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###### Department of Health and Human Services

###### Health Care Financing Administration

          - [HCFA-3056-NC]

# AGENCY:

Health Care Financing Administration (HCFA), HHS.

# ACTION:

Notice with Comment Period.

# SUMMARY:

                        This notice describes how HCFA intends to evaluate the Peer                               ( print page 20998)                            Review Organizations (PROs) under their 6th round contracts, for efficiency and effectiveness in accordance with the Social Security Act. In accordance with the provisions of the Government Performance and Results Act of 1993, Tasks 1 and 4 of the 6th round contracts with the Peer Review Organizations are performance based.                    

# DATES:

Comments will be considered if we receive them at the appropriate address, as provided below, no later than 5 p.m. on June 25, 2001.

# ADDRESSES:

Mail written comments (1 original and 3 copies) to the following address: Health Care Financing Administration, Department of Health and Human Services, Attention: HCFA-3056-NC, P.O. Box 8013, Baltimore, MD 21244.

If you prefer, you may deliver your written comments (1 original and 3 copies) to one of the following addresses: Room 443-G, Hubert Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201-0001, or Room C5-16-03, 7500 Security Boulevard, Baltimore, MD 21244-1850.

Because of staffing and resource limitations, we cannot accept comments by facsimile (FAX) transmission. In commenting, please refer to file code HCFA-3056-NC. Comments received timely will be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, in Room 443-G of the Department's offices at 200 Independence Avenue, SW., Washington, DC 20201-0001, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. (Telephone (202) 690-7890).

# FOR FURTHER INFORMATION CONTACT:

Susan Smith, (410) 786-6748.

# SUPPLEMENTARY INFORMATION:

## I. Background

The Peer Review Improvement Act of 1982 (Title I, Subtitle C of Public Law 97-248) amended Part B of Title XI of the Social Security Act (the Act) to establish the Peer Review Organization (PRO) program. The PRO program was established to redirect, simplify and enhance the cost-effectiveness and efficiency of the medical peer review process. Sections 1152, 1153(b) and 1153(c) of the Act define the types of organizations eligible to become PROs and establish certain limitations and priorities regarding PRO contracting. In 42 CFR 462.102 and 462.104, (Medicare and Medicaid Programs; Programs of All-Inclusive Care for the Elderly, 64 FR 66234 (November 24, 1999) (To be recodified at CFR Part 475) subpart C, of our regulations, we describe the types of organizations eligible to become PROs and the capabilities they must demonstrate.

The Secretary enters into contracts with PROs to perform three broad functions:
    - Improve quality of care for beneficiaries by ensuring that beneficiary care meets professionally recognized standards of health care.
    - Protect the integrity of the Medicare Trust Fund by ensuring that Medicare only pays for services and items that are reasonable and medically necessary and that are provided in the most economical setting.
    - Protect beneficiaries by expeditiously addressing individual cases such as beneficiary quality of care complaints, contested hospital issued notices of noncoverage (HINNs), alleged Emergency Medical Treatment and Labor Act (EMTALA) violations (patient dumping), and other statutory responsibilities.

Section 1154 of the Act requires that PROs review those services furnished by physicians; other health care practitioners; and institutional and non-institutional providers of health care services, including health maintenance organizations and competitive medical plans; as specified in their contracts with the Secretary.

                    Section 1153(h)(2) of the Act requires the Secretary to publish in the                     **Federal Register**                     the general criteria and standards that will be used to evaluate the efficient and effective performance of contract obligations by PROs and to provide the opportunity for public comment. The following criteria apply to PROs operating under the 6th Round contracts. The PRO 6th Round contracts were awarded for 3 years with starting dates staggered into three approximately equal groups starting August 1, 1999, November 1, 1999 and February 1, 2000.                

## II. Measuring PRO Performance

Under the 6th Round contract, PROs are responsible for completing Tasks in the following 5 areas:

Task 1—National Quality Improvement Projects.

Task 2—Local Quality Improvement Projects.

Task 3—Quality Improvement Projects in Conjunction with Medicare+Choice Plans.

Task 4—Payment Error Prevention.

Task 5—Other Mandatory Activities.

