Quality in Medicare: From Measurement to Payment and Provider to Patient

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INTRODUCTION

The Medicare Program has made it possible for older and disabled Americans to obtain medical care while providing significant protection against the financial burden of illness. Important breakthroughs in medicine might not have happened without sufficient and dependable funding from a payer as large as the Federal Government. This dependable funding created a market for new and improved technology, such as less invasive heart procedures and more accurate imaging.

Yet, until the mid-1980s, Medicare spent minimal effort measuring or working to improve quality. Medicare was originally designed to mirror private sector insurance practices; among them was a policy of not interfering with the practice of medicine. Title 18 of the Social Security Act begins with the following admonition for the Federal Government to stay out of the practice of medicine (Section 1801. [42 U.S.C. 1395]).

"Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided ..."

The prevailing view, then, was that properly licensed, autonomous physicians could be relied on to assure quality, providing that the Federal Government or private insurers did not meddle.

However, times have changed. We now know that high quality cannot be assumed. There are wide variations in how physicians practice, and some well-established medical practices have not been proven to be effective. Meanwhile, many effective treatments are underutilized and even appropriate care may be improperly administered, posing significant safety issues. In short, quality cannot be taken for granted; it must be zealously pursued.

COST CONTROL AND QUALITY ASSURANCE

Medicare was established without a mechanism for overseeing quality, but escalating costs soon aroused concern regarding the appropriateness of admissions for certain services. Congress authorized the creation of experimental medical care review organizations (EMCROs) in 1971 to try to reduce unnecessary utilization. The program was built on the assumption that groups of locally based physician peers could review inpatient and ambulatory medical records to identify individual cases in which the care provided was unnecessary. This model led to the establishment in 1972 of the professional standards review organizations (PSROs). Using the same mechanism as the EMCROs, the PSROs reviewed records for whether services were medically necessary, met professionally recognized standards and were provided in the most effective and economic manner (Bhatia et al., 2000). Congress then made further refinements to the program when it passed the Peer Review Improvement Act of 1982, which established the utilization and quality control peer review organization (PRO). So that the program was less focused on local practice patterns, this legislation consolidated the number of entities that could perform this type of work and provided a tighter Federal structure.

In 1983, Congress passed legislation establishing a prospective payment system (PPS) for hospitals. Changing the payment from the costs of care to a prospective amount determined by diagnostic-related groupings (DRGs) created incentives for hospitals to use fewer resources and days to deliver care. At the time, there was some concern that hospitals might react by trying to admit more patients while shortening the average length of stay. To evaluate hospital behavior in response to the PPS, HCFA placed a strong emphasis in the first 3-year PRO contract cycle (1984-1986) specifically on inappropriate admissions and early discharges. The statute also gave the PROs the ability to deny claims when health services are not medically necessary and reasonable. The PROs determined the appropriateness of specific cases based on individual case review. As a result of this emphasis, relationships between local PROs and providers were often antagonistic.

In addition to the program to monitor providers, HCFA created standards for facilities to meet, entitled conditions of participation (COPs), when they entered into contracts with the program. In 1966, HCFA created the first set of such standards for hospitals, adding other standards as provider settings came into the program. These requirements were primarily structural in nature and intended as minimum standards for assuring quality for beneficiaries (Institute of Medicine, 1990). The requirements were general in nature. For example, they require hospitals to have adequate nurse and physician staffing and quality assurance and discharge planning processes. HCFA did not establish any such standards for physician offices, relying instead on State licensure to ensure quality.

In 1986, after receiving a request from the New York Times for data collected by the PROs, William Roper (HCFA Administrator), decided to publish Medicare hospital mortality statistics. HCFA staff did the analysis, with very significant assistance from leading health services researchers. HCFA emphasized that mortality rates alone should not be used to make judgments about the quality of care in individual hospitals, yet the message was clear: Hospitals should not be assumed to perform equally well. Despite strong opposition from the hospital industry, the hospital mortality statistics were published annually until the mid-1990s. By that time, however, another barrier had been crossed. Data about quality were not just for health care providers and …