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Performance Budget Submission for Congressional Justification

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FY 2004: Research on Health Care Costs, Quality and Outcomes (HCQO) (continued)

Impact of Payment and Organization on Cost, Quality and Equity

Health care in the United States is provided by large systems, with complex funding streams. Before we can improve the quality and efficiency of health care, providers, purchasers and policymakers need more information about how these systems operate and how different financial and organizational arrangements affect health care. AHRQ's FY 2002 research grant portfolio addressed these issues by asking questions such as:

  • How do different payment mechanisms and financial incentives affect quality, access and the cost of care?
  • How can payment arrangements be designed to provide appropriate incentives to both patients and providers and enhance patient knowledge of and compliance with treatment regimens?
  • How does consumer and patient decisionmaking influence payment policies?
  • How do different patterns and levels of market competition affect the quality and cost of care?
  • What is the impact of employer and coalition efforts on the quality and cost-effectiveness of care in the marketplace, the impact of State efforts to monitor and improve access and quality, and the impact of public and private payment changes on the health care safety net?
  • What organizational structures and processes are most likely to sustain high-quality, efficient health care?

AHRQ developed a Program Announcement on the effects of payment and organizational structures and processes on the cost, quality, and equity of health care. Important areas to be addressed by this research include:

  • The effects of different payment mechanisms and financial incentives on health care quality, costs, and access.
  • The impact of purchaser and public-sector initiatives on quality, costs, and access to care and to health insurance.
  • The organizational structures most likely to sustain high-quality, accessible health care.
  • The impact of different patterns and levels of market competition on health care quality and costs.

Three examples of grants funded under this program announcement are:

  • Hospital Finances and the Quality of Hospital Care. This grant will look at the relationship between a hospital's financial condition, its operational and resource allocation decisions, and the quality of clinical care at that hospital. Since many hospitals and provider organizations in the United States are facing significant financial constraints, it is important to understand the impact of financial conditions on operational decisions.
  • Purchaser/Provider Evaluation: Hospital Quality Data. This project will compare and contrast the perceptions of health care purchasers and hospital administrators regarding the relative importance of hospital quality measures. It will also determine how health care purchasers use the comparative reports of hospital performance among their employees and for negotiating health coverage. Thus, the study will address key public policy questions such as: the impact and utility of public disclosure of hospital patient safety measures on purchasers/employers and on hospital administrators, the possible pathways for improving hospital performance, and how to increase the impact of future hospital comparative reports.
  • Physician Networks and Children with Chronic Conditions. The aim of this grant is to study the effect of offering out-of-network benefits for children with two chronic conditions: asthma and diabetes. The grant will determine the associations between the out-of-network benefits and cost-sharing of health plans and children's likelihood of seeing and out-of-network physician. The grant will also determine whether quality of care and expenditures are significantly different among children seeing in-network versus out-of-network physicians.

AHRQ Research to Improve Cost and Improve the Quality of Health Care

For at least the past 10 years, the Agency for Healthcare Research and Quality (AHRQ) has helped the health care system reduce cost and improve quality by answering critical questions regarding the delivery of health care services. Some examples of these questions and the AHRQ findings follow.

Medicaid Question. Is capping the number of prescriptions for Medicaid beneficiaries a useful cost-containment strategy?

Answer. No

Background. The New Hampshire legislature limited Medicaid reimbursement to three prescriptions per month for an 11-month period. AHRQ research evaluated the impact of this Medicaid cost-containment initiative.

AHRQ's finding. Investigators estimated that overall statewide increases in utilization costs were 17 times greater than the savings in drug expenditures (e.g., hospitalizations increased by 35 percent; nursing home admissions also increased in association with the prescription cap).

Result. New Hampshire abolished the prescription cap, and another nine States have also changed their policies based on this research.

AIDS/HIV Question. Can we reduce the cost and improve the quality of care for AIDS patients?

Answer. Yes

Background. Pneumocystis carinii pneumonia is an opportunistic infection most often occurring in patients with AIDS. The research examined whether the administration of inexpensive prophylactic antibiotics prevented the development of this infection, and whether the treatment was cost effective.

