff – who are primarily nurses – with physicians in order to carry more clout with the clinicians they are instructing about quality issues, believes Holmes.

Government Response

A week before release of the IOM report, it was endorsed by a bipartisan group of members of the House Energy & Commerce Committee, who in a letter to their chair suggested that Congress use the report to modernize and strengthen the QIO program. "Quality problems, as well as their potential solutions, revealed by this research necessitate that Congress act to support high quality care for patients, and particularly our vulnerable elders," they wrote, adding that, "As more health care quality data is available to consumers and provider payments are increasingly tied to performance, it is imperative that QIO assistance – including help to effectively utilize health information technology for better patient care – is available to as many providers and practitioners as possible."

Several months before release of the IOM report this March, CMS began its own internal review of QIOs, and its findings agreed with virtually everything in the IOM report, according to CMS Chief Medical Officer Barry Straube, M.D. CMS plans to release those finding to Congress, along with specific QIO program reform proposals, on June 1, he adds.

"You’re going to see some changes in how QIO boards are constructed and how senior QIO staff are reimbursed, so there are no longer conflicts of interest," says Straube. CMS will focus more on efficiency when choosing QIO activities and will be more rigorous in requiring QIOs to prove that their interventions did lead to improvement, while it may also use the Agency for Healthcare Research and Quality (AHRQ) to conduct QIO program evaluation, Straube adds.

Straube says CMS’s formal evaluation of the QIO program’s 2002-2005 contract activities found "solid evidence that QIOs nationally led to quality improvement in skilled nursing, home health and physician office activities, as well as some degree of improvement in hospitals." The study compared provider groups having the most QIO interventions with groups having fewer and none, and found significantly more improvement in the QIO intervention groups, he notes.

Straube acknowledges the difficulty of measuring quality improvement effects, but points out that other area health care agencies, such as commercial insurers and the NCQA, have not been asked to show this level of proof that intervention yields improvement. One QIO under the current 2005-2008 contract is specifically engaged in more rigorous evaluation efforts, which Straube says will help in planning for the next QIO contract period.

QIOs nationwide should focus on quality improvement areas that no one else is working on, in order to show that their intervention was the one that made the difference, says Straube, citing successful results of the national "Fistula First" initiative, which engages nephrologists, vascular surgeons, dialysis facilities, primary care physicians and patients in efforts to significantly increase the use of AV fistulas for safer hemodialysis access. CMS found that the fistula adoption rate for kidney patients in the U.S. increased to 41 percent for the fourth quarter of 2005, a marked increase over the rate of 33 percent in 2003, and credits its Fistula First coalition for much of the improvement.

CMS wants to align the QIO program with states’ quality improvement efforts under the Medicaid program, as well as with CMS’s End Stage Renal Disease Network program. "At a minimum, we want to align them – that could mean getting the three programs to focus on the same quality measures, to achieve efficiencies," says Straube.

Straube notes that the QIO program’s annual $400 million budget represents only one-tenth of one percent of overall Medicare expenditures, whereas many private insurers devote one to two percent – 10 to 20 times as much – to quality improvement funding. Because CMS felt QIOs were being asked to do too much, it de-emphasized their statewide responsibilities under their current contract and focused intervention on targeted subsets of provider groups, Straube says. The Office of Management and Budget is in charge of apportioning the Medicare Trust Fund, and there needs to be discussions with Congress about whether or not QIOs are being asked to do too much with the limited amount currently spent on them, or if it would be better for them to focus on fewer intervention activities, says Straube. "That’s why it is important to show the value of the QIO program: to make the case for more funding," he adds.