Quality gaps in the care delivered by the U.S health care system result in preventable mortality and morbidity and contribute costs to the system. Multiple indicators show that quality of care could be improved; these indicators include high rates of healthcare-associated infections (HAIs) and a lack of adherence to evidence-based guidelines, among others. For example, approximately 100,000 people die each year from HAIs, at an estimated cost ranging from $28.4 to $45.0 billion dollars. In addition, a 2007 study found that only 46.5% of children receive care recommended by evidence-based guidelines, and a similar study conducted in 2003 concluded that adults receive only 55% of indicated care. The 2010 National Healthcare Quality Report , released annually by the Agency for Healthcare Research and Quality (AHRQ) of the U.S. Department of Health and Human Services (HHS), found that health care quality is suboptimal, especially for low-income individuals and certain minority groups. Quality of care also varies geographically; for example, a recent study found that high-quality, low-cost hospitals were less likely to be small or located in the South. Although no single definition of high-quality health care has been agreed upon, the Institute of Medicine (IOM) provided a framework for considering the quality of care, based on six domains: (1) effective, (2) efficient, (3) equitable, (4) patient-centered, (5) safe, and (6) timely. Numerous efforts have been undertaken in recent years to improve the quality of health care; despite this, the consensus remains that progress in quality improvement across the health care system has been variable and, in some cases, slower than anticipated. Many efforts that aim to improve the quality of care focus on increasing health care providers' accountability for the care they provide. This includes, in some cases, a focus on improving the value of health care; that is, the ratio of desired or positive outcomes to long-term costs. In all cases, efforts include accountability to an external actor, for example the public, regulators, or payers. Policymakers have used three basic policy approaches in an effort to enhance provider accountability, among other things. These include (1) payment incentives, (2) public reporting of performance data, and (3) quality assurance through regulation and accreditation. These approaches are used for several purposes, including to determine appropriate reimbursement, to drive market share, and to demonstrate quality and cost-efficient performance. Payment incentives and public reporting encourage providers to change their behavior to improve quality and/or value. Regulatory oversight and accreditation of providers, on the other hand, first serve an oversight function and generally rely on mandating certain behavior, as opposed to incentivizing it (in addition to having an increasing focus on improving quality). This report focuses on payment incentives and public reporting, specifically. Many payment incentive and public reporting policies rely on quality measurement. For example, payment incentives based on provider performance rely on a comprehensive set of quality measures that can directly or indirectly measure clearly identified outcomes, among other things. Quality measures that highlight meaningful differences in provider performance, and that address outcomes of interest to patients, facilitate the effectiveness of publicly reporting quality performance data. Policymakers have taken steps to address these measurement needs, for example through support for health services research or the development of quality measures in areas in which they do not currently exist. In some cases, these measurement needs were not adequately addressed prior to the implementation of policies; this contributed to initial provider questions about the effectiveness of such policies. Improving the quality of health care involves all components of the health care system; therefore, policies supporting (1) an adequate and appropriately trained health care workforce; (2) interoperable health information technology; and (3) a robust evidence base, informed by health services research, are all relevant. In addition, improving the quality of care may be closely tied to other broad policy goals, such as (1) reducing health care disparities, (2) improving the affordability of health care, and (3) improving the health status of communities. However, a full discussion of these interactions is beyond the scope of this report. Ongoing congressional interest in enhancing the quality of health care is likely given the federal role in the delivery and financing of health care through, for example, Medicare, Medicaid, the Children's Health Insurance Program (CHIP), the Veterans Health Administration (VHA), and the Indian Health Service (IHS). This interest is reflected to date by significant legislative activity in this area, and most recently, by the passage of the Patient Protection and Affordable Care Act of 2010 (ACA, P.L. 111-148 , as amended by the Health Care and Education Reconciliation Act of 2010, P.L. 111-152 ). The ACA contains numerous provisions, directed at both the financing and delivery of care, that use the three policy approaches outlined above to target improvement in the quality of care. This report begins with a discussion of the role of quality measurement in policies to enhance provider accountability and presents selected policies addressing quality measurement in this context. It then provides an overview of payment incentives and public reporting of performance data to improve quality, along with selected policy examples for each approach. Policies based on payment incentives and public reporting generally require the assessment of some combination of (or both) absolute and relative provider performance. These determinations rely on quality measures to determine current performance, as well as to monitor progress in performance. They also rely on information about the effectiveness of various interventions, care delivery models, treatment modalities, and therapeutics, and their links to health outcomes. Identifying desired outcomes, and evaluating the link between interventions and identified outcomes, relies on health services research. For example, comparative effectiveness research (CER) may contribute to identifying