AHRQ finding. AHRQ-funded investigators at Johns Hopkins University School of Medicine found that patients admitted to hospitals with pneumocystis pneumonia who did not receive prophylactic antibiotics accounted for 85 percent of the hospital days, 100 percent of the intensive care unit days, and 89 percent of the inpatient hospital charges.

Result. Extrapolating the findings to all of Maryland, they estimated failure to receive prophylaxis resulted in 62 patient deaths and a cost of $4.7 million to the State.

Carve-Out Programs Question. Are carve-out programs for special health conditions, such as mental health/substance abuse (MHSA) problems, cost-effective?

Answer. Yes, they can be.

Background. Health plans and insurers increasingly cover services, such as MHSA, through a separate contract (known as a "carve-out" program) with a specialty vendor. The vendor manages these services and is at partial or full risk for providing the services. The Massachusetts Group Insurance Commission adopted a carve-out program to cover MHSA services. The contract exposed the vendor to a limited amount of financial risk to avoid providing strong incentives to skimp on service provision but still gave the vendor the incentive to perform well and save the GIC a substantial amount of money.

AHRQ Finding. Findings from a study supported in part by AHRQ indicate that this carve-out resulted in a 54% decrease in total episode costs for individuals with unipolar depression and a 33% decrease for those with substance dependence. But the researcher noted the importance of two benefit design features—the addition of partial hospitalization services for MHSA conditions, which previously had not been covered, and the expansion of the outpatient MHSA benefit, which reduced copayments and removed the annual limits on use of outpatient services—that helped maintain quality care.

Health Care Markets and Managed Care

From a growing body of social science evidence we are learning that market dynamics and delivery system organization are critical determinants of patients' access, quality of care, outcomes and health care costs. Over the last several years, AHRQ's research portfolio has emphasized two areas of inquiry, each focusing on particular patient populations:

  1. What managed care features improve the quality of care given to patients with chronic conditions?
  2. What public insurance program policies and practices improve access to and the quality of health care for low-income children?

These areas of inquiry were selected in direct response to the need for information about key market and delivery system determinants. Decisionmakers need to know how deliberate or unintended changes in system determinants affect care provided to low-income children and people with chronic conditions. In addition to these two priority areas, AHRQ has supported a broader portfolio related to marketplace complexities and delivery system organization.

To gather evidence on how best to provide care to the millions of patients with chronic conditions, AHRQ teamed with the American Association of Health Plans Foundation and AHRQ's sister agency, the Health Resources and Services Administration (HRSA) in 1998. Findings from this initiative are now emerging, including:

  • The choice of compensation method used by independent practice associations (IPAs) and health maintenance organizations (HMOs) to pay physicians has an impact on quality of care. In a study of over 50 group practices, IPA/HMO payment formulas that capitated ophthalmology group practices and provided bonuses to individual physicians were associated with lower satisfaction ratings among patients with diabetic retinopathy and open-angle glaucoma—two leading causes of blindness—than fee-for-service payment formulas.
  • IPA networks consistently had worse process and outcome quality indicators for patients with chronic heart and lung diseases than more tightly managed medical groups.

Integrated Delivery System Research Network (IDSRN)

The Integrated Delivery System Research Network (IDSRN) is a creative agency-private-sector partnership that links AHRQ with the Nation's top researchers and some of the largest health care systems in the country. The network is being tapped for research by a number of AHRQ's sister agencies, including CMS, the Office of Minority Health/Office of the Secretary of Health and Human Services, and the Office of Public Health Preparedness.

The IDSRN includes nine practice-based research consortia and their collaborators, who provide care to more than 55 million Americans across the United States. Many of those who receive care in participating facilities represent hard to reach populations, such as those covered by Medicare or Medicaid, those who are uninsured, racial and ethnic minorities, and rural and urban residents.

IDSRN Statistics

As a group, the IDSRN provides health services to over 55 million Americans including:

  • Medicare patients (3 million).
  • Medicaid patients (2 million).
  • Uninsured patients (0.6 million).
  • Ethnic and racial minorities (5.8 million).
  • Rural patients (6.3 million).
  • Children (14.4 million).

