Grassley Continues Review of Medicare Quality Improvement Organizations

WASHINGTON – Sen. Chuck Grassley, chairman of the Committee on Finance, today
continued his review of Medicare contractors known as Quality Improvement Organizations by
asking the Centers for Medicare and Medicaid Services to respond to an Institute of Medicine Report
on these organizations released today.

Grassley is concerned about the seeming lack of effectiveness and accountability by Quality
Improvement Organizations, which have a major responsibility to investigate individual Medicare
beneficiary complaints and appeals about the quality of doctor and hospital care.

The text of his letters today follows.

Via Electronic Transmission

The Honorable Mark McClellan
Administrator
Centers for Medicare and Medicaid Services
Department of Health and Human Services
200 Independence Avenue, SW
Washington, DC 20201

Dear Administrator McClellan:

As Chairman of the Senate Committee on Finance (Committee), which has jurisdiction over the
Medicare program, I am responsible for oversight of matters that affect the beneficiaries of federal
health care programs. A number of allegations regarding Quality Improvement Organizations (QIO),
which are charged with improving the quality of care provided to Medicare beneficiaries, were
brought to my attention during the past several months, including but not limited to allegations of
mismanagement of government funds and a lack of responsiveness to beneficiary complaints. As I
outlined in correspondence to you dated March 3, 2006, the preliminary findings of my inquiry
indicate a reason for concern about, among other things, the effectiveness of the QIOs.

Today, the Institute of Medicine (IOM) released a report on the QIOs mandated by Section 109 of
the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Many of the findings
and recommendations confirm some of the problems my Committee staff identified in its ongoing
review of documents and information related to the QIOs. As Chairman of the Committee, I request
that the Centers for Medicare and Medicaid Services (CMS) describe in detail any actions it plans
to take to address the issues and individual findings and recommendations presented in the IOM
report by April 7, 2006. In particular, please respond specifically to the findings and
recommendations outlined below. In addition, if CMS disagrees with, or wishes to expand upon,
amend, or modify any of the IOM’s findings please feel free to share your views regarding the future
activities, operations, and structure of the QIOs.

QIO EFFECTIVENESS

On February 9, 2006, Secretary Michael Leavitt, Department of Health and Human Services (HHS),
testified before the Committee on the President’s fiscal year 2007 budget proposal and stated, among
other things, that in assembling the HHS budget, he asked his colleagues to apply eight principles
to every investment that the agency is making. One of those principles is looking for programs that
can be measured. In particular, he testified, “If we cannot measure their benefit, I think there has to
be some question asked about whether there is benefit.” One of the repeated concerns about the QIOs
is the lack of information about the effectiveness and quality of the services they provide. I am sure
we both agree that ensuring an independent and rigorous evaluation of program effectiveness is
critical to making significant financial investments of taxpayer funds.

The IOM recommends that a rigorous and extensive evaluation be conducted to assess the QIO
program. The literature review conducted by the IOM revealed a lack of any conclusive evidence to
determine the effectiveness of the QIOs in improving the quality of health care. Even when general
improvements in quality are identified, it is not possible to determine the extent to which these
improvements can be attributed to the QIOs’ efforts. Furthermore, the IOM itself could not find
conclusive evidence about which QIO intervention methods are most effective. The IOM report
points to anecdotal evidence about the existence of “outstanding” and “mediocre” QIOs; however,
based on the available QIO contractor performance data, IOM could not determine which QIOs
belong in each category or whether there are significant differences in performance between QIOs.
In light of the fact that the IOM could not attribute the gradual improvements in quality of care to
the QIOs, it recommends that CMS evaluate the QIO program as a whole, as well as evaluate the
individual QIOs, and selected quality improvement interventions implemented by the QIOs. As
noted in the current IOM report, the IOM has recommended in the past the need for documentation
of the impact of QIOs and the need to evaluate the QIOs.[1] [2] Unfortunately, CMS did not
implement these recommendations. Accordingly, please explain how CMS now plans to address the
lack of conclusive evidence to determine the effectiveness of QIOs in improving the quality of health
care. Additionally, please explain how CMS plans to address the lack of rigorous evaluations of the
QIO program’s impact on quality of health care. As Chairman of the Committee, as a U.S. Senator,
and as a taxpayer, I believe it is imperative that CMS not let another decade go by before addressing
this issue of QIO effectiveness, especially given the amount of taxpayer dollars consumed by the
QIOs.