desired outcomes by providing evidence about the effectiveness, harms, and benefits of treatment options for specific conditions. Where quality measures are not available, or clearly identified outcomes are lacking, policies to enhance accountability through payment incentives or public reporting may be of limited value. In addition, simply making measures available or identifying outcomes are, on their own, unlikely to serve as sufficient impetus for change, or for comprehensive and well-coordinated change; instead, it is the application of policy approaches, using this information, that most often brings about desired changes. Several considerations arise when considering the use of quality measures in policies aiming to enhance provider accountability through payment incentives or public reporting. These include, among others (1) the availability of a comprehensive set of quality measures, (2) the strength of the evidence base supporting the measures, (3) the National Quality Forum (NQF)-endorsement status of the measures, and (4) the relative mix of different measure types. The effectiveness of policies that are based on quality measurement is at least partially determined by the comprehensiveness of available quality measures and, specifically, measures that span diseases and conditions, care settings, and provider types. NQF, a private, nonprofit membership organization concerned with improving health care quality performance measurement and reporting, notes that, "[t]here is a strong need for the development of quality and cost measures that will ensure broad transparency on the value of care and support performance-based payment and quality improvement around the most prevalent conditions and health risks that account for the greatest share of health care spending." Identifying measure gaps is a part of achieving that aim. In March of 2010, at the direction of the HHS, NQF convened the Measure Prioritization Advisory Committee to identify measure gap domains and sub-domains, among other things. This effort was part of a larger effort to develop a measure development and endorsement agenda. In a recent GAO report, HHS officials noted that critical measure gaps exist with respect to their health care quality programs and initiatives; in addition, the ACA established new, and expanded the scope of existing, HHS quality programs and initiatives, increasing the need to fill existing measure gaps. In policies that have an accountability component, measures that are based on a robust body of evidence may be preferred. For example, experts suggest that clinical process quality measures should be based on "a strong foundation of research showing that the process addressed by the measure, when performed correctly, leads to improved clinical outcomes." The evidence should consist of more than a single study and be a majority randomized trials, thus reflecting a higher standard than that used for the development of practice guidelines (practice guidelines may serve as the basis for the development of quality measures). Research has suggested that high levels of performance on clinical process quality measures does not always correlate with a commensurate improvement in clinical outcomes. Quality measures may be endorsed by NQF; that is, candidate measures are evaluated against a specified set of criteria, and if these are met, the measure receives NQF's endorsement. For use in policies aiming to enhance accountability, NQF-endorsed measures are generally preferred. However, the endorsement process is lengthy and deliberative, and this can affect the availability of endorsed measures for end users (e.g., HHS). If statute does not specifically require the use of NQF-endorsed measures, policymakers may face decisions about balancing the need to move programs forward with waiting for endorsed measures to become available. There are a number of different types of quality measures available, and policies may include a mix of these types, depending on the purpose or goal of the specific policy. Types of quality measures include, among others (1) structure, (2) process, (3) outcome, and (4) patient experience of care (see Textbox 1 ). There is an increasing focus on shifting away from clinical process quality measures to outcomes measures; for example, the Centers for Medicare & Medicaid Services (CMS) notes that it is seeking to "move as quickly as possible to using primarily outcome and patient experience measures" in its public reporting and value-based payment systems. However, clinical process quality measures are still the most commonly used type of measure in most measurement activities (for both accountability and quality improvement purposes). The ability to directly compare the performance of providers is an essential component of many payment incentive and public reporting policies that aim to enhance provider accountability; at a basic level, the creation of incentives to improve quality relies on being able to make distinctions between providers. Quality measurement allows for the generation of provider-specific performance information, which, in turn, allows for these distinctions to be made based on relative comparisons between providers (as well as monitoring of improvement in individual provider performance). Given the central importance of quality measurement in payment incentive and public reporting policies, policymakers have taken steps to support the development of measures, and specifically in gap areas (see Textbox 2 ). For example, comparative performance information allows, among other things, payers and purchasers to selectively reward higher-quality performance (payment incentive); payers and purchasers to evaluate relative outcomes associated with new delivery models to guide payment incentives (payment incentive); providers to improve their own performance (public reporting); and patients to choose providers or care that best meets their needs (public reporting). Despite the role of quality measurement in payment incentive and public reporting policies that aim to enhance provider accountability, and an increasing focus on these policies overall, questions remain about the link between quality measurement and actual quality of care. As discussed before, the link between clinical process quality measures and outcomes is not always clear. Experts suggest