[Federal Register Volume 68, Number 16 (Friday, January 24, 2003)]
[Rules and Regulations]
[Pages 3435-3455]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1293]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 482

[CMS-3050-F]

RIN 0938-AK40


Medicare and Medicaid Programs; Hospital Conditions of 
Participation: Quality Assessment and Performance Improvement

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule requires hospitals to develop and maintain a 
quality assessment and performance improvement (QAPI) program. In the 
December 19, 1997 Federal Register, we published a proposed rule to 
revise the hospitals conditions of participation (CoPs). The QAPI CoP 
was one of the conditions included in the proposed rule. We separated 
the QAPI CoP from the larger set of hospital CoPs so that it could be 
published in advance of the remaining CoPs to implement the 
Administration's initiatives regarding medical errors. QAPI focuses 
provider efforts on the actual care delivered to patients, the 
performance of the hospital as an organization, and the impact of 
treatment furnished by the hospital on the health status of its 
patients. Specifically, it is important to note that a QAPI is not 
designed to measure a hospital's quality, but rather a minimum 
requirement that the hospital systematically examine its quality and 
implement specific improvement projects on an ongoing basis. State 
agencies (SAs) during their surveys, review all aspects of a hospital's 
operations and this review provides a framework in which the SA can 
assess a hospital's QAPI program. In addition, the QAPI entails all 
activities required for measuring quality of care and maintaining it at 
acceptable levels. This typically includes--
    [sbull] Identifying and verifying quality-related problems and 
their underlying cause;
    [sbull] Designing and implementing corrective action activities to 
address deficiencies; and
    [sbull] Following up to determine the degree of success of an 
intervention and to detect new problems and opportunities for 
improvement.
    Performance improvement activities aim to improve overall 
performance assuming that there is no permanent threshold for good 
performance. Under performance improvement framework, hospitals will 
continuously study and improve the processes of healthcare and delivery 
of service.

EFFECTIVE DATE: These regulations are effective on March 25, 2003.

FOR FURTHER INFORMATION CONTACT: Nancy Archer, (410) 786-0596; Mary 
Collins, (410) 786-3189; Monique Howard, (410) 786-3869; Jeannie 
Miller, (410) 786-3164;

SUPPLEMENTARY INFORMATION:

I. Background

A. General

    In the December 19, 1997 Federal Register (62 FR 66726), we 
published a proposed rule entitled ``Medicare and Medicaid Programs; 
Hospital Conditions of Participation; Provider Agreements and Supplier 
Approval'' to revise the entire set of Conditions of Participation 
(CoPs) for hospitals. The CoPs are the requirements that hospitals must 
meet to participate in the Medicare and Medicaid programs. The CoPs are 
intended to protect patient health and safety and to ensure that high 
quality care is provided to all patients. The State survey agencies 
(SAs), in accordance with section 1864 of the Social Security Act (the 
Act), survey hospitals to assess compliance with the CoPs. The SAs 
conduct surveys using the instructions in the State Operations Manual 
(SOM), (Health Care Financing Administration (HCFA) Publication No. 7). 
The SOM contains the regulatory language of the CoPs as well as 
interpretive guidelines and survey procedures and probes that elaborate 
on regulatory intent and give guidance on how to assess provider 
compliance. Under Sec.  489.10(d), the SAs determine whether hospitals 
have met the CoPs and report their recommendations to us.
    Under the authority of section 1865 of the Act and the regulations 
at Sec.  488.5, hospitals accredited by the Joint Commission on 
Accreditation of Healthcare Organizations (JCAHO) or the American 
Osteopathic Association (AOA) are deemed to meet the requirements in 
the CoPs, and therefore, are not routinely surveyed for compliance by 
the SAs. However, all Medicare and Medicaid participating hospitals are 
required to be in compliance with our CoPs regardless of their 
accreditation status.

B. Patient Safety and Medical Errors

    In 1999, the Institute of Medicine (IOM) published a report 
entitled ``To Err is Human: Building a Safer Health System,'' which 
highlighted patient injuries associated with medical errors. In this 
report, the IOM defined an error as the following: ``An error is 
defined as the failure of a planned action to be completed as intended 
or the use of a wrong plan to achieve an aim.'' The IOM report also 
indicated that an estimated 44,000 to 98,000 Americans die annually as 
a result of preventable medical errors. The results of the report have 
generated substantial media, public, Congressional, and Departmental 
concerns regarding patients health and safety.
    As recommended by the IOM, the Quality Interagency Coordination 
Task Force (QuIC), evaluated and responded to the recommendations in 
the IOM report with a strategy to identify patient safety issues and to 
reduce the number of errors by 50 percent over the next 5 years. In an 
effort to thoroughly consider all of the relevant issues related to 
medical errors, the QuIC expanded the IOM's definition to read as 
follows: ``An error is defined as the failure of a planned action to be 
completed as intended or the use of a wrong plan to achieve an aim. 
Errors can include problems in practice, products, procedures, and 
systems.'' We have adopted the QuIC revised definition of an error.
    Accordingly, the QAPI CoP has been separated from the larger set of 
CoPs and published in an accelerated timeframe because it provides the 
framework to implement the Administration's initiatives designed to 
help distinguish and avoid mistakes in the healthcare delivery system. 
In addition, we are requiring that a hospital's QAPI program be an 
ongoing program that shows measurable improvement in indicators for 
which there is evidence that they will improve health outcomes and 
identify and reduce medical errors. The remaining provisions of the 
hospital CoPs will be published at a later date.
    Many people believe that medical errors involve medication (for 
example, an incorrect or improper dosage of medicine) or surgical 
errors (for example, incorrect site amputation). However, there are 
many other types of medical errors including--
    [sbull] Diagnostic errors (for example, misdiagnoses leading to an 
incorrect choice of therapy or treatment, failure to use an indicated 
diagnostic test, misinterpretation of test results, and

[[Page 3436]]

failure to properly act on abnormal test results);
    [sbull] Equipment failures (for example, a defibrillator without 
working batteries, or inadvertent dosing of medications in a short time 
frame due to intravenous pumps with valves that are easily dislodged);
    [sbull] Infections (for example, nosocomial and post-surgical wound 
infections);
    [sbull] Blood transfusion-related injuries (for example, hemolytic 
blood transfusion reactions); and
    [sbull] Deaths due to seclusion or restraint use.
    Harm experienced while receiving healthcare services is a growing 
concern for the American public. While both the public and the private 
sectors have made notable contributions to reducing preventable medical 
errors, additional and aggressive efforts are needed to further reduce 
these types of incidents. Therefore, we are publishing this final rule, 
with some modification in response to comments, to guide improved 
patient safety in the hospital setting.
    Medical errors can be difficult to recognize in healthcare due to 
the variations in individuals' responses to treatment. In addition, 
medical professionals may not recognize that a particular product or 
procedure may have contributed to or caused a problem since the patient 
is already ill or the event appears unrelated to the product or 
procedure. Because medical errors usually affect only a single patient 
at a time, they are treated as isolated incidents and little attention, 
if any, is drawn to these problems. Finally, the healthcare community 
acknowledges that errors are most likely under reported due to 
malpractice threats and practitioner confidentiality concerns. All of 
these factors explain the ongoing invisibility of medical errors 
despite the existence of research that documents their high prevalence. 
The IOM report recommended the following:
    [sbull] Action to reduce preventable medical errors;
    [sbull] Implementation of a system of public accountability;
    [sbull] The development of a knowledge base system regarding 
medical errors; and
    [sbull] A culture change in healthcare organizations in order to 
promote the recognition of errors and improve patient safety.

