EXECUTIVE SUMMARY

This policy report of the American Medical Peer Review Association (AMPRA) recommends the establishment of a National Quality Management Program (NQMP) to complement any health reform legislation enacted by Congress. The program's mission would be to preserve and improve the quality of health care for all Americans. Special attention would be focused on identifying barriers to access and underuse of appropriate services as health reform legislation encourages the spread of prepaid systems of health care delivery.

A National Quality Management Program would be responsible for the following functions: Consumer Protection To safeguard against health care delivery of potential harm to patient health and welfare, the NQMP would establish:

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An independent quality monitoring system that holds plans accountable for improved performance; Authority by regulatory bodies to penalize consistently poor quality care;

A consumer complaint and appeals system;

A licensing and accreditation system for health plans, institutional providers and medical professionals. Quality Improvement -- To ensure the diffusion and transfer of new medical knowledge and to share comparative performance information among competing health care plans and participating providers, the NQMP would establish:

A community-based feedback and education program that creates a safe environment for provider self-examination and acts a catalyst for quality improvement at all levels in the delivery system. Informed Consumer Choice - To ensure that consumer selection of competing health plans is guided by objective and scientifically-based measures and to ensure that consumers have adequate information in making treatment decisions, the NQMP would establish:

Comparative performance reports on health plan price, quality, service and consumer satisfaction; A community-based information resource on treatment alternatives.

These important functions would be distributed within a federal, state, and local framework that take advantage of existing organizational structures, require a minimal degree of additional bureaucracy and insist upon coordination and active communication among all entities.

The Federal Government would be responsible for establishing a national health care information database, setting quality standards and performance expectations based on emerging medical knowledge, and monitoring the impact of the delivery system on the quality of care, particularly for the most vulnerable populations. Participating federal entities would include:

A National Quality Management Council;

A national network of state-based, independent Health Quality Foundations;
State-based Data Networks.

State Government would take the lead role in the administrative and regulatory oversight of the health care delivery system. Participating state entities would include:

Value purchasing and the provision of high quality health care services would be the responsibility of the Local Marketplace. Local entities would include:

Health and Corporate Alliances, responsible for organizing the consumer choice function and negotiating health plan contracts on the basis of quality;

Health Plans and Participating Providers, accountable for the improved health status of their enrolled population.

HEALTH REFORM AND THE QUALITY IMPERATIVE
An AMPRA Policy Report

INTRODUCTION

The prospect for enactment of comprehensive health care reform has never been better. The
emerging constellation of public opinion, motivated legislators, and an ambitious Clinton
Administration augurs for a lively national debate on the topic. Not only is there consensus
on the need for comprehensive reform, but there is also significant bipartisan support for
some version of the "managed competition" approach, first articulated by the Jackson Hole
Group, championed by President Clinton during his
campaign and then drafted into proposed legislation by the
Administration and other lawmakers. This model
envisions a medical marketplace dominated by prepaid
health plans competing on the basis of price, quality,
service, and consumer satisfaction.

"Nevertheless, it is quality and the public's perception of whether or not it will be jeopardized under the new plan, that will help decide the fate of health reform legislation."

The success of any health care reform agenda rests on its
ability to master the basics: cost, access, and quality.
Incentives and controls must be designed that can tame rising costs and provide universal
coverage while preserving and improving quality of care. The public discussion of the
problem has been lopsided. The cost of health care has become a huge concern as it
consumes an ever larger share of the gross domestic product with no real abatement in sight.
The perception of unfairness regarding inadequate access to care and coverage has also
grown dramatically as recession robbed millions of middle class Americans of their
job-related health benefits. Quality -- for those who do have adequate coverage -- has been
a relative non-issue in the public debate over health care reform.

Nevertheless, it is quality and the public's perception of whether or not it will be jeopardized under the new plan, that will help decide the fate of health reform legislation. Health Maintenance Organizations (HMOs), which would be encouraged as the dominant delivery system under managed competition, have not been preferred by most consumers of health care in most parts of the country, despite their lower out-of-pocket costs, and efforts to be consumer-responsive. Persistent fears about undertreatment and the incentives inherent in pre-payment to cut costs at the high end have frightened many into opting for more expensive fee-for-service alternatives that allow patients more direct control over their choice of physicians, and preserving what they perceive as a wider range of treatment options in the case of serious illness.

The various legislative proposals for health care reform based on managed competition share a collective weakness: the inadequacy of provisions to ensure quality under the powerful new incentives it gives providers to curb expenditures. In fact, nowhere is there to be found a structure capable of performing basic, ongoing, independent quality monitoring that would logically seem to be at the heart of any quality program. The Institute of Medicine (IOM) in a recent policy pronouncement articulated the need succinctly:

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the paradigm shift calls for health plans to provide medical services to a population in the face of stringent resource constraints, and the incentive will likely be to underserve people. These changes make monitoring the quality of care imperative, especially for the sickest individuals and other at-risk populations."