that more systematic surveillance efforts are needed to better understand trends, links between process and outcome, and facility-by-facility differences in performance. In addition, the meaning of quality to consumers may differ from the definition used by policymakers or regulators. For example, consumers value access, the availability of their providers, cost, and provider choice, among other things; these factors are variably captured in policy efforts that use quality measurement. Consumers may also value health outcomes differently, complicating efforts to define and measure quality. Emphasis has been placed on changing the way health care is paid for, away from a system where payment is simply a transaction based on the unit of care provided, to one where higher-quality, lower-cost care is preferentially rewarded. This policy approach, representing a shift from volume-based or fee-for-service (FFS) payment to value-based payment, is often referred to as value-based purchasing or value-driven health care. Value-based purchasing may be defined as modifying reimbursement to encourage health care providers, through joint clinical and financial accountability, to deliver higher quality care at lower total cost. Such efforts may modify payment through payment incentives. These incentives may include adjustments to payment (generally in the form of reductions) as well as performance-based payments; in addition, direct payment, generally in the form of a monthly fee, may be made for a desired activity (e.g., care coordination) that is not itself the actual provision of care. Payment incentives may be based on the reporting of, or performance on, a set of quality measures. For this reason, payment incentives may rely integrally on quality measurement. In addition, payment modification may create incentives that are directive; that is, incentives to modify the delivery of specific clinical care processes (e.g., by linking payment to specific clinical process quality measures). They also may create incentives that are non-directive; that is, incentives to modify overall delivery of care that link payment to performance on an outcome (e.g., rates of hospital readmissions or healthcare-associated infections [HAIs]), but that rely on individual providers to implement care delivery changes of their choice to improve performance on these outcomes. This section begins by discussing the role of the Medicare program in this area and then summarizes the modification of payment through incentives. This discussion focuses on those payment incentives that have improving quality or value as their primary goal, rather than those aimed solely at altering resource use. In addition, it addresses mechanisms for the modification of payment, as opposed to different models of payment (e.g., capitation, shared savings); many of the payment incentives discussed here could theoretically be applied in the context of different payment models. At the federal level, the Medicare program provides policymakers the opportunity to implement value-based purchasing approaches and other payment modifications. Other coverage and financing arrangements generally are not under the sole or direct control of the federal government, and therefore do not afford federal policymakers a similar opportunity. For example, government health care delivery systems (e.g., the Veterans Health Administration [VHA] or the Indian Health Service [IHS]) in which the government is a direct provider of care (i.e., both paying for and delivering care) do not offer an opportunity to implement traditional value-based purchasing approaches that incentivize individual provider behavior change through accountability because services are not paid for individually and providers are salaried. In addition, although the federal government does regulate the private health insurance market to an extent, this is a role that rests primarily with the states. Some payment incentive policies have been established at the federal level for the Medicaid program (a shared federal-state program), although the states generally have responsibility for implementing their programs and are given wide discretion in doing so. Although the opportunity to directly implement policies modifying payment, including value-based purchasing policies, is generally limited to the Medicare program at the federal level, these efforts may have a broader impact given Medicare's frequent role as a leader for private insurers. Researchers note that "(o)ver the last 40 years, Medicare has exerted more influence on the organization, finance and delivery of USA health care than any other individual payer." In recent years, CMS has implemented a range of initiatives, including value-based purchasing efforts, largely at the direction of Congress, in an effort to "transform Medicare from a passive payer of claims to an active purchaser of quality health care for its beneficiaries." The effect of payment incentives on cost and quality is unclear, however. For example, a review by the Cochrane Collaboration concluded that there is little evidence of the success of financial incentives in improving the quality of primary health care, citing the need for additional study in this area. Given this uncertainty with respect to the impact on health care cost and quality, payment incentives implemented in the Medicare program may provide valuable data that private insurers and others may use when considering implementing these approaches. Recently, the Congressional Budget Office (CBO) noted, in a review of Medicare demonstration projects meant to reduce cost and improve quality for the program, that "substantial changes to payment and delivery systems will probably be necessary for programs involving … value-based payment to significantly reduce spending and either maintain or improve the quality of care provided to patients." As mentioned above, payment incentives may be achieved through adjustments to payment or through performance-based payments. Additionally, a fee may be offered as direct payment, generally for a desired non-clinical service. Payment adjustments may be made using a predetermined adjustment factor or through non-payment for costs associated with specific care. Payment may be decreased by an adjustment factor (e.g., a specified percentage reduction) applied to specific charges