Medicare spends over $136 billion annually on inpatient hospital care for its beneficiaries. To help ensure the quality of the care it purchases through Medicare, CMS launched the Hospital Quality Initiative in 2003. This initiative aims to refine and standardize hospital data, data transmission, and performance measures as part of an effort to stimulate and support significant improvement in the quality of hospital care. One component of this broader initiative is CMS’s participation in the Hospital Quality Alliance (HQA), a public-private collaboration that seeks to make hospital performance information more accessible to the public, payers, and providers of care. Before the enactment of MMA, HQA had organized a voluntary program for hospitals to submit data on quality of care measures intended for public reporting. For its part as a participant in HQA, CMS set up a central database to receive the data submitted by hospitals and initiated plans for a Web site to post information on hospital quality of care measures. Thus, CMS had a data collection infrastructure in place when MMA established the financial incentive for hospitals to submit quality data. The 10 measures chosen by the Secretary of Health and Human Services for the APU program are the original 10 measures that were adopted by HQA. HQA subsequently adopted additional measures that relate to the same three conditions—heart attacks, heart failure, and pneumonia—and others that relate to surgical infection prevention. (See table 1 for a listing of the APU-measure set and the expanded-measure set.) Hospitals participating in HQA were encouraged to submit data on the additional measures, but data submitted on the additional measures did not affect whether a hospital received its full payment update under the APU program. CMS and the QIOs have tested these measures for validity and reliability, and all measures have been endorsed by the National Quality Forum, which fosters agreement on national standards for measurement and public reporting of health care performance data. To minimize the data collection burden on hospitals by the APU program, CMS and the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) have worked to align their procedures and protocols for collecting and reporting the specific clinical information that is used to score hospitals on the measures. JCAHO-accredited hospitals— approximately 82 percent of hospitals that participate in Medicare—have since 2002 submitted data to JCAHO on the same measures as those in the APU-measure set as well as many of those in the expanded-measure set. Beginning with the first calendar quarter of data submitted by hospitals for the APU program, hospitals had the option of submitting the same data to CMS that many of them were already collecting for JCAHO. In November 2004, CMS and JCAHO jointly issued a manual laying out the aligned procedures and protocols for discharges beginning January 1, 2005. Hospitals use CMS’s definition of the eligible patient population to identify the patients for whom they should collect and submit quality data for each measure. The definition is based on the primary diagnosis and, for the two cardiac conditions, the age of the patient. Specifically, hospitals use diagnostic codes and demographic information from the patients’ medical and administrative records to determine eligibility based on protocols established by CMS. Once the eligible patients have been identified, hospitals extract from their patients’ medical records the specific data items needed for the Iowa Foundation for Medical Care (IFMC) to calculate a hospital’s performance, following detailed data abstraction guidelines developed by CMS. Hospitals may submit data for all eligible patients for a given condition, or if they have more than a specified number of eligible patients, they may draw a random sample according to a formula, and submit data for those patients only. These data are put into a standardized data format and submitted quarterly through a secure Internet connection to the QIO “clinical warehouse” administered by IFMC. IFMC accepts into the clinical warehouse only the data that meet the formatting and other specifications established by CMS and that are submitted before the specified deadline for that quarter. About 80 percent of hospitals rely on data vendors— which typically are collecting the same data for JCAHO—to submit the data for them. IFMC aggregates the information from the individual patient records to generate a rate for each hospital on each of the measures for which the hospital submitted relevant clinical data. These rates show how often a hospital provided the specific service or activity designated in the measures to patients for whom that service or activity was appropriate. Hospitals also collect information on each patient that identifies patients for whom the particular service or activity would not be called for, such as patients with a condition that would make prescribing aspirin or beta blockers medically inappropriate. CMS posts on its Hospital Compare Web site each hospital’s rates for all the APU and expanded measures for which it submitted data. In November 2004, CMS first posted these rates, based on data from the first quarter of calendar year 2004. It subsequently posted new rates in March 2005, based on the first two quarters of calendar year 2004 data, and again in September and December 2005 with additional quarters of