The PRO must meet the performance standards for each of these 5 Tasks to be eligible for a noncompetitive renewal for the 7th Round contract cycle, except that a PRO with no M+C organization in its state will not be evaluated on Task 3. However, meeting the minimum performance standards does not guarantee a noncompetitive renewal of its contract. (If, for example, an organization within a particular State meeting the definition of a PRO expresses an interest in competing for a contract currently held by a PRO from outside that State, pursuant to § 1153(i) we will compete the contract despite acceptable performance by the current PRO.) We will make a final decision on renewal/nonrenewal by the end of the 30th month of the 6th Round contract. We will issue a “Notice of Intent to Non-renew the PRO Contract” letter to all PROs that do not meet the minimum performance standards no later than the end of the 33rd month of the contract. The PRO will be considered to have met minimum performance standards if the PRO has demonstrated acceptable performance in each Task area as specified in section III, (Standards for Minimum Performance) of this notice.

If the initial quantitative and/or qualitative assessments suggest that the PRO has not met or exceeded the criteria for one or more of the five Tasks, its performance of that Task(s) will be referred to a HCFA-wide panel for a second, more in-depth assessment of its contract performance. The panel will be made up of representatives from each of the 4 PRO Regional Offices and the Central Office. The panel will have the right to create its own procedures, but must apply them consistently to all PROs it reviews. At a minimum, the panel will use the criteria listed below for all Tasks:
    - The degree of collaboration the PRO exhibited with other PROs, both by sharing the lessons and tools it developed and by adopting practices and tools developed by other PROs.
    - Whether the PRO was a new contractor for the 6th round contract.
    - Whether specific identifiable circumstances uniquely interfered with the PRO's improvement efforts.
    - Any other issues which the panel may deem relevant.

Additionally, for Tasks 1 and 4, the panel will consider the degree of difference between the measured improvement of the PRO and that of the top 75 percent of the PROs in the same contract renewal cycle.

## III. Standards for Minimum Performance General Criteria

                    In general, Task 1 and portions of Tasks 3 and 4 will be evaluated quantitatively. Success will be measured by assessing changes in statewide baselines over a period of time. Task 2 and the remaining portions of Tasks 3 and 4 will be qualitatively                           ( print page 20999)                        evaluated. Success will be measured both on the improvement achieved and on the contribution made to the health care quality improvement process. Task 5 will be evaluated based on evidence reported by the PRO that demonstrates that it has met the requirements contained in Parts 4, 5, 7, 9 and 12 of the PRO Manual for the mandatory activities. A principal evaluation element for all Tasks will be the timeliness and completeness of all required reports.                

### Task-Specific Standards

#### 1. Task 1 National Quality Improvement Projects

We provided the PRO a state-specific baseline combined topic average (CTA) near the start of the 6th round contract. We calculated the CTA by including all the quality indicators for the six national topics. We will provide the PRO a second state-specific CTA based on re-measurement data, in time for an end-of-contract evaluation.

The baseline and remeasurement CTAs are calculated in 2 steps. First, for national topics with multiple Quality Indicators (QIs), each QI has been given a specific weight for calculating performance on that topic. Using these weights, an average, termed a Topic Weighted Average, is created for each topic. Then a Combined Topic Average (CTA) is calculated. The CTA is then calculated by using the average of the 6 National Topic Weighted Averages. The success of the PRO's efforts under this task will be evaluated on the basis of the observed improvement in the second CTA compared to the baseline CTA.

The PRO's relative improvement on the CTA will be compared to the relative improvement demonstrated by the other PROs that share the same contract renewal cycle. For the purposes of this evaluation, relative improvement is defined as the amount of observed improvement compared to a possible 100% improvement.

If the PRO has demonstrated some measured improvement on the CTA and its relative improvement exceeds at least 25 percent of the other PROs in the same contract renewal cycle, it shall be judged to have performed successfully on Task 1.

If the PRO fails to demonstrate any measured improvement on the CTA or its relative improvement is less than at least 75 percent of the other PROs in the same contract renewal cycle, our evaluation panel will review its work under Task 1.