or to annual updates in payment. For example, a payment adjustment may be applied for failing to complete a discrete activity (e.g., reporting data for a set of quality measures). Such an adjustment factor can be applied for failure to meet a specific performance threshold (e.g., being in the top 25% of hospitals in terms of number of hospital acquired conditions). Payment may also be adjusted such that it is withheld for the cost of care associated with a specific undesirable outcome in an individual patient. Payment incentives may also be based on discrete performance, or improvement in performance over time. This type of performance-based payment may be given to individual providers, based on the individual provider's performance, and on this performance in the context of other participating providers' performance. In the Medicare program, a performance-based payment is often made in a budget-neutral manner; that is, all affected entities receive a specified decrease in payment. This generates money that may then be redistributed to the affected entities differentially as payment incentives based on performance. A third type of payment incentive is the offering of a fee to providers in exchange for providing services that generally fall outside of the scope of direct care provision; the basis for this approach is the contention that in the absence of direct payment, these services would not be provided to patients. Examples include payment for carrying out administrative and other duties associated with care coordination or chronic disease management (e.g., patient education, tracking receipt of recommended clinical preventive services). In the context of fee-for-service Medicare, the payment may be a per-beneficiary, per-month fee. In addition, the fee may be at-risk; that is, all or some portion of the fee may be withheld if cost targets are not met. This strategy has been tested through multiple Medicare demonstrations with mixed results. Payment incentives may also be blended; that is, policies may include some combination of the approaches outlined above. For example, while primary care physicians could receive a care coordination fee in exchange for carrying out the administrative duties associated with being a designated medical home for patients, payment for the actual provision of health care services could additionally be modified based in some part on performance on quality measures. This would be an example of using a fee to pay directly for a desired service that is not currently being offered (administrative duties associated with being a medical home) and a performance-based payment incentive to reward performance on quality of care measures. The Patient Centered Primary Care Collaborative (PCPCC) proposed such a blended model, which has three components: (1) a fee-for-service payment based on office visits, (2) a performance-based component based on achievement of greater quality and efficiency, and (3) a care coordination payment to reimburse for the coordination work that takes place outside of the office visit and also to support health information technology as necessary to serve as a medical home. See Textbox 3 for specific examples of payment incentive policies. Policymakers have undertaken efforts to enhance provider accountability through the public reporting of performance information; these efforts have generally occurred in concert with policies that modify payment to incentivize higher quality. Public reporting, in this context, may be defined as "the objective measurement and public disclosure of physician and hospital performance." The objectives of public reporting are numerous, but include, among others (1) increasing the accountability of health care organizations, professionals, and managers; and (2) maintaining standards or stimulating improvements in the quality of care provided. In addition, public reports are intended to encourage consumer participation through the facilitation of informed decision making. The impact of public reporting on both consumer decision making, as well as quality improvement efforts by providers, is unclear. Regardless, a number of efforts are underway in the Medicare program to make performance information publicly available, largely at the direction of Congress; these include websites providing comparative information about hospitals, nursing homes, and physicians, for example. This section discusses the theory underlying public reporting, factors influencing consumers' use of performance information to guide decision making, and the effect of public information on provider quality improvement efforts. Theoretically, making information on provider performance public serves to correct an existing information asymmetry; that is, an imbalance in information between the provider and user of a service, in this case, health care services. However, this information imbalance could, in fact, be exacerbated by the release of inaccurate information; additionally, this would have the potential to harm the reputation of providers. Assumptions underlying the public release of performance information include the contention that consumers want to make use of the data, and that they in fact will. The public provision of performance information is expected to facilitate informed decision making among consumers with respect to their health care. This modified decision making, in turn, is expected to increase market share for those better performing providers. This would create a feedback loop that would reward higher performing providers financially. With respect to health care providers, public reporting of performance information is "expected to fuel professional desire to improve care and improve quality, either out of concern for public image or in an effort to maintain professional norms and standards of self-governance." In practice, the theory underlying public reporting of performance information is complicated by a number of other factors related to consumer decision making in health care. This decision making may be influenced by (1) characteristics of the performance information itself (e.g., how user-friendly it is); (2) characteristics of the consumer herself (e.g., health literacy); and (3) factors that are important to the consumer but unrelated to performance information or objective quality of care (e.g., referrals from family members or friends). Characteristics of the performance information itself that influence its use by consumers include, among others (1) awareness of the information, (2) relevance of the information, and (3) usability of the information (e.g., its presentation). Data suggest that the public's familiarity with public sources of performance information is generally low; for example, one survey found that only 6% of the public had heard of CMS's Hospital Compare website (see Textbox 4 ). Studies have indicated that in some cases, consumers find performance information to be of limited relevance; specifically, for example, information must apply to conditions that are relevant to the consumer and must distinguish between high-quality and low-quality care in a clear manner. Finally, although a consumer's ability to use performance information is affected by the way in which the performance information is presented, it also is dependent on personal characteristics of the consumer herself, such as her ability to understand technical clinical process quality measures. Consumer decision making in health care is also known to be influenced by a number of factors unrelated to performance information. These factors include, for example, referrals from trusted family or health care providers, hospital location, and cost (e.g., varying insurance cost-sharing). These competitive factors may outweigh use of performance information in decision making altogether, in some cases. Public reporting aims to both motivate quality improvement activities by health care providers and to facilitate consumer participation in their health care through informed decision making. Studies suggest that consumers are generally not making use of performance information in their health care decisions. For example, one survey found that only 7% of the public had seen and used quality information about hospitals, and only 6% had seen and used quality information about physicians. This is likely due, at least in part, to the presentation of the information, the actual information being presented, and other factors that are also valued by the consumer (e.g., hospital location). The impact of the public reporting of performance data on motivating quality improvement efforts by providers is unclear. One study found, for example, that the release of performance information is not correlated with an increase in performance on clinical process quality measures. This study also found, however, that hospitals receiving publicly available performance reports on both an early and delayed basis undertook quality improvement initiatives in response to this information. That is, many hospitals initiated quality improvement efforts upon learning about the public reporting activity from hospitals in the group receiving early feedback, but before receiving their own hospital-specific feedback. 

Summary: Quality gaps in the care delivered by the U.S health care system result in preventable mortality and morbidity and contribute costs to the system, with multiple indicators showing that quality of care could be improved. Although no single definition of high-quality health care has been agreed upon, the Institute of Medicine (IOM) provided a framework for considering the quality of care, based on six domains: (1) effective, (2) efficient, (3) equitable, (4) patient-centered, (5) safe, and (6) timely. Ongoing congressional interest in enhancing the quality of health care is likely given the federal role in the delivery and financing of health care through, for example, the Medicare and Medicaid programs. Many efforts that aim to improve the quality of care focus on increasing health care providers' accountability for the care they provide. These efforts include, among others, the modification of payment through incentives and the public reporting of performance information. Many payment incentives and public reporting policies rely on quality measurement, and numerous issues arise when considering the use of quality measures in these policies. These include, among others (1) the availability of a comprehensive set of quality measures, (2) the strength of the evidence base supporting the measures, and (3) the relative mix of different measure types. The ability to directly compare the performance of providers is an essential component of many payment incentive and public reporting policies, and quality measurement allows for the generation of this comparative provider-specific performance information. Emphasis has been placed on changing the way health care is paid for, away from a system where payment is simply a transaction based on the unit of care provided, to one where higher-quality, lower-cost care is preferentially rewarded. This policy approach is often referred to as value-based purchasing or value-driven health care, and such efforts may include payment incentives in the form of adjustments, performance-based payments, or fees. At the federal level, the Medicare program provides policymakers the opportunity to implement value-based purchasing approaches and other payment modifications; payment incentive policies implemented in the Medicare program may provide valuable data that private insurers and others may use when considering implementing these approaches. Policymakers have undertaken efforts to enhance provider accountability through the public reporting of performance information; these efforts have generally occurred in concert with policies that modify payment to improve quality. Theoretically, making provider performance information public serves to correct an existing information asymmetry; that is, an imbalance in information between the provider and user of a service, in this case, health care services. Consumer decision making in health care is influenced by a number of factors, including, among others (1) awareness of the information, (2) relevance of the information, and (3) usability of the information. Other factors unrelated to the performance information itself may also affect consumer use of this information (e.g., location of hospital). The impact of public reporting on both consumer decision making, as well as quality improvement efforts by providers, is unclear, although evidence suggests that consumers do not use performance information very often in their decision making.