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Medicare funds health care services for more than 46 million beneficiaries. The Centers for Medicare & Medicaid Services (CMS)--the agency that administers Medicare--contracts with private organizations known as Quality Improvement Organizations (QIO) to, among other core functions, improve the quality of care for Medicare beneficiaries. CMS contracts with one QIO for each of the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. One of the QIOs' many responsibilities is to review quality of care concerns, raised by Medicare beneficiaries or others, to determine whether Medicare-financed medical services meet professionally recognized standards of health care. Quality of care reviews may address a range of issues, such as inappropriate treatment or hospital staff not administering medications on time; may involve a variety of health care services and settings; and may include a range of Medicare providers or practitioners. CMS enters into 3-year contracts with QIOs for a range of activities and reviews, including quality of care reviews. For each QIO contract, CMS establishes a budget reflecting the estimated costs of these activities and reviews. For the most recent contracts, which cover August 1, 2008, through July 31, 2011, CMS's budgets for the QIOs totaled about $1.1 billion, with approximately $208 million for all types of reviews, including QIOs' quality of care reviews, as well as some other activities. Questions have been raised about CMS's ability to set budgets appropriately for QIOs' quality of care reviews. A 2006 report by the Institute of Medicine (IOM) and a 2008 internal report commissioned by CMS identified weaknesses in CMS's ability to accurately compare costs across QIOs. Based on reports of wide variation in the costs that QIOs report for conducting these reviews, Congress raised questions about how CMS establishes QIOs' budgets. Ensuring that QIOs' budgets are based on accurate information is particularly important because CMS's contracts with the QIOs are funded from the Medicare Trust Funds, which are primarily used to support inpatient and outpatient health care services for Medicare beneficiaries. QIO contracts are funded from the Medicare Trust Funds in proportions from each that CMS determines to be fair and equitable, and the QIO program is not subject to the same kind of congressional oversight as other CMS programs, which are funded through the annual appropriations process. Policymakers are concerned about the long-term solvency of these Trust Funds and thus their ability to fund health care services for Medicare beneficiaries in the future. Congress raised questions about the information QIOs report to CMS for budgeting purposes and how CMS uses this information. To assist congressional consideration of this matter, this report describes and assesses the information CMS uses to establish the portion of QIOs' budgets for quality of care reviews.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare and Medicaid Services 1. To ensure that QIOs consistently record volume and cost information for their quality of care reviews and to help ensure that the budgets CMS establishes for these reviews are appropriate, the Administrator of CMS should develop clear instructions specifying how QIOs should record information about the volume and costs of their quality of care reviews in CRIS and FIVS.
Closed - Implemented
On October 21, 2011, P.L. 112-40 was enacted, which gave CMS (1) more flexibility in the number of quality improvement organization (QIO) contracts it awards and (2) the authority to establish QIO contracts with more specialized functions. In May 2014, CMS announced a restructuring of the QIO program and awarded contracts to two contractors, who will specialize in reviewing quality of care concerns raised by Medicare beneficiaries or others. Previously, this responsibility was one of many QIO functions that were handled by 53 separate QIO contractors?one for every state, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. GAO recommended that CMS take action to increase the consistency of volume and cost information recorded by QIOs for their quality of care reviews, so that CMS would have more consistent information for establishing QIO budgets. Since, as of August 1, 2014, all quality of care reviews will now be handled by two contractors, instead of 53 contractors, and the work of these contractors will be more specialized than that of the previous 53 contractors, the intent of GAO?s recommendation has been addressed.

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