C. Balancing Collegial and Regulatory Modes of Oversight

    The proposed revision of the hospital CoPs is part of a larger 
effort to bring about improvement in the quality of care furnished to 
beneficiaries through a patient-centered approach to healthcare 
delivery, quality improvement, and integration of care, as well as our 
quality of care oversight responsibilities.
    The fundamental purpose of the QAPI CoP is to set a clear 
expectation that hospitals must take a proactive approach to improve 
their performance and focus on improved patient care. We stress 
improvement in systems in order to improve processes and patient 
outcomes. This is not meant to suggest that we plan to abandon our 
regulatory role. In fact, this approach reinforces our primary 
responsibility for assuring patient safety and protection through our 
delegated regulatory authority.
    We must note that accreditation surveys for deemed status performed 
by JCAHO, AOA, and any other national accrediting organization 
recognized by us in the future, are performed under an extension of our 
authority. Onsite accreditation surveys may serve as the basis for 
enforcement activity since accreditation organizations' standards are 
determined by us to meet or exceed our own CoPs. SAs acting as our 
regulatory agents perform validation, recertification, and complaint 
surveys in hospitals to determine compliance with the CoPs.
    During surveys the QAPI program will be evaluated for its hospital-
wide effectiveness on the quality of care provided. The impact of the 
program will be assessed during a survey, as surveyors are looking at 
data gathered at different points in time, compared, and actions taken 
based on that comparison. The hospitals will be analyzing data and 
evaluating the effectiveness of their own program continually.
    Whenever the state agency surveyors enter the hospital to conduct a 
survey they will evaluate the hospital's program and its own internal 
evaluation process along with an evaluation of all hospital services. 
When there is an onsite review of the hospital's QAPI program, the 
surveyors determine whether or not the hospital is meeting the QAPI CoP 
requirements. Following the existing survey process and procedures, if 
the SA determines that the hospital is significantly out of compliance 
with the QAPI CoP requirements, the hospital will be scheduled for 
termination from the Medicare and Medicaid programs. The hospital is 
then given the opportunity to submit a plan of correction. The SA would 
conduct a follow-up survey to assess whether the hospital is now in 
compliance with all of the requirements, prior to the actual 
termination taking place.
    Three to five years after the implementation of this final rule, we 
will assess Online Survey Certification and Reporting System (OSCAR) 
data and evaluate how well hospitals have implemented the QAPI process. 
During this time, we will also assess the state of the art for quality 
improvement practices.
    Similarly, we view the Quality Improvement Organizations (QIOs) 
(formally known as Peer Review Organizations (PROs)) operating in a 
largely ``penalty-free'' environment, as our quality improvement 
agents. Each State has a QIO that contracts with Medicare to monitor 
and improve the care delivered to beneficiaries. Each QIO operates 
under a contract know as a ``statement of work'' governed by extensive 
portions of Titles 11 and 18 of the Act, as amended by the Peer Review 
Improvement Act of 1982. Specific QIO tasks fall under three areas of 
responsibility, as provided in the Act and reiterated in the statement 
of work:
    [sbull] Improve quality of care for beneficiaries by ensuring that 
beneficiary care meets professionally recognized standards of health 
care;
    [sbull] 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 
appropriate (for example, economical setting);
    [sbull] Protect beneficiaries by expeditiously addressing 
individual cases, such as beneficiary complaints, provider-issued 
notices of noncoverage, Emergency Medical Treatment and Active Labor 
Act (EMTALA) violations and other statutory responsibilities.
    We look to the QIOs to advance quality of care in the hospital 
environment. We view accreditation deeming activities as part of our 
overall responsibility to certify providers for program participation.

II. Legislation

    Section 1861(e)(1) through (9) of the Act: (1) Defines the term 
``hospital''; (2) lists the statutory requirements that a hospital must 
meet to be eligible for Medicare participation; and (3) specifies that 
a hospital must also meet other requirements as the Secretary finds 
necessary in the interest of the health and safety of the hospital's 
patients. Under this authority, the Secretary has established in the 
regulations 42 CFR part 482, the requirements that a hospital must meet 
to participate in the Medicare program. Under section 1865 of the Act 
and 42 CFR 488.5 of the regulations, hospitals that are accredited by 
the JCAHO or the AOA are not routinely surveyed by SAs for compliance 
with the CoPs but are

[[Page 3437]]

deemed to meet most of the requirements based on their accreditation.
    Section 1905(a) of the Act provides that Medicaid payments may be 
applied to hospital services. The regulations at Sec.  
440.10(a)(3)(iii) require hospitals to meet the Medicare CoPs to 
qualify for participation in Medicaid.

III. Provisions of the Proposed QAPI CoP

    We proposed revisions of the CoPs that emphasized lessening Federal 
regulation: (1) To eliminate unnecessary structural and process 
requirements; (2) focus on outcomes of care; (3) allow greater 
flexibility to hospitals and practitioners to meet quality standards; 
and (4) place a strong emphasis on quality assessment and performance 
improvement.
    The proposed provisions of the QAPI CoPs included three standards 
that addressed the scope and direction of the performance improvement 
program, discussed the hospital entity that is responsible and 
accountable for the QAPI activities, and retained the current 
requirement on autopsies (existing Sec.  482.22(d)). In addition, we 
proposed 12 critical areas in which hospitals must, at a minimum, 
objectively evaluate their performance.
    We solicited comments on the feasibility of national outcome-based 
performance measures for hospitals and the minimum level requirements 
for performance improvement activities. We did not include in the 
hospital CoPs any requirement for hospitals to collect and report 
certain standard data items that could produce quality of care 
predictors in the future. However, we did invite public comment on the 
following seven key questions regarding the development and 
implementation of hospital-based performance measures.
    (1) Should CMS assume a leadership role in developing the measures?
    (2) How should CMS proceed to develop and implement the measures?
    (3) If CMS does not assume a leadership role in this area and 
hospitals invest in the development of multiple systems, would the 
overall burden be greater than if a single system had been imposed at 
the outset?
    (4) If CMS does not assume a leadership role in this area and 
individual hospitals adopt multiple systems that produce 
nonstandardized data, to what extent would it be difficult to make 
comparisons between hospitals?
    (5) Should CMS require or encourage hospitals to use the 
standardized measures that some accredited hospitals are using?
    (6) Would it be appropriate for CMS to include ``placeholder'' 
language in the revised CoPs concerning the eventual need for hospitals 
to report relevant data, or is this premature?
    (7) If CMS includes ``placeholder'' language, what changes should 
we make to these proposed requirements to set the stage for the 
development and implementation of such a system?

IV. Analysis of and Responses to Public Comments

    We received over 1,200 comments in response to the QAPI 
requirements presented in the December 19, 1997 proposed rule. These 
comments were from hospitals, professional organizations, accrediting 
bodies, practitioners, and other individuals. Summaries of the public 
comments received and our responses to those comments are set forth 
below.