data. CMS continues to update these rates quarterly, using the four most recent quarters of data available. There can be up to a 14-month time lag between when patients are treated by the hospital and when the resulting rates are posted on the CMS Web site. (See fig. 1.) CMS had to make its determination of hospital eligibility for the fiscal year 2005 annual payment update decision approximately 1 month after hospitals submitted their data for the first quarter. In implementing the APU program, CMS uses the same policies and procedures for collecting and submitting quality data as are used for HQA. For the first annual payment update determined by the APU program, which applied to fiscal year 2005, hospitals were required to begin submitting data by July 1, 2004, for the patients discharged during the first calendar quarter of 2004 (January through March 2004). Data were received from 3,839 hospitals, over 98 percent of those affected by the MMA provision. These figures include 150 hospitals that certified to CMS that they had no eligible patients with the three conditions during the first calendar quarter of 2004. Hospitals that have no eligible patients are not penalized and receive the full annual payment update. For the second annual payment update determined by the APU program, which applied to fiscal year 2006, participating hospitals were required to continue to submit data in accordance with the quarterly deadlines set by CMS. Failure to meet the requirements of the program and qualify for the full annual payment update in one year does not affect a hospital’s ability to participate in and qualify for the full update in the succeeding year. CMS has assigned primary responsibility to the 53 QIOs to inform hospitals about the APU program’s requirements and to provide technical assistance to hospitals in meeting those requirements. This includes assistance to hospitals in submitting their data to the clinical warehouse provided by IFMC. There are several organizations that administer reporting systems that collect clinical data, some of which also release their data to the public. Some of these organizations are in the public sector, such as state health departments, and some are in the private sector, such as accreditation bodies. Several of these systems have been in existence for a number of years, including one for as long as 16 years. Hospitals, health plans, nursing homes, and other external organizations submit data to these systems on a range of medical conditions, which for most of these systems includes at least one cardiac condition (e.g., percutaneous coronary intervention, coronary artery bypass grafting, heart attack, heart failure). Many of these systems make the results of the data they have collected available for public use. For example, one public organization has been collecting individual, patient-level data on cardiac surgeries from hospitals for the past 16 years and creates reports based on the data collected, which it subsequently posts on its Web site. Additionally, data collected by these reporting systems can also be used for quality improvement efforts and to track performance over time. (For more background information on other reporting systems, see app. II, table 3.) CMS has processes for ensuring the accuracy of the quality data submitted by hospitals for the APU program, but has no ongoing process to assess whether hospitals are submitting complete data. To check accuracy, IFMC, a CMS contractor, electronically checks the data as they are submitted to the clinical warehouse. In addition, CDAC independently audits the data submitted by hospitals. Specifically, it reabstracts the quality data from medical records for a sample of five patients per quarter for each hospital and compares its results to the quality data submitted by hospitals. The data are deemed to be accurate if there is 80 percent or greater agreement between these two sets of results, a standard that hospitals had to meet for the APU-measure set to qualify for their full annual payment update for fiscal year 2006. To check completeness, CMS has twice compared the number of cases submitted by each hospital for the APU program for a given period to the number of claims the hospital submitted to Medicare, once for the fiscal year 2005 update and once for the fiscal year 2006 update. However, these analyses did not address non-Medicare patient records and the approach that CMS took in these analyses was not capable of detecting incomplete data for all hospitals. CMS has not put in place an ongoing process for checking the completeness of the data that hospitals submit for the APU program that would provide accurate and consistent information for all patients and all hospitals. Moreover, CMS has not required hospitals to certify that they submitted data for all eligible patients or a representative sample thereof. CMS employs two processes to check and ensure the accuracy of the quality data submitted by hospitals for the APU program. First, at the time that data are submitted to the clinical warehouse, IFMC, a CMS contractor, electronically checks the data for inconsistencies and missing values. The results are shared with hospitals. After the allotted time for review and correction of the submissions, no more data or corrections may be submitted by hospitals for that quarter. These checks are done whether the hospital submits its data directly to the warehouse or through a data vendor.