#### 2. Task 2 Local Quality Improvement Projects

We will evaluate the success of the PRO's work under Task 2 in two ways. In most instances, we will assess whether the PRO has achieved measurable improvement on the quality indicators, particularly when the projects have employed project tools and indicators that have previously been well-developed. In the event that a project fails to achieve measurable improvement, we will use as a second standard of success the amount of knowledge that has been gained through the experience of the project. We directly acknowledge that projects using new tools and indicators may not always achieve measurable improvement. We will consider these projects successful only if the PRO bases the project(s) on plausible hypotheses, uses scientifically valid project and evaluation methods, and clearly documents all essential elements of the project. The PRO must document these lessons learned in a professional manner comparable to the standards used by peer-reviewed journals.

#### 3. Task 3 Quality Improvement Projects in Conjunction With Medicare+Choice Plans

The PRO shall report on all projects in which it collaborates with one or more M+C plans under Task 3 using the SDPS reporting system. The PRO's success under Task 3 will be evaluated in one of two ways. For HCFA-directed projects that all plans implement using a standardized set of indicators, such as diabetes, we will evaluate the PRO in a manner comparable to the evaluation criteria in Task 1.

For all other projects in which the PRO collaborates with the plan(s) or provides technical assistance to the plan(s), we will evaluate the success of the PRO in a manner comparable to the evaluation criteria in Task 2.

We may also solicit feedback from the plans on their satisfaction with the PRO's technical assistance, and may also consider this information as part of its evaluation of the PRO's success under Task 3.

#### 4. Task 4 Payment Error Prevention

We provided the PRO a statewide baseline payment error rate and will provide a second statewide payment error rate in time for an end-of-contract performance evaluation. For the purposes of this contract, we will define the inpatient PPS payment error rate as the number of dollars found to be paid in error out of the total of all dollars paid for inpatient PPS services. The number of dollars paid in error is defined as the absolute (unsigned) difference between what was actually paid and what should have been paid as a result of review.

The PRO's relative improvement on the state-wide payment error rate will be compared to the relative improvement demonstrated by the other PROs that share the same contract renewal cycle. For the purposes of this evaluation, relative improvement is defined as the amount of observed improvement, compared to the amount of possible improvement, that is, zero payment errors.

The success of the PRO's efforts under Task 4 will be evaluated, in part, based on the observed improvement in the second statewide payment error rate compared to the baseline payment error rate.

The PRO's efforts under Task 4 will be determined to be successful if it—

1. Performs the required first year projects within the agreed time frames;

2. Establishes contact and coordination with local, State and Federal agencies, contractors, hospitals, medical staffs and their professional and trade associations, and pertinent law enforcement agencies (Evaluation of this requirement will be based upon reports from the agencies identified by the Project Officer.); and 

3. Demonstrates some measured improvement on the statewide payment error rate, and its relative improvement exceeds at least 25 percent of the other PROs in the same contract renewal cycle.

If the PRO does not meet requirements 1 and 2 or if it fails to demonstrate any measured improvement on the statewide payment error rate or its relative improvement is less than at least 75 percent of the other PROs in the same contract renewal cycle, our evaluation panel will review its work under Task 4.

#### 5. Task 5 Other Mandatory Activities

The Project Officer will continuously review the work of the PRO under Task 5, based primarily on periodic reports that the PRO shall submit through the SDPS reporting system. The PRO's work will be judged to have been successful for each of the categories of review and other mandated activities only if it conducts the work in accordance with the requirements set forth in Parts 4, 5, 7, 9 and 12 of the PRO Manual.

In accordance with the provisions of Executive Order 12866, this notice with comment period was not reviewed by the Office of Management and Budget.

Authority:Section 1153 of the Social Security Act (42 U.S.C. 1320c-2)
      ( print page 21000)    
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance Program; No. 93.773, Medicare-Hospital Insurance Program; and No. 93.774, Medicare—Supplementary Medical Insurance Program)

Dated: February 27, 2001.

Michael McMullan,

Acting Deputy Administrator, Health Care Financing Administration.

[FR Doc. 01-10397 Filed 4-25-01; 8:45 am]

BILLING CODE 4120-01-P