With access to linked private-sector data about care in ambulatory and inpatient settings, the IDSRN is uniquely situated to develop, disseminate, and implement scientific evidence about what works in a variety of health care settings. The partners and collaborators collect and maintain administrative, claims, encounter, and other health care data on large populations that are clinically, demographically, and geographically diverse. The IDSRN represents a real-world laboratory for organization and system level demonstrations, and serves as a dissemination medium for putting evidence-based findings into practice.

Network Partners

The IDSRN includes the following nine practice-based research consortia and their collaborators:

  • HMO Research Network.
  • Abt Associates, Incorporated.
  • Center for Health Care Policy and Evaluation (UnitedHealth Group).
  • Research Triangle Institute-UNC Network.
  • Emory Center on Health Outcomes and Quality.
  • Denver Health.
  • University of Minnesota Consortium.
  • Marshfield Medical Research and Education Foundation.
  • Weill Medical College of Cornell University.

Research Accomplishments. Accomplishments in the past year include the development of a simulation model of mass antibiotic prophylaxis for bioterrorism response developed by Weill Medical College of Cornell University in conjunction with New York City health and emergency preparedness agencies. The model was used in May 2002 in a large-scale live exercise that evaluated the city's ability to respond to a large bioterrorist attack. Called Operation TriPOD, for "Trial Point of Dispensing," it involved tracking simulated patients using bar-code technology that allowed the organizers to measure both the time required to process each patient and the accuracy with which the correct antibiotic was given to the right "patient." National, regional and municipal officials are using the results of this exercise to develop a template for bioterrorism response that can be adapted by other cities in the United States and around the world.

In another IDSRN project, Marshfield Health Clinic assessed the impact of its Coumadin Clinic on health care utilization, including urgent care, emergency department and inpatient events. While the estimates are still preliminary, testimony by Marshfield Clinic before the Way and Means Committee's Subcommittee on Health strongly suggests that disease state management initiatives like Marshfield's Coumadin Clinic offer potential for significant cost reductions by averting hospital inpatient and emergency department visits. Medicare, for example, would save an estimated $235,943 per 100 person years.

Primary Care Practice-based Research Networks (PBRNs)

In FY 2002, AHRQ funded 33 PBRNs for $2.9 million under a new initiative that doubles the number of funded networks and greatly increases the number of providers (about 10,000) and patients (about 10 million) who will be affected by AHRQ's efforts.

PBRNs are groups of practices devoted principally to patient care that work together with academic researchers and/or professional organizations to study and improve the delivery and quality of primary care. Through cooperative agreements, AHRQ supported network efforts to define the practice base of each PBRN and to improve network methods of managing data and translating research into practice.

Several of the networks are made up entirely of rural practices. Others, especially those made up of mostly inner-city practices or community health centers, serve large minority and low-income patient populations. In addition to several regional networks, the group included two national networks managed by major primary care professional organizations: the American Academy of Family Physicians and the American Academy of Pediatrics.

In particular, AHRQ wanted to improve in-office systems designed to assure that the primary care delivered in practice is consistent with current medial evidence. In addition to collecting survey data about their provider and patient populations, the networks have tested the use by practitioners of various electronic information technologies, including handheld devices, notebook computers, and Web-based applications. Two networks conducted qualitative studies on patient and provider concerns about the privacy and confidentiality of patient-related data collected in primary care practices.

AHRQ has partnered with the Robert Wood Johnson Foundation in the development of a new PBRN-targeted initiative that will focus on identifying successful methods of promoting healthy behaviors (smoking cessation, avoidance of risky drinking, increased activity, and healthy diets) in primary care practices. The agency also partnered in FY 2002 with the National Cancer Institute in issuing a program announcement supporting research by PBRNs aimed at improving rates of screening for colorectal cancer in primary care practice. We expect the initial awards to PBRNs from both the AHRQ/Robert Wood Johnson Foundation and the AHRQ/National Cancer Institute initiatives will be made in early 2003.

HIV Research Network

The HIV Research Network (HIVRN) is a network of HIV providers who pool data and collaborate on research to provide policymakers and investigators with timely information about access to and the cost, quality, and safety of HIV care; and to share information and best practices among those participating in the Network.