A. Regulatory Approach

    We asked for comments on the fundamental shift in our regulatory 
focus for quality from the current approach that identifies and 
corrects problems in patient care delivery to an approach that 
emphasizes improving patient outcomes and satisfaction using a data-
driven QAPI program.
    Comment: The majority of commenters expressed support for our 
change in philosophy and the introduction of the new QAPI CoP, stating 
this approach will create more consistency between accrediting and 
regulatory bodies' standards.
    Response: We appreciate the support. One of our initiatives is to 
revise many of the provider CoPs, including hospitals, so that they 
focus on outcomes of care and eliminate unnecessary procedural 
requirements.
    Comment: A commenter requested clarification regarding whether this 
requirement applies to all patients or only Medicare patients.
    Response: This requirement as well as all of the other hospital 
CoPs applies to all Medicare- and Medicaid-participating hospitals; 
therefore, all patients receiving services provided by these hospitals 
are protected by this requirement. Moreover, these standards govern 
quality of care issues for the hospital and its practitioners and 
contractors.
    Comment: Many commenters were against promulgating a final 
regulation that is too prescriptive. They emphasized that what is 
needed, above all, is flexibility to design a program that meets the 
needs of hospitals of varying sizes and specialties, rather than a 
``one-size-fits-all'' regulation.
    Response: We agree and believe that the proposed QAPI condition was 
designed to incorporate flexibility with the appropriate amount of 
accountability. We have made several revisions to the QAPI condition, 
to increase its flexibility and accountability, and minimize burden.
    Comment: Some commenters stated that the proposed QAPI condition is 
process-oriented and conflicts with our intent of reducing process-
oriented requirements. In addition, the commenters stated that we 
should allow hospitals to pursue quality improvement in whatever manner 
they choose.
    Response: We recognize that by permitting hospitals to evaluate 
themselves in the 12 specific areas we believe are critical to hospital 
performance, the proposed QAPI appeared prescriptive in nature. Based 
on public comments, we have deleted the proposed requirement for 
hospitals to assess their performance in 12 specific areas. We agree 
that hospitals should be able to pursue quality improvement in a manner 
of their choosing. We encourage hospitals to identify and resolve 
performance problems specific to their situations in the most effective 
and efficient manner possible. The provisions also require 
collaboration between all hospital departments and services, to ensure 
that all entities are included, to the greatest extent possible, in the 
QAPI program. After monitoring, tracking, and assessing performance in 
all areas of hospital service and operations, the hospital has the 
flexibility to design a program to address its specific needs. We also 
believe giving the hospital flexibility to design its own program 
provides the hospital with the flexibility to adopt its own best 
practices in specific areas, (for example, hospital staff education, 
record reviews, and information technology). We believe that it is 
critically important that hospitals examine the adequacy of their 
information technology and identify opportunities to improve and expand 
the use of such technologies to prevent medical errors and improve 
quality of care. This Administration is committed to working with other 
public and private stakeholders to develop means for improving and 
expanding the use of information technologies (for example, bar coding 
and computerized physician order entry systems) in health care 
settings.
    Comment: Some commenters were concerned that our proposal to have 
an outcome-oriented and patient-centered regulatory approach would 
eliminate structure and standardized practice

[[Page 3438]]

patterns and ultimately jeopardize patient safety.
    Response: We did not intend to suggest that hospitals eliminate the 
standardization of care when appropriate and effective. We believe that 
one of the most effective means of reducing errors is by standardizing 
processes wherever possible. For example, by standardizing drug doses 
and times of administration, the advantages in efficiency as well as in 
error reduction are obvious. By mandating a QAPI CoP that focuses on 
performance improvement activities, we expect hospitals to conduct 
systematic internal QAPI activities including the application of 
standards of care and best practices throughout the institution. For 
example, if standardizing insulin coverage sliding scales in the 
intensive care unit decreased the incidence of hypoglycemia by 25 
percent, we would expect the hospital to determine other areas that 
would benefit from the standardized approach. After making this 
determination, hospitals should implement and track actions and 
determine a mechanism to assure achievement of goals and sustained 
improvement.
    Comment: A commenter suggested strengthening the regulation text by 
adding the phrase ``hospital-wide'' as used in the preamble.
    Response: We agree with the commenter and have made the appropriate 
changes to Sec.  482.21. The change in language recognizes the 
importance of assuring that the QAPI program reflects the complexity of 
the hospital's organization and services.
    Comment: Some commenters believed that medical staff provisions 
should not be deleted as they are not entirely captured in this QAPI 
provision.
    Response: In the December 19, 1997 proposed rule, we proposed to 
eliminate several process-oriented requirements, currently set forth in 
Sec. Sec.  482.12 and 482.22, relating to the composition, 
organization, and conduct of a hospital's medical staff. We have 
decided to defer any decision regarding the proposal to delete these 
requirements until the remaining hospital CoPs are published in their 
entirety.

B. Other QAPI Approaches

    We solicited comments on other possible approaches to the QAPI 
condition to ensure that hospitals invest substantial effort in QAPI. 
In addition, we solicited comments on how we might offer a more precise 
explanation of our expectations.
    Comment: Several commenters made recommendations for more precise 
ways to measure performance. One commenter suggested that we use 
historical billing data to establish minimum benchmarks or standards of 
performance as a basis for the performance-based reimbursement system, 
stating that financial incentives are the best way to motivate change 
and improve performance. Other commenters stated that a combination of 
outcome data and the assessment of structured quality improvement 
processes would be more effective. However, most commenters 
overwhelmingly expressed concerns that we should develop a final 
requirement that would allow for flexibility.
    Response: We appreciate the commenters' suggestions for more 
precise ways to measure performance but we believe that these 
suggestions are more prescriptive than the proposed strategy. In 
addition, we currently do not have a basis or statutory authority for a 
performance-based reimbursement system based on benchmarks developed 
from historical billing data. We agree that using outcome data in 
combination with assessing the structure of the QAPI program and 
processes of the hospital would be very effective. However, 
standardized outcome measures that can be used nationwide have not been 
established to date so this is not feasible at this time. We believe 
that the QAPI requirements presented in this final rule address the 
flexibility concerns of the majority of commenters.
    Comment: Several commenters suggested creating a transition period 
in order to ease the burden of creating a QAPI program.
    Response: Since hospitals are currently required to have an 
``effective, hospital-wide quality assurance program'' in accordance 
with Sec.  482.21, we do not believe a transition period is necessary.
    Comment: Many commenters stated the proposed QAPI requirements will 
substitute high-level hospital-wide QI processes for more effective, 
focused, department-level performance improvement. These commenters 
suggested strengthening the language by adding sentinel events to the 
minimum performance elements.
    Response: We agree that hospitals should consider adverse events in 
the development of its QAPI strategy. We expect hospitals to implement 
an internal error reduction system. Adverse event tracking and analysis 
of underlying causes are an effective way to determine issues involving 
medical errors. We emphasize the need for hospitals to assess processes 
and systems that affect patient care and quality. Section 482.21(c) 
requires the hospital(s) to establish priorities, and identify areas of 
risk that affect patient safety. We believe that the identification of 
adverse events and analyses of events must be an integral part of the 
hospital's QAPI program, as the analyses will lead to better 
protections for patients.
    JCAHO's performance improvement strategy is consistent with our 
approach. Their standards require hospitals to collect data to monitor 
performance of processes that involve risks or may result in sentinel 
events. Similarly, Sec.  482.21(c) requires hospitals to consider 
prevalence and severity of identified problems and to give priority to 
improvement activities that affect clinical outcomes, patient safety, 
and quality of care. In order to meet the requirements, a hospital 
should consider information from its own risk-management data or from 
external sources of information (for example, hospital industry data on 
problem-prone processes, JCAHO's list of frequently occurring sentinel 
events; data from the National Patient Safety Foundation) and quality 
indicators from the Healthcare Cost and Utilization Project (HCUP QIs), 
as possible data measures to assist hospitals in designing their QAPI 
programs pertinent data and information from our ``science partner'' 
the Agency for Healthcare Research and Quality (AHRQ) (http://www.arhq.gov/data/hcup/qiact.htm).