"Effective quality assurance and improvement must complement vigorous cost containment and expanded access

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it is the essential third component of a sound health

The purpose of this document is to examine the basic elements of the managed competition bills in Congress and to propose a National Quality Management Program that is accountable, dedicated, efficient, effective, and logically organized across federal, state and local jurisdictions. It is critical that quality and consumer protection be built into the system from the outset. Effective quality assurance and improvement must complement vigorous cost containment and expanded access -- it is the essential third component of a sound health care system.

care system."

It is important to first outline the framework of the new health care delivery system that has been proposed before the quality requirements of the system can be discussed. The Clinton plan and several of the other congressionally sponsored plans for health reform are modeled on the managed competition proposals of the Jackson Hole Group, some in combination with global expenditure budgets. Managed competition restructures the market for health services into competing prepaid health plans, giving providers built-in incentives to offer the standard package of benefits at the lowest premium price.

National Health Board - Under managed competition, the locus of health system design
and control would be with a National Health Board comprised of presidentially appointed
members. Its primary functions would be to determine
the standard benefit plan; to establish global and
statewide budgets (Clinton Plan); to set up rules of fair
play for competing health plans; and to oversee the
state Health Alliances. The National Health Board
would also be responsible for establishing a uniform
data reporting system that would serve as the basis for
measuring the performance of competing health plans
and the new system's impact on the quality of care.

"Managed competition restructures the market for health services into competing prepaid health plans, giving providers built-in incentives to offer the standard package of benefits at the lowest premium price."

State Flexibility - Generally speaking, the federal government can be expected to establish the rules of the game, with administrative and regulatory control of the health care delivery system concentrated at the state level. Recognizing that many states have already taken steps toward health care reform, the Administration has signaled its willingness to allow states to experiment and design alternative approaches. To that end, Medicare and Medicaid waivers will be encouraged and monitored, presumably creating variations and adaptations to local circumstances, including single payer systems.

Health Alliances - In every state, at least one Health Alliance would operate as a collective purchasing agent for small to medium (proposals range up to 5000 employees) employers, and would be organized as not-for-profit membership organizations governed by employers and consumers. Alliances would be subsidized by federal, state, employer (an employer mandate is proposed by Clinton) and individual contributions. In addition to small employers, Alliances would act on behalf of self-insured and uninsured individuals. The state-administered Medicaid program would also be folded into Alliances. Large employers would be permitted to opt out, acting as their own Corporate Alliance but under similar rules of operation.

Health Plans Each year, Alliances in each state would organize rosters of integrated delivery systems, called Health Plans. Although all types of delivery systems would be allowed to participate (i.e., HMO, PPO, indemnity), it is expected that indemnity plans will quickly be phased out of operation because they will not be able to compete on premium price. Health plans would be required to report uniform price, quality and service

information under the national data reporting system mandated by the National Health Board.

Each year, Alliances would administer open-enrollment periods allowing Alliance members to select the health plan of their choice. A health plan would not be able to prevent an Alliance member from enrolling, even if the individual was a poor medical risk.

Medicare - Under the managed competition proposals, Medicare would continue as a stand-alone program although beneficiaries would be allowed to opt out of Medicare by joining a local Health Alliance. Several proposals would add additional coverage for home and community-based long term care and coverage of prescription drugs.

The Context for Quality Management Under Managed Competition

The Institute of Medicine (IOM) has identified three broad categories of potential concerns

"The IOM has identified three broad

categories of potential concerns with regard to health care quality: use of unnecessary or inappropriate care; underuse of needed and appropriate care; lapses in the technical and interpersonal aspects of care."

with regard to health care quality: use of unnecessary or inappropriate care ("too much care"); underuse of needed and appropriate care ("too little care"); lapses in the technical and interpersonal aspects of care ("inferior care"). To these, one might add another category, service or consumer responsiveness.

One can reasonably assume that health plans would, by themselves, strive to improve service quality, i.e., waiting times, amenities, convenience, etc., in order to increase their enrollment. Similarly, the restructuring of incentives in the direction of managed competition will improve quality to the extent that it virtually eliminate quality concerns that directly result from overtreatment. No longer will there be any need for external utilization review or any real concern that patients will be encouraged toward inappropriate or marginally needed surgeries.

Apart from the natural motivation of professionals towards excellence, technical quality should not be affected by managed competition incentives. Technical quality is thought to be protected by the opportunity for patients to bring malpractice suits in the event of serious problems. While the threat of malpractice may indeed provide consumers with a degree of assurance of medical competence, it has long been recognized that the threat of malpractice can itself distort clinical judgement. Even in fully capitated managed care environments, in which financial incentives strongly discourage overtreatment, physicians point to a degree of unnecessary diagnostic testing that is conducted purely as a defense to potential malpractice suits.

Any concerns about technical quality will be greatly ameliorated by the increased dissemination, application, and use of practice guidelines which clearly define the best practices for treating specific medical conditions. The Clinton health reform plan would encourage pilot programs in which documented adherence to a practice guideline could confer protection to a provider against malpractice litigation. Widespread development of