Title: Shift in priorities: Facing budget cuts, QIOs to trim hospital services Published: 02/25/2002 By: Ed Lovern Section: The Week in Healthcare Just three months after expanding the duties of the state-based agencies responsible for overseeing the quality of care delivered to Medicare beneficiaries, the Bush administration is slashing the agencies' budgets. With less money, quality-improvement organizations said they will curtail services to hospitals. Last month, Stephen Jencks, M.D., the Centers for Medicare and Medicaid Services' Quality Improvement Group director, told QIOs, formerly called peer-review organizations, that their budgets would be cut by about 20% during the next three-year funding cycle, which begins in August. A new three-year workplan for Medicare's peer-review program unveiled in November 2001 calls for giving QIOs new responsibilities to improve the quality of care delivered by nursing homes, home health agencies and physician offices. QIOs traditionally have focused on medical case review and quality improvement in hospitals. ``There is a heck of a lot more work and a heck of a lot less money,'' said David Schulke, executive vice president of the American Health Quality Association, which represents the nation's 38 QIOs. Some QIOs said they will no longer be able to provide staff to work with individual hospitals but instead will try to gain efficiencies by working with groups of hospitals through local and state associations. ``If a hospital needed to do quality-improvement activities and didn't have the staff, we went out and did it for them. We aren't paid to do that anymore,'' said Thomas Schaefer, president and chief executive officer of the Delmarva Foundation for Medical Care, which serves as the QIO for Maryland and the District of Columbia. The American Hospital Association said the cuts would be a concern. ``It is important that the (QIOs) are adequately funded,'' said Anne Berdahl, the association's senior associate director of health policy development. The AHA is pleased, however, that the QIOs will reduce resources spent on monitoring Medicare payment errors in the upcoming workplan. Funding for Medicare's peer-review program will fall to $1.04 billion during the upcoming three-year period from $1.05 billion over the past three years, according to the CMS. However, money going directly to QIOs will fall to $645 million from $740 million, Schulke said. The CMS plans to increase the use of other contractors to centralize activities such as medical-record data management and production of communication materials, which QIOs previously have done on their own. CMS Administrator Thomas Scully has questioned the role and value of QIOs during the past year, according to government and private sources who requested anonymity. A CMS draft document obtained by Modern Healthcare last November said the agency wanted to ``redirect the focus'' of the peer-review program to ``work more effectively'' in improving healthcare quality beyond specific provider groups, such as hospitals (Nov. 26, 2001, p. 6). Also, researchers who published an article critical of Medicare's quality in the January/February issue of Health Affairs questioned the effectiveness of the approach historically used by the QIOs to address quality. ``Investigating things like errors doesn't get to the more fundamental problems of what the (Institute of Medicine) identified last year,'' Megan McAndrew Cooper, editor of the Dartmouth Atlas of Health Care, told Modern Healthcare. The Dartmouth Atlas monitors regional variations in care delivered to Medicare beneficiaries. Some QIOs suspect that the drop in funding reflects concerns over management of the program. Schaefer believed that Scully and the Office of Management and Budget perceived a lot of inefficiency with the QIOs. The budget office sets the QIO budget. The QIOs agreed that operating in a tighter fiscal environment will require creativity. A CMS spokesman said the QIOs will have financial incentives built into the three-year budget plan to encourage high performance. ``Scully wants to really put the QIO community to the test ... to do more with less,'' said Richard Royer, interim CEO of the Missouri Patient Care Review Foundation. But doing more with less is a concern to provider groups beyond hospitals. The QIOs are charged with publishing on Web sites quality of care indicators for nursing homes and helping them improve during the next three years. Though nursing homes have made a commitment to work with the QIOs in improving quality, the drop in QIO funding coupled with shortcomings in reimbursement will make improvement difficult, said Charles Roadman, M.D., president and CEO of the American Health Care Association. QIOs may find themselves unable to make changes to the Medicare beneficiary complaint program, which HHS' inspector general's office sharply criticized last year. The QIOs' new workplan calls for instituting a mediation program to help practitioners and beneficiaries resolve complaints more effectively. But Schulke said he is now pushing for the mediation program, which he expects to be costly to start, to be dropped. ``With the financial crunch coming it makes sense for the QIOs to spend their time working on case review and not to spend their time on communications issues,'' he said. The smaller budget also may force QIOs to drop activities aimed at reducing medical errors. Schaefer said the Delmarva Foundation was considering pulling out of a partnership with the Maryland Health Care Commission to produce an annual report to assist with the reduction of hospital medical errors. The CMS' efforts to make spending in the peer-review program more efficient have included some questionable choices. Scully dropped $10 million of last year's Medicare quality budget on a series of television advertisements featuring actor Leslie Nielsen. ``We don't think that money was spent properly,'' Schulke said.