C. Minimum Elements for a QAPI Program

    We proposed that the hospital's QAPI program consist of assessment 
activities in a minimum of 12 areas. We also asked for comments on the 
minimum content of the QAPI program.
    Comment: We received many comments citing concerns in the medical 
community about the broad language of the proposed rule regarding 
minimum performance areas and associated projects, and the possibility 
that it could be interpreted to mean that hospitals must perform 12 
simultaneous projects. Commenters stated that projects in all areas 
would be too prescriptive and burdensome, and suggested allowing 
hospitals to prioritize and implement improvement activities based upon 
self-assessment. It was stressed that small hospitals would have 
difficulty identifying measures predictive of outcomes in all 12 areas 
and low patient volumes in rural hospitals would produce data of little 
value.
    Response: We proposed 12 specific areas of self-assessment, which 
we believe are critical to a hospital's evaluation of its performance. 
However, we gave serious consideration to

[[Page 3439]]

commenters' concerns regarding burden and the misunderstanding of the 
self-assessment in the 12 areas and have eliminated this requirement. 
In this final rule, although we have not specifically prescribed areas 
to be assessed, the CoP requirement is for the hospital's QAPI program 
to be, but not be limited to, an ongoing program that shows measurable 
improvement in indicators for which there is evidence that they will 
improve health outcomes and identify and reduce medical errors. Section 
482.21(c) requires that hospitals set priorities for performance 
improvement based on the prevalence and severity of identified 
problems. Hospitals are expected to assess all areas of hospital 
services and operations, and based on that information prioritize the 
improvement activities that most directly affect patient safety and 
clinical outcomes. The most important aspect of a QAPI program is the 
implementation of actions based on the hospital's assessment of its 
improvement needs. The hospital must use the data collected and make 
changes in its processes or programs to improve patient outcomes. When 
adverse outcomes are identified, hospitals must, when applicable, 
perform system and process analyses and take action to achieve and 
sustain long-term corrections. These actions could include changes in 
protocols and systems and staff education and training.
    We recognize the special needs and circumstances of rural 
hospitals. We also recognize that the collection and analysis of 
clinical outcome data could represent some increase in burden on some 
hospitals, particularly on the nonaccredited hospitals that are subject 
to our survey process. Nonaccredited hospitals typically are smaller 
than most accredited hospitals, are located in sparsely populated 
areas, and may not have the resources for extensive data gathering and 
reporting. For these reasons, the framework established by the QAPI CoP 
is flexible enough to recognize the unique circumstances and 
characteristics of hospitals. The QAPI CoP affords the hospital the 
flexibility to identify processes targeted for improvement based on its 
unique needs, priorities and patients. Hospitals that have more 
resources may be able to produce more sophisticated measures that 
involve more complex issues, but the focus for all hospitals is that 
they make an aggressive and continuous effort to improve performance 
and address patient safety issues. Moreover, we would expect the 
processes targeted for improvement to change over time as the hospital 
succeeds in its initial efforts.
    Comment: Some commenters agreed with our rationale for the 
inclusion of these areas stating these can point to opportunities for 
improvement in both hospital and practitioner performance.
    Response: Although we agree that our rationale for listing these 12 
areas represent identifiable opportunities around which a hospital 
could develop a QAPI program, we determined that a far more valuable 
approach, at this time, would be to allow hospitals the flexibility to 
identify their own areas to address. Characteristics of healthcare 
delivery are too diverse and hospitals strengths and weaknesses are too 
varied to take such a narrow approach.
    Comment: We were asked to clarify how a hospital would show 
sustained improvement in all 12 areas, anticipating it would be too 
difficult to select measures to guarantee and improve patient outcomes.
    Response: As stated above, we have eliminated the 12 areas 
presented in the proposed rule. One of the benefits of operationalizing 
a QAPI program is that, because it is a continuous process, it affords 
the hospital a mechanism for evaluating its own improvement efforts. 
Specifically, the process of improvement includes--
    [sbull] Identification of an organization's critical patient care 
and services components;
    [sbull] Application of performance measures that are predictive of 
quality outcomes that would result from delivery of the patient care 
and services; and
    [sbull] Continuous use of a method of data collection and 
evaluation that identifies or triggers further opportunities for 
improvement.
    Comment: Commenters requested that we clarify and define the list 
of 12 areas, but the overwhelming majority of commenters strongly 
encouraged the deletion of the list. These commenters argued it would 
be more effective to allow hospitals to assess, measure and analyze 
themselves, but concurred with the identification of hospital processes 
and functions that could produce valuable information. Alternatives 
were given such as the adaptation of JCAHO's standards, or us merely 
providing the components of the QAPI program and giving the hospital 
the flexibility to create a program of its own design.
    Response: As stated previously, we have eliminated the list of 12 
areas for self-assessment. The regulations provide the components of a 
QAPI program and allow for individual hospital flexibility in 
implementation.
    Comment: Some commenters suggested that nonaccredited hospitals be 
exempt from QAPI requirements until we provide scientific evidence that 
participation in external measurement systems by nonaccredited 
hospitals improves patient care.
    Response: We cannot relinquish our responsibility for assuring 
quality healthcare to all patients. We believe that we have provided 
hospitals with enough flexibility and have identified enough resources 
for improving the process of patient care to facilitate the development 
of an effective QAPI program by a hospital of any size. Therefore, we 
do not believe there is a need to differentiate our expectations for 
accredited and nonaccredited hospitals.

D. Data

    We proposed that hospitals use hospital-specific data (for example, 
medical record and committee information), including QIO, and other 
relevant data as an integral part of its QAPI program. In this final 
rule under Sec.  482.21(b), program data, we use the phrase ``quality 
indicator data including patient care data, and other relevant data,'' 
since hospital-specific data, is covered under ``other relevant data.'' 
The infrastructure of performance improvement activities is based on 
the collection of data. Analysis of this data allows hospitals to 
identify trends, identify process variations, and assess performance 
patterns. We recognize there may be some costs associated with data 
collection, and realize it is not feasible nor desirable to collect 
data on everything. Therefore, we have given the hospital the 
flexibility to establish, through its priorities and needs, the areas 
on which to focus. Data collection should focus on areas of prevalence 
and the severity of identified problems, giving consideration to 
patient safety and quality of care. The governing body must determine 
priorities regarding which processes to monitor with data collection 
and the subsequent development of planned improvement efforts, as 
needed.

E. Improvement Projects and QIO Projects

    In the preamble to the proposed rule, we asked whether we should 
require a hospital to engage in a minimum number of improvement 
projects that are based upon their own performance assessments. In the 
proposed regulation text, we stated that hospitals must track 
performance to assure that improvements are sustained. We asked for 
comment on the advisability and necessity of such a requirement, and

[[Page 3440]]