LIMITING QIO ROLE TO TECHNICAL ASSISTANCE

The IOM recommends that QIOs concentrate their resources and efforts solely on providing technical
assistance to providers for performance measurement and quality improvement. To accomplish this,
the IOM also recommends that the responsibility for beneficiary complaints, appeals, and case
reviews for payments be assigned to other entities such as fiscal intermediaries. IOM concluded this
based on its finding that, currently, QIOs do not see the beneficiary as their primary customer. The
IOM also concluded that a QIO’s conflicting dual role of partner with providers on quality
improvement and regulator on beneficiary complaints hinders its ability to perform both functions
well. My Committee staff found information indicating that beneficiary complaints are not a high
priority for QIOs even though it is one of their major functions. The number of beneficiary complaint
cases completed by the QIOs, 2,891 between August 1, 2004, and August 30, 2005, appears
disproportionately low considering there are 43 million Medicare beneficiaries.

In addition, the IOM found that the confidentiality protections afforded providers by the QIOs are
not well suited to broader trends in the health care environment which empha transparency,
public reporting, and consumer access. The IOM concluded that the current confidentiality
restrictions constrain the use and sharing of data on quality improvement. My Committee staff
identified a lack of responsiveness on the part of QIOs with regard to communicating with
beneficiaries about the results of complaint reviews. Indeed, you may recall the Washington Post
exposé on the QIOs this past summer. That exposé discussed a QIO’s lack of responsiveness to
David Shipp regarding the findings of a QIO investigation into the death of Mr. Shipp’s wife; an
investigation which was initiated by a complaint Mr. Shipp filed with the QIO. Mr. Shipp was forced
to wait for the conclusion of legal proceedings, including an appeal by HHS of a ruling favorable to
Mr. Shipp, just to learn what the QIO found with regard to his wife’s death. Even the American
Health Quality Association (AHQA) has now proposed changing the practice of withholding
information about complaint reviews from complainants.

In light of the IOM’s recommendation, coupled with AHQA’s proposed changes to the practice of
withholding information, I would appreciate knowing CMS’s position on the IOM’s
recommendation to transfer beneficiary complaints, appeals, and case reviews to entities other than
the QIOs. Regardless of CMS’s preferred mechanism for conducting complaints, appeals, and case
reviews, how will CMS ensure transparency and responsiveness to beneficiaries, who at this time
are left in the dark?

DATA PROCESSING

The IOM concludes that the “Changing environment of health care, with the increased public
reporting of performance measures and payment incentives for providers who meet certain quality
standards, will create a growing demand from providers for technical assistance with the reporting
of performance measures and analysis as well as with process and systems.” The IOM recommended
that the QIOs become an integral component of strategies for future performance measurement. The
IOM believes the QIOs should help build provider capacity by providing instruction on how to
collect, aggregate, and interpret data on quality measures, how to conduct root-cause analysis, and
provide advice and guidance on how to bring about and sustain internal system design among other
things. One IOM recommendation that is integral to this transformation is the revision of the QIO
program’s data handling practices. Data should be available to providers and the QIOs in a timely
manner to improve services and measure performance. National reporting of performance measures,
data aggregation, data analysis, and feedback are important components in the development of
quality initiatives. The goal of integrating more care data from all providers and public and private
payers to create records of patient data over time is also important as we move forward with greater
transparency in the health care system. In light of IOM’s recommendations in this area and CMS’s
commitment to pay for performance as a strategy to improve quality, please explain how HHS and
CMS plan to move forward with these recommendations regarding data processing and management
on a national level. Please also outline what steps are being taken, if any, to allow and encourage the
sharing of medical claims data when the sharing of the data is not precluded by the Health Insurance
Portability and Accountability Act.

BOARD OF DIRECTORS: FUNCTIONS & STRUCTURE

The IOM recommended a number of changes to QIO board functions and structure. Specifically, the
IOM called for implementing methods for periodically assessing the performance of individual board
members and the boards as a whole, establishing a strong oversight role for the board, and ensuring
transparency with regard to board member compensation. My Committee staff’s review of the QIOs
identified some problems with regard to board member compensation, contractual and other financial
arrangements which give the appearance of conflicts of interest, and questionable expenditures by
the QIOs. Steps taken to assess board member performance, strengthen the oversight role of QIO
boards of directors, and increase transparency regarding board member and executive staff
compensation arrangements would go a long way to addressing some of the problems that the IOM
and my Committee staff found. Accordingly, please describe for the Committee, what actions CMS
plans to take to address the issues raised by the IOM report regarding transparency and effectiveness
of QIO boards of directors.