Scientific advances in recommended treatment regimens for HIV disease have the potential to profoundly improve care provided to people with HIV. Medicaid, Medicare, the Department of Veterans Affairs, and the Ryan White CARE Act programs spent nearly $9 billion in FY 2002 to treat people with HIV disease. To address the need for real time data on the treatment of persons with HIV disease. New drugs are being developed so rapidly that data collected as recently as 3 years ago do not reflect the current situation and cannot be used reliably for tracking the resources expended or the quality of care provided to people with HIV; reliable information on these topics is critical in informing policy and clinical practice. Policymakers, service providers, and patients need to know how often people with HIV infection receive specific services and what factors are related to receiving more or fewer services. The goal of the HIVRN is to disseminate this information widely, using the most recent data that are available.

To address the need for data on the treatment of people with HIV disease, AHRQ joined with the Department's Assistant Secretary for Policy and Evaluation (ASPE), the Substance Abuse and Mental Health Services Administration (SAMHSA), and HRSA in 1999 to establish a pilot HIV data center at the Johns Hopkins School of Medicine. Researchers at the data center tested on a small scale the feasibility of transmitting data from HIV caregivers. These included data on patient characteristics, payer data, clinical data, and data on the number of visits and admissions. In the initial phase of the this project, the researchers succeeded in enrolling a set of HIV care providers in different regions of the United States and in establishing procedures for transferring data on HIV-related resource use and relevant clinical parameters to the HIVRN. Data on over 10,000 HIV-infected patients for calendar year 1999 were transferred to the HIVRN.

In 2000, the pilot was deemed successful, NIH's Office of AIDS Research joined the collaboration, and efforts were expanded to collect data from 18 providers who treated at least 14,000 people with HIV disease. This unique dataset permits analyses looking at patient characteristics, payer variation, drug therapy regimens, number of visits and admissions.

Research Accomplishments. Accomplishments in the past year include findings that provide an evidence base about care nationwide for persons with HIV, such as:

  • Monthly inpatient care averaged $423 per patient, and monthly outpatient care averaged $168 per patient.
  • The cost of highly active antiretroviral therapy (HAART) was partially offset by cost reductions associated with lower hospital inpatient utilization; HAART was associated with monthly inpatient costs of $389 compared with $470 among non-HAART users.
  • White HIV-infected patients (55 percent) are more likely than blacks (48 percent) or Hispanics (44 percent) to receive new and expensive drug therapies.
  • Men (70 percent) are more likely than women (56 percent) to receive new and expensive drug therapies.
  • Privately insured patients (61 percent) are more likely than Medicaid (43 percent) and uninsured (38 percent) patients to receive new and expensive drug therapies.

Starting in 2002, health officials and others can now access HIV health care use data online through AHRQ's HIVnet, which draws from HIVRN data. This interactive service, found at, provides statistical answers in real time to questions about HIV patients' use of outpatient and inpatient care by age, sex, race/ethnicity, HIV risk group, insurance status and type, protease inhibitor use, and other variables. HIVnet now has data for 1999 and 2000, and half of the data for 2001 have been added.

The HIVRN provides an ongoing means to collect timely information on resource use associated with HIV disease. It is a cost-effective way to obtain reasonably complete medical and financial information on a large number of HIV-infected patients, thus facilitating research on HIV care among different types of patients.

Healthcare Cost and Utilization Project (HCUP)

HCUP is a Federal-State-industry partnership to build a standardized, multi-State health data system. This long-standing collaborative endeavor has built and continues to develop and expand a family of databases and powerful, user-friendly software to enhance the use of administrative data.

The HCUP family of databases currently includes:

  • State Inpatient Databases (SID).
  • Nationwide Inpatient Sample (NIS).
  • State Ambulatory Surgery Databases (SASD).
  • State Emergency Department Databases (SEDD).
  • Kids' Inpatient Database (KID).

HCUP includes data on hospital discharges from participating States, as well as a nationwide sample of discharges from community hospitals. AHRQ has expanded HCUP beyond inpatient hospital settings to include hospital-based ambulatory surgical facilities, and a pilot effort is underway to capture information from emergency department databases.

Data from HCUP have been used to produce reports that answer questions on reasons Americans are hospitalized, how long they stay in the hospital, the procedures they undergo, how specific conditions are treated in hospitals, charges incurred for hospital stays, and resulting outcomes.