also on the best approaches to achieve this minimum level of effort. We 
also proposed that if a hospital chooses not to participate in a QIO 
project, it must be able to demonstrate, to the SA, a level of 
achievement through its own QAPI strategy comparable to or better than 
expected from QIO participation.
    Comment: A commenter stated QAPI should not be required without the 
supporting scientific evidence showing QAPI improves patient care.
    Response: The current quality assurance CoP (Sec.  482.21) has been 
in effect since 1986. At that time the healthcare industry as a whole 
embraced a quality assurance approach to measuring and improving the 
care delivered to patients. The 1986 CoP reflected state-of-the-art 
practices. Since that time, the healthcare industry has moved toward a 
QAPI approach in the delivery and measurement of patient care. The 
proposed rule was intended to update the existing quality assurance CoP 
to reflect current practice in quality improvement. We proposed to 
change the focus of a hospital's quality assurance activities from one 
that relies on a problem-focused approach of quality assurance to one 
that focuses on systemic quality improvements, that parallels the 
JCAHO's overhaul of its accreditation standards.
    We specifically requested public comment on the approach as well as 
the advisability and necessity of the proposed requirements. Commenters 
were in favor of and supported the continuance of the existing quality 
assurance CoP. However, they were overwhelmingly opposed to the 
proposed QAPI requirement that mandated assessment in 12 predetermined 
areas, stating that this was too rigid and prescriptive.
    As stated earlier, we restructured the final rule based on public 
comments and have eliminated the proposed provision requiring 
assessment in 12 predetermined areas. We believe that this final rule 
gives the hospital the flexibility to establish a QAPI program that 
meets our requirements by conducting systems or process analysis and 
taking actions to afford long-term correction and improvement of 
identified or potential problems.
    Comment: Several commenters stated that the final regulation should 
specify both a minimum level of scope, as well as a minimum number of 
improvement projects. One commenter added the number of improvement 
projects required should be based on the percentage of all patients 
receiving services at the hospital. Conversely, the overwhelming 
majority of commenters were strongly against any such requirement, 
favoring an approach where the hospital would be required to 
demonstrate to the SA what projects they are doing and what progress is 
being achieved.
    Response: We considered specific requirements regarding the number, 
scope, and complexity of projects to be performed by each hospital. In 
the preamble of the proposed rule, we specifically stated that at a 
minimum, we were considering requiring that the number of distinct 
successful improvement activities to be conducted annually be 
proportional to the scope and complexity of the hospital's programs and 
we also presented other alternatives for consideration. We decided not 
to base the number of projects on discharges, number of beds, or 
operational areas as proposed. Based on public comments, we have 
decided to require hospitals to document what quality projects are 
being conducted, the reasons for conducting these projects, and 
measurable progress achieved on these projects. In fulfilling the QAPI 
regulatory requirements for collection and use of clinical data, we 
anticipate that hospitals will make use of information technologies. 
Indeed, we believe that the effective use of information technology 
(IT) systems (for example computerized physician order entry systems 
(CPOE) or barcoding) could over time prove invaluable to the 
improvement of quality and safety of patient care. As an alternative to 
a performance improvement project, we added a provision, Sec.  
482.21(d)(2), that allows hospitals to invest in information 
technology; that is, we will allow hospitals to undertake a program of 
investment and development of IT system that are geared to improvements 
in patient safety and quality, in place of a QAPI project. In 
recognition of the time required to develop and implement this type of 
system, we will not require that such activities have a demonstrable 
benefit in their initial stages, but we would expect that quality 
improvement goals and their achievement would be incorporated in the 
plan for the program. Initial stages of development, include activities 
such as installation of hardware and software, testing of an installed 
system, training of staff, piloting the system, and hospital-wide 
implementation of the system. Upon implementation of the system, 
monitoring will begin and data will be collected over time as part of 
the process to evaluate the impact of the new system on patient safety 
and quality. We believe that this modification demonstrates this 
Administration's deep commitment to patients, high quality care, and 
flexibility to our partners. This approach will allow hospitals the 
flexibility to invest appropriate efforts in their quality program and 
the freedom to make decisions about the best way to improve the quality 
of care.
    Comment: A commenter stated that we have failed to identify the 
specific outcomes hospitals should achieve, measure, and report. The 
commenter advocated uniform, standardized measures.
    Response: Our long-term goal is the identification of a 
standardized measure set for hospitals. However, since these measures 
have not yet been identified, we expect hospitals to engage in 
activities based on analyses of their own data, initiatives that 
promote patient safety, improve quality of care, and increase patient 
satisfaction. One goal of this rule is to stimulate providers to 
develop and pursue a wide variety of information and data, from 
internal and external sources, to guide their improvement efforts. 
External sources of information and data can include organizations like 
the National Quality Forum (NQF), QIOs, and accrediting bodies.
    Comment: Commenters agreed with the concept of performance 
improvement, but stated most aspects of quality depend on judgments and 
subjective assessments. These commenters questioned if quality 
improvement would be quantified into numerical values, and if so, what 
numerical value would demonstrate optimum performance, and what should 
be done if that level is not achieved.
    Response: Through our survey process, we intend to assess the 
hospitals' success in using its own objective data, assessing 
performance, prioritizing improvement efforts, and demonstrating that 
sustained improvements have taken place. In the future, based on a set 
of standardized performance measures that can be used nationwide, some 
improvement efforts might by quantified into numeric values. However, 
as stated in the 1999 IOM report, continuous improvement assumes there 
is no threshold for good performance. The central premise is that 
healthcare systems should never be content with present performance. 
Rather, providers of healthcare services should continuously study and 
improve the process of healthcare and service delivery.
    Comment: One commenter proposed a revision to the following 
requirement: The hospital must take actions that result in performance 
improvements and must track performance to assure that improvements are 
sustained. The

[[Page 3441]]

commenter proposed the requirement should read: ``The hospital must 
take quality assessment and improvement actions that result in improved 
performance outcomes for identified problems.'' Several other 
commenters wrote seeking clarification regarding the meaning of the 
phrase, ``improvements that are sustained.''
    Response: We did not accept the commenter's proposed language 
verbatim, but we did modify the language. The evaluation should enable 
a facility to judge where resources need to be focused for priority 
improvement efforts, while assuring sustained improvement in areas 
where improvement goals have been achieved. For example, if project(s) 
to improve reduction in antimicrobial resistance have produced 
successful improvements in the physician's antibiotic prescribing 
patterns and in the facility's anti-microbial resistance rate, a 
hospital might defer funding for this effort to focus on another 
priority topic. At the same time, success with the first project must 
be sustained, and where possible, improved further over time. Lessons 
learned from past projects should be incorporated into staff training 
and evaluations, where appropriate. The evaluation ``loop'' of setting 
priorities for improvement, tracking results and determining continued 
use of resources based on priorities must include continued evaluation 
of outcomes in ``past'' improvement projects and staff education in a 
manner determined by the facility. These activities should lead to 
long-term correction and improvement of identified focus areas.
    Comment: A commenter stated that not all hospital departments and 
services, for example marketing and maintenance, should be included in 
QAPI programs. The commenter also recommended that the language of the 
requirement be changed to delete the word ``all.''
    Response: We did not accept the commenter's suggestion to delete 
the word ``all.'' We believe that all hospital departments and services 
furnished under contract or arrangement, must be involved in the 
hospital-wide QAPI program. The hospital's marketing program may be 
instrumental in increasing patient satisfaction and performing post-
hospital surveys. The hospital's maintenance program may be 
instrumental in decreasing the potential for infections. There are many 
ways to involve all areas of the hospital. This final rule, although 
flexible, requires hospitals to consider the entire scope of its 
services and operations. However, we reiterate that although a hospital 
is required to monitor and track performance in all areas of its 
operations, it must use this surveillance activity to help set 
priorities for the remainder of its QAPI program including data 
collection, development of performance measures, and the selection of 
specific quality improvement projects.
    Comment: The overwhelming majority of commenters wrote that not all 
QIO data is relevant and timely and sought clarification regarding how 
a hospital choosing not to participate in a QIO project would 
demonstrate that its own QAPI strategy is comparable to or better than 
that expected from QIO participation. Some commenters requested 
clarification regarding demonstrating ``value,'' as well as the 
determination of a ``sufficient'' project.
    Response: We share the commenters'' concern and as a result, we are 
revising the proposed regulation text, now Sec.  482.21(d)(4) of this 
final rule, to require projects of comparable effort. Through our QIOs, 
we are working to reduce errors of omission for 39 million Medicare 
beneficiaries. Under their current performance-based contracts, QIOs 
are working to prevent failures and delays in delivering services for 
breast cancer, diabetes, heart attack, heart failure, pneumonia, and 
stroke. These efforts have already decreased mortality for heart attack 
victims. In assessing projects, hospitals should consider the number of 
patients affected, range of services covered, the projected magnitude 
of the benefit to individual patients, as well as the actual changes 
achieved by the project versus the actual changes achieved by 
participants in the QIO project. Any improvements in care made by 
hospitals working with the QIOs on their projects would transfer to 
better care and services to all patients served by these hospitals. 
Although hospitals are not required to participate in QIO projects, the 
hospital must document what quality projects are being conducted, the 
reason for conducting these projects, and that the measurable progress 
achieved on these projects demonstrate that the projects are of 
comparable effort. A hospital can compare its own projects to QIO 
cooperative projects if the following techniques are used as guidance:
    [sbull] Improvement Projects--These projects are based upon the 
hospital's own assessments of its performance and show measured, 
sustained results that actually benefit patients. Because most 
organizations identify more improvement opportunities than they can 
initiate, improvement project priorities have to be set. These 
priorities must be endorsed by the hospital's governing body. Although 
we do not require a specific number of projects, we do expect the 
number of distinct improvement projects conducted annually to be 
proportional to the scope and complexity of the hospital's program. 
JCAHO states in its Comprehensive Accreditation Manual for Hospitals 
that certain criteria--the expected impact on performance; and the 
selection of a high-risk, high-volume, or problem-prone process to 
monitor-- are helpful in setting project improvement priorities. We are 
adopting a parallel philosophy by specifying at Sec.  482.21(c) that a 
hospital must prioritize its performance activities, which must focus 
on high-risk, high volume, or problem-prone areas; consider the 
incidence, prevalence, and severity of the problem in those areas; and 
affect clinical outcomes, patient safety, and quality of care. 
Therefore, we are giving the hospital the flexibility to determine the 
areas that require performance projects.
    [sbull] Quality Improvement Organization Projects--There are two 
basic areas of consideration used when establishing criteria for 
selection of QIO projects: identifying clinical topics and prioritizing 
clinical topics. These criteria were designed to ensure that a project 
has the greatest likelihood of significantly impacting the health 
outcomes of Medicare beneficiaries. Hospitals should utilize these same 
criteria in determining which projects best encompass the needs of 
their particular hospital, and in determining if projects identified by 
the hospital would be comparable to the expected outcomes of those 
identified by their QIO.
    Comment: Many commenters understood that the proposed requirement 
would mean that hospitals would have to demonstrate they are doing as 
``good of a job'' as a QIO if they chose not to participate in QIO 
projects. These commenters, however, stated that this process would be 
burdensome for hospitals, and would be counterproductive to the goal of 
establishing positive cooperative relationships.
    Response: We disagree. The requirement is to demonstrate a 
comparable effort. Since the requirement is to invest equal effort, the 
following material is included as guidance only as how to better make 
these decisions.
    There are four criteria that QIOs use to assess when identifying 
clinical topics: prevalence, science, measurability and the opportunity 
to improve care. These criteria address the