CONTRACT STRUCTURE

The IOM recommends further that CMS change the QIO contract structure to provide incentives for
high performance and penalties for poor performance, and permit greater competition for new
contracts. My inquiry revealed that there is very little, if any, competition for QIO contracts. Almost
all QIO funding and contract renewals are contingent on a QIO’s performance of the contract terms
and not on performance relative to improving the quality of health care. As I suggested in my
previous letter to CMS, dated March 3, 2006, perhaps it is time that CMS consider competing all
QIO contracts in the future. Without introducing competition into the mix, CMS cannot ensure, in
light of the wide and complex assortment of tasks performed by QIOs, that the executive branch is
contracting with those entities best suited to perform the task at hand at the highest level for the
American taxpayer.

RECENTLY PROPOSED GUIDELINES

Recently, AHQA formalized standards of business practices and accountability for the QIO
community. Such guidelines are certainly a step in the right direction. Specifically, AHQA called
upon the QIO community to adopt a “formal code of conduct.” I understand that a good number of
the QIOs have voluntarily agreed to adopt these guidelines addressing issues such as board/executive
compensation, board structure, and travel policies. At the same time, it is indisputable that selfregulation,
voluntary adoption, and public endorsement of high standards for QIO accountability are
meaningless without consistent oversight and related accountability.

In closing, I would be remiss if I did not acknowledge that the QIO community does indeed have a
function and a role to play in improving the quality of care provided to our Medicare beneficiaries.
After all, there are thousands of individuals who are committed to improving the care in hospitals,
nursing homes, physician practices, and home health care in all 50 states and the U.S. territories. At
the same time, I do think it is high time to turn back the covers, to address the IOM’s
recommendations, to re-examine the role and structure of the QIO community, and to force positive
change for the future.

Thank you for your attention to this important matter. I would appreciate a response to my inquiries
no later than April 7, 2006. Additionally, I propose that our respective staff join forces to address the
critical issues and recommendations set forth by the IOM, as well as the findings of my Committee
staff. Accordingly, please have your staff contact my office to schedule a meeting to occur no later
than April 28, 2006, to discuss how to improve the QIO program.

Sincerely,

Charles E. Grassley
Chairman

(1) Institute of Medicine, Medicare: A Strategy for Quality Assurance, Volume I, Washington, DC:
National Academy Press, 1990.
[2] Institute of Medicine, An Assessment of the HCFA Evaluation Plan for the Medicare Peer Review
Organization, Washington, DC: National Academy Press, 1994.

Via Electronic Transmission

Harvey V. Fineberg, MD, PhD
President
Institute of Medicine
500 Fifth Street, NW
Washington, DC 20001

Dear Dr. Fineberg:

The Committee on Finance (Committee), which has exclusive jurisdiction over the Medicare
program, has a responsibility to the millions of Americans served by this program to ensure that
initiatives funded with Medicare dollars, such as the Medicare Quality Improvement Organization
(QIO) program, achieve value for money spent.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 directed the Institute
of Medicine (IOM) to conduct a study of the QIO program, including, among other things, evaluating
the extent to which QIOs improve the quality of care for Medicare beneficiaries. Thank you for the
report entitled, “Medicare’s Quality Improvement Organization Program.” I appreciate the IOM’s
intensive review and careful examination of the QIOs’ activities, services, and operations.

Many of the IOM’s findings regarding the beneficiary complaints process, board structure,
contracting, and QIO effectiveness echo the concerns I raised about the program in my letter to the
Centers for Medicare and Medicaid Services (CMS) last week. In particular, my Committee staff
have heard from beneficiaries that are very dissatisfied with efforts by the QIOs on their behalf. It
appears that the QIOs place a very low priority on their mandate to investigate and resolve
beneficiary complaints against providers. Although the IOM did not have the opportunity to seek
input from individual beneficiaries regarding the QIO program as part of its review, information
obtained from other sources led the IOM to recognize that the QIOs are not effectively carrying out
this portion of their mission and propose moving that function to a different set of organizations
altogether. I commend the IOM for adding to the public discourse regarding the effectiveness of and
future role for the QIOs.

In closing, I forwarded a copy of IOM’s report to CMS for consideration. In particular, I asked CMS
to respond to specific issues, findings, and recommendations presented in the report. Thank you
again for the IOM’s input and recommendations on the QIO program.

Sincerely,

Charles E. Grassley
Chairman

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