AHRQ has made available the Kids' Inpatient Database (KID), the Nation's first comprehensive database on hospital use, charges, and outcomes focused exclusively on children and adolescents. The KID contains 1.9 million pediatric discharges representing 6.7 million pediatric discharges nationwide and data on various hospital characteristics such as region, location (urban/rural), bed size, ownership, teaching status, and children's hospital status.

Nationwide Inpatient Sample (NIS) is the largest all-payer inpatient database in the United States. It provides information on about 7 million inpatient discharges from about 1,000 hospitals, including data from 1988-2000. According to NIS data:

  • About 135,000 hospital stays a year for treatment of depression, and alcohol- and substance-related mental disorders are not covered by either private insurance or public insurance programs such as Medicare and Medicaid
  • Childbirth is the leading type of hospital care not covered by private or public insurance. About 5 percent of all hospitalizations for childbirth-roughly 191,000 hospital stays a year-are uninsured.
  • Two chronic diseases, which if appropriately treated in primary care practices do not ordinarily result in hospitalization, also are among the top 10 types of uninsured inpatient care-asthma and diabetes. Together they account for 65,000 hospital admissions a year.

Accomplishments. FY 2002 accomplishments include increasing the number of States participating in HCUP; 29 States are HCUP partners. Four new State partners joined HCUP in FY 2002: Kentucky, South Carolina, Texas, and West Virginia. They were selected based on the diversity—in terms of geographic representation and population ethnicity—they bring to the project, along with data quality performance and their ability to facilitate timely processing of data.

The number of States now participating in the State Ambulatory Surgery Databases (SASD), a second group of HCUP databases, increased from 9 in FY 2000 and 13 in FY 2001 to 15 in FY 2002.

During the past year AHRQ implemented a multifaceted effort to make HCUP data more accessible to researchers and other interested users. HCUP tools include:

  • HCUPnet. HCUPnet ( is a free, interactive, menu-driven online service that allows easy access to national statistics and trends and selected State statistics about hospital stays. HCUPnet answers questions about conditions treated and procedures performed in hospitals for the population as a whole, as well as for subsets of the population such as children and the elderly. In addition, six new States for a total of 16 States have agreed to include their data in HCUPnet. At 5,000 plus visits a month, HCUPnet is consistently within the Top 10 resources accessed from the AHRQ Web site.

    Select for Quick Hospital Statistics.

  • HCUP Central Distributor. Researchers' access to HCUP data has been facilitated by the creation of a central distribution center for the State-level databases. Now researchers can go one-stop shopping instead of contacting each State on an individual basis. We have increased the number of States providing data to the Central Distributor to 17.
  • HCUP fact books. Data from HCUP have been used to produce reports that answer questions on reasons Americans are hospitalized, how long they stay in the hospital, the procedures they undergo, how specific conditions are treated in hospitals, and the resulting outcomes. In FY 2002, a fact book on care of women in the U.S. hospitals was produced. The fact book answers questions about hospital care for women such as: What are the most common reasons for hospitalizations? In what ways do hospitalized women differ from men? Who is billed for various types of hospital stays?

Care of Women in U.S. Hospitals, 2000

  • For women, 6 out of the top 10 conditions for non-obstetric hospital stays are related to the circulatory system. These conditions make up 18% of all hospital stays for women and 23% of all stays for men.
  • For two cardiac conditions—heart attack and hardening of the arteries of the heart—about 1 in 3 hospitalizations for women include no procedure. But for men, only 1 in 4 receives no procedure for heart attack and only 1 in 5 receives no procedure for hardening of the arteries of the heart. Men are more likely than women to receive cardiac catherization, percutaneous transluminal coronary angioplasty (PTCA), and coronary artery bypass graft (CABG).

Medical Expenditure Panel Survey (MEPS)

MEPS is an annual nationally representative survey of health care use, expenditures, sources of payment, and insurance coverage for the U.S. civilian non-institutionalized population. The first MEPS survey, in 1996, also included a national survey of nursing homes and their residents. Through MEPS, AHRQ collects and examines comprehensive data that estimate the level and distribution of health care use and expenditures, monitor the dynamics of the health care delivery and insurance systems, and assess health care policy implications. Select for more details on MEPS.

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