[[Page 3442]]

issues central to identifying appropriate clinical topics and quality 
indicators. The remaining criteria are relevant in establishing 
priorities among those clinical topics that meet the first four 
criteria (essentially, determining how you can best allocate limited 
resources to obtain the greatest improvement for the most 
beneficiaries). We are providing additional guidance regarding the use 
of criteria for identifying clinical topics as follows:
    [sbull] Prevalence, Incidence and Disease Impact--The burden 
(morbidity, mortality) of the clinical condition or medical procedure 
under consideration is great for the population affected. The burden 
within a subpopulation (for example, minority, disabled, at-risk) may 
be another consideration that is taken into account.
    [sbull] Science--There should be scientific consensus through 
multiple independent observations or clinical trials that changing a 
process or procedure of care will measurably improve patient outcomes. 
Note that we are adopting the operational definition of the term 
``scientific consensus'' by the Office of Medical Applications of 
Research in the Office of the Director of the National Institutes of 
Health as follows:

* * * (T)he (consensus) statement reflects the unified view of a panel 
of thoughtful people who understand the issues before them and have 
carefully examined and discussed the scientific data available on these 
issues. The creative work of the panel is to synthesize this 
information, along with sometimes conflicting interpretations of the 
data, into clear and accurate answers to the questions posed to the 
panel.

    [sbull] Measurability--The process(es) or outcome(s) of care for 
the topic can be stated in clearly defined, discrete, and quantifiable 
data elements from data sources which are valid and reliable; 
accessible in a timely manner; from appropriate care settings; and when 
necessary, span the continuum of care. In addition to the final 
measures of outcome, interim measures of progress toward achieving the 
quality improvement goal are desirable.
    [sbull] Opportunity to Improve Care--Not only should the process or 
outcome be measurable, there should be a gap between current 
performance and what can reasonably be achieved. The wider the gap 
between the present situation and what is feasibly achievable, the 
greater the opportunity is for improvement. Additionally, there must be 
a feasible means of narrowing that gap. Merely measuring the problem is 
not sufficient; you must also be reasonably certain your actions can 
improve the situation.
    Clinical topics meeting the above criteria should be further 
prioritized. The following criteria should be helpful in that process. 
Although it is likely that no topic will consistently meet all of the 
criteria, proposed topics can be compared on the basis of the number 
and degree to which the criteria are met.
    [sbull] Previous Projects or Pilot Studies--Demonstrate or provide 
a citation that demonstrate previous experience with the proposed 
project methodology or demonstrate that a project of similar design can 
reasonably be expected to improve healthcare outcomes. Potential 
priority topics may have been the subject of previous successful 
projects by QIOs or other organizations. Here, the focus is on 
selecting topics for which quality improvement has previously been 
demonstrated or on replicating successful project methodologies.
    [sbull] Adequate Program Resources--Consider whether you have 
adequate resources (time, personnel, and funding) to implement the 
quality improvement project. Alternative potential projects with 
similar costs should be compared for their relative potential benefit. 
Whenever feasible, topics that make use of existing data sets should be 
selected.
    [sbull] Availability of Partnerships--Select topics that allow you 
to collaborate with other providers and national, regional, and local 
organizations with similar goals. Collaboration with other 
organizations is encouraged for several reasons: planning, 
implementation, and analytic costs can be shared; planned, coordinated 
differences in project methods can be compared for efficacy and cost; 
local lessons learned can be shared and compared; and ideas for second 
and subsequent improvement cycles can be gathered.
    [sbull] Ability to Enable or Facilitate Ongoing Quality 
Improvement--Select topics and interventions that are likely to foster 
or enhance the development of quality improvement efforts which extend 
to care processes and conditions beyond those targeted by the 
improvement project. Some topics may be selected, in part, because of 
the learning value to the intended user (for example, demonstrating 
principles and methods that can be applied by the user to other topics) 
and the ability to sustain the improvements that they trigger.
    [sbull] Likelihood of Success (Readiness)--Identify topics that are 
of interest to the relevant stakeholders who will be asked to make 
improvements. This criterion recognizes the fact that significant 
improvement is not likely to occur if some pivotal individuals (for 
example, chiefs of Medicine, department heads, and clinical leaders) do 
not welcome or are not capable of participating in the project.
    Comment: Several commenters stated that the regulation should 
eliminate the requirement to use QIO data. Others suggested that 
hospitals, especially rural hospitals, should be required to only use 
QIO data that is relevant to its own QAPI programs.
    Response: A hospital is not required to use QIO data. The QAPI 
program must incorporate quality indicator data that may include data, 
for example, QIO data or other relevant data.
    Comment: Several commenters stated that the quality of care and 
patient outcomes should be the focus of the QAPI program, not the usage 
of specific data. Some commenters stated the proposed data requirement 
was too prescriptive and unclear. Others stated that many providers are 
unaware of what ``QIO data'' is, how to access it, and the associated 
costs, if any. Several commenters requested this provision be removed.
    Response: As stated previously, there is no requirement to use QIO 
data. QIO data is generally relevant information submitted to (or 
received) from the hospital's QIO. It can be a good source of quality 
indicator data to inform the hospital of areas where improvements are 
necessary. It is important that each quality improvement project have 
valid and representative baseline data; however, that baseline data may 
be from QIO data or from another source.
    Comment: A commenter stated QIO cooperative projects, rules, and 
policies are already established and stated referring to them in 
regulatory text is unnecessary.
    Response: As stated before, the QIOs are making great strides in 
national quality projects; however, hospitals are free to work on 
projects of their own design as long as the effort is comparable to QIO 
projects. Our intent is to allow hospitals the greatest flexibility, by 
offering options and examples.

F. Assessment of Compliance and Enforcement

    Through our survey process, we intend to assess whether hospitals 
have all of the components of a QAPI program in place. The SAs will 
expect hospitals to demonstrate, with objective data, that improvements 
have taken place in actual care outcomes, processes of care, patient 
satisfaction levels, hospital operations, or other performance 
indicators.
    Comment: Many commenters strongly supported our proposal to 
require,

[[Page 3443]]

through the survey process, an assessment of the hospital's success in 
using performance measures and objective data to demonstrate 
improvements have occurred.
    Response: We are encouraged by the comments that support the 
proposed survey focus for the QAPI requirements. Further, we recognize 
the need for appropriate training of our surveyors. We do not intend 
for surveyors to judge the measures used by a hospital. Instead, we 
will train the SAs to assess the hospital's success in its own efforts 
to improve its performance. The surveyors will ensure that the number 
of distinct successful improvement activities conducted annually are 
proportional to the scope and complexity of the hospital services, 
operations and patient acuity, and that improvement activities 
demonstrate sustained improvement over time.
    Comment: A commenter stated JCAHO should be involved in 
enforcement, emphasizing the hospital's familiarity with the current 
JCAHO requirements regarding QAPI.
    Response: We disagree. JCAHO is an accreditation organization that 
sets healthcare standards but it does not have the direct authority to 
enforce our regulatory requirements. We also note that compliance with 
our quality standards is assessed either through an accreditation 
process that we have determined meets or exceeds our requirements or 
through the survey and certification process conducted by SAs under 
contractual agreements with us. Ultimately, we are responsible for 
enforcing our own requirements; and therefore have the following 
hospital quality oversight responsibilities: (1) Being a prudent 
purchaser of quality hospital services; (2) establishing minimum 
standards to ensure the health and safety of our beneficiaries through 
the CoPs; (3) ensuring that hospitals are in compliance with the CoPs; 
and (4) promoting quality improvement in hospitals.
    Comment: Many commenters expressed concern over the lack of clarity 
regarding the specific documentation hospitals are required to provide 
to surveyors to indicate compliance on surveys and the correlation of 
this information in determining how these regulations improve and 
protect the quality of care and increase patient satisfaction. 
Commenters also questioned the hospital's ability to deny access to 
information collected for quality activities, citing confidentiality 
and fear of disclosure.
    Response: As previously stated, surveyors will not judge the 
various measures used by a hospital in its QAPI program. In general, a 
hospital should maintain materials and documentation that it deems 
necessary to objectively demonstrate its QAPI goals and outcomes to a 
surveyor. The surveyor should, at a minimum, expect a hospital to have 
documentation that describes the program; assessment information 
(data); the rationale for prioritized improvement projects; and the 
progress that has been achieved. The SAs and we have the legal 
authority to review records pertaining to the operation of the 
provider, including patient medical records (including, medical error 
reports, and peer review information), when these documents are 
necessary to determine whether the provider is in compliance with the 
statutory and regulatory requirements for Medicare and Medicaid 
participation. Section 1864 of the Act authorizes SAs to determine 
whether an entity meets hospital qualification under section 1861 of 
the Act. Included in these qualifications are requirements concerning 
patient records, hospital administration, and medical and nursing 
services. The surveyor must have access to the hospital and patient 
records as necessary to determine compliance for participation in the 
Medicare program. Also, the facility denial of access to our surveyors 
or us may prevent us from determining that facility's compliance with 
program requirements. Therefore, under the statute and regulations, we 
may need to pursue termination proceedings.
    This information is protected by the provision of section 1106 of 
the Act, 42 CFR 401, as well as, the survey agency's responsibilities 
for protecting the confidentiality of documents, as set out in sections 
3300-3316 and 3318 of the State Operations Manual.

G. Responsibilities of the Hospital's Governing Body

    We proposed that the hospital's governing body, medical staff, and 
administrative officials are responsible for ensuring that the 
hospital-wide QAPI efforts address identified priorities in the 
hospital and for implementing and evaluating improvement actions.
    Comment: A commenter stated that all of proposed Sec.  482.25(b) 
should be deleted because it is included in the opening paragraph for 
the QAPI CoP.
    Response: Accountability and leadership are vital to any QAPI 
program, and the hospital's leadership (for example, administration and 
governing body) must provide the foundation for its establishment. 
There must be an explicit organizational goal that is demonstrated by 
clear leadership and support. With this, the hospital and its staff 
would be more likely to consider the quality program as a high priority 
and initiative. We have expanded the proposed standard entitled 
``Program Responsibilities'' and renamed it ``Executive 
Responsibilities'' to more appropriately reflect the scope and intent 
of this standard. The organization's governing body must have an 
ongoing commitment to creating safe systems of care. The IOM report, 
``To Err is Human,'' states, ``Senior level leadership should define 
program objectives, plans, personnel and budget, and should monitor 
QAPI activities by requiring reports to the executive committee and 
board of directors.'' The executive responsibilities standard clarifies 
that it is the responsibility of the hospital's governing body to 
establish a culture of safety and quality and to define the importance 
of QAPI activities throughout the institution. The culture of a 
hospital plays a critical role in how well patient safety and quality 
of care are viewed throughout the institution. The standard also 
requires the governing body to ensure that the hospital-wide QAPI 
efforts address priorities for improved quality of care and patient 
safety and that all improvement actions are evaluated.
    Comment: A commenter stated that the governing body should not be 
held accountable for the performance of independent contractors in the 
medical staff because the governing body lacks the scientific knowledge 
to judge physicians.
    Response: We are not asking, nor do we expect, the governing body 
to ``judge'' physicians or any member of the multidisciplinary team. 
The governing body is responsible for assuring that there is an 
ongoing, effective, internal QAPI program and that this program 
methodically identifies and addresses priorities in the hospital and 
initiates efforts to evaluate and address improvement actions. The 
analysis of these projects and events identified by the quality 
initiative is an integral part of the program. It is not a separate 
function performed by the governing body. We expect hospitals to learn 
from these efforts and initiate plans and actions to improve patient 
care outcomes, safety, and satisfaction.

H. Autopsies

    We proposed that hospitals must attempt to secure autopsies in all 
cases of unusual deaths and in the interest of medical, legal, and 
educational endeavors. The mechanism for documenting permission to 
perform an

[[Page 3444]]

autopsy must be defined. There must be a system for notifying the 
medical staff, specifically the attending practitioner, when performing 
an autopsy.
    Comment: A few commenters asked why we would give hospitals 
(instead of the medical staff) the responsibility for securing 
autopsies and then notifying the medical staff and attending 
practitioner. These commenters suggested that this authority be 
maintained under the auspices of the physician. Conversely, other 
commenters supported this shift of authority, but strongly opposed the 
elimination of the medical staff CoP, stating this group is essential 
for quality oversight of any hospital. There were other commenters that 
requested that we delete the autopsy requirements and administrative 
assessments. These commenters believe that these requirements were 
particularly burdensome and may have an adverse effect on patient care 
or are too difficult to measure.
    Response: We have removed the proposed standard for autopsies under 
the QAPI condition. However, we will retain the current autopsy 
requirements at Sec.  482.22. This requirement states that the medical 
staff should attempt to secure autopsies in all cases of unusual deaths 
and of medical, legal and educational interests.

I. Future Development of a Core Set of Evidenced-Based Standardized 
Measures for Hospitals

    We have a national strategy for standardizing performance 
measurement and data collection that is, in part, an outgrowth of the 
creation of a National Forum for Health Care Quality Measurement and 
Reporting (National Quality Forum (NQF)). In May 1999, the NQF was 
organized in the private sector and brought together private and public 
purchasers and stakeholders to reach a consensus on standardizing a 
national approach to performance measurement in healthcare. The NQF 
adopted the concepts of our guiding principles and incorporated them 
into its own national strategy to standardize performance.
    The three principles that guide our national performance 
measurement strategy are as follows:
    [sbull] Performance measures should be consumer- and purchaser-
driven. A major challenge for us is to determine value through quality 
measurement and to use the information to purchase better healthcare 
services for beneficiaries. This should be done through collaboration 
with other purchasers.
    [sbull] Performance measures and the collection tools needed to 
collect them should be in the public domain with a publicly held 
copyright. This means that the public good is served through a broader 
access to the measures and data collection tools. Further, the 
government and the public need unrestricted access to the measures and 
measurement systems to be able to adopt, collect, revise and report 
results to the public.
    [sbull] The content and collection of data and performance measures 
derived from that data should be standardized. Standardization leads to 
more useful information for consumers and purchasers and reduces the 
burden for providers and plans.
    Our performance measurement strategy is designed to achieve our 
mission of: (1) Providing consumer information that assists 
beneficiaries in making choices in healthcare; (2) setting process and 
outcome criteria to which plans/providers are held accountable; and (3) 
facilitating quality improvement activities at the program level 
focusing on national Medicare and Medicaid key clinical priorities at 
the plan and provider level.
1. Why Standardized Measures?
    Quality improvement is difficult to measure and accountability for 
quality improvement may be a new concept for some providers of care. A 
quality improvement program is developed from the collection of data 
within a facility that are analyzed and used internally to develop and 
measure the impact of standards of practice, processes, and systems. 
The organization learns to compare its measured performance results, 
using appropriate risk-adjustment techniques, with standardized 
benchmarks used nationally to evaluate how well it is doing compared to 
similar institutions across the nation. In order to develop these 
standardized benchmarks, we participate in pilot projects with our QIOs 
and accrediting bodies. We are committed to partnering with consumers, 
health plans, providers, purchasers, States, industry and professional 
representatives, and accrediting organizations over time, to identify 
key performance measures of quality that guide what institutions can 
measure internally for comparisons of standardized measures. 
Standardization of these measures is key to assure comparability of 
performance and to make these measures appropriate for accountability 
purposes. Further refinement and testing of select measures that are 
suitable for public reporting of comparisons of performance among like-
providers is part of the long-range plan for the use of standardized 
measures. Ultimately, a continuous process of refinement and 
flexibility in the selection of a core set of standardized measures is 
our long-term goal. The requirement for hospitals to conduct ongoing 
monitoring and evaluation of their internal processes and systems 
through the QAPI program will continue to be a part of the effort for 
improving the quality of care provided. Standardized measurements will 
complement QAPI, not replace it.
2. How Will This Program Be Implemented in Hospitals?
    We are engaged in multiple initiatives that address the development 
of a core set of evidence-based standardized performance measures, 
which will be universally applied to hospitals. One initiative is a 
pilot project where we intend to work with multiple partners, including 
the JCAHO and the QIOs, in the development of a core set of evidence-
based standardized performance measures, which are expected to be 
presented to the NQF for endorsement. Additionally, we are working with 
other organizations, like the NQF, on an initiative that will further 
the national private/public effort to standardize a core set of 
hospital performance measures that include patient safety measures. 
Until a core set of measures is developed, we expect hospitals to 
conduct their QAPI programs using pertinent objective measures of 
performance. Hospitals also have the opportunity to pursue measurement 
of clinical practices in focus areas of national high priority. One 
example of this could be a hospital's assessment of physician 
prescribing patterns in comparison to evidence-based clinical 
guidelines, in an effort to reduce the prevalence of antimicrobial 
resistant organisms.
3. Reporting
    Since the standardized measures project would involve the Federal 
government, as well as accrediting bodies and other organizations, its 
development would not only lessen the burden on hospitals but would 
also support our goal of developing a regulation that would be 
universally endorsed. In this process, we will determine how data could 
be collected, validated, and presented to the general public, and 
determine the impact of providing this type of information. In the 
December 19, 1997 proposed rule we stated the following:

    Under this proposed rule, we would require a hospital to engage in 
a quality assessment and performance improvement program that uses 
objective measures, but we are not

[[Page 3445]]

proposing that a hospital be required to participate in a system of 
performance measurement at this time * * * however, we intend to 
develop such a requirement for inclusion in our final rule and welcome 
public comments addressing the appropriateness of such a requirement or 
how it could best be structured.

    In this final rule, we are not setting a requirement for using and 
reporting on a core set of evidence-based performance measures. Once 
the evidence and methodologies to support a set of performance measures 
that can be used nationwide are available, we will assess issues such 
as commonality of data elements, standardization, and reporting 
systems. We will inform hospitals and the public of the specifics of 
and the methods for reporting these performance measures via future 
rulemaking. This will give the public the opportunity to comment on the 
core measures before implementation.
4. Core Set of Standardized Performance Measures
    In the December 19, 1997 preamble to the proposed QAPI Condition, 
we also asked for responses and comments to seven questions we posed to 
the public regarding the development of standardized performance 
measures for hospitals.
    a. Question 1: Should CMS assume a leadership role in developing 
the measures?
    Comment: Several commenters stated that we should assume a 
leadership role in developing a national database of clinical outcomes 
accessible to all healthcare provider organizations. We received 
comments from providers as well as practitioners stating that it was 
the Federal Government's responsibility to set quality standards for 
the nation with its parallel roles of protecting consumers and 
supporting healthcare professionals.
    Response: We remain committed to our leadership role of protecting 
consumers and supporting healthcare professionals. We are exploring the 
concept of requiring Medicare- and Medicaid-participating hospitals to 
report on a standardized set of performance measures that can be used 
nationwide. Currently, we are negotiating the terms of a pilot project. 
The pilot project will be conducted through a collaborative effort 
among several States, accrediting bodies, and QIOs. These organizations 
will evaluate a set of standardized performance measures that can be 
used nationwide. We believe the outcome of this project will yield 
valuable information regarding the efficacy of data, as well as the 
effectiveness of requiring Medicare- and Medicaid-participating 
hospitals to report on a standardized set of performance measures that 
can be used for national comparative studies.
    Comment: Many commenters stated our role should be limited to 
convening a group of experts and stakeholders to develop performance 
measures, while others argued that we should not be involved in this 
process or limit its role to nonaccredited hospitals. Some commenters 
believed that we should not enter into public/private partnerships to 
develop measures, stating high accreditation costs would be passed on 
to consumers. While others stated an outcome measure database should be 
developed with input from CMS regional office and State agency staff.
    Response: We have established a performance measurement leadership 
agenda to pursue standardization of hospital performance measurement. 
We plan to work with organizations like the NQF, hospital associations, 
and accrediting organizations to standardize a core set of hospital 
performance measures. Through the QIO Program 6th Scope of Work, we 
currently have performance measures for pneumonia, heart failure, 
stroke, acute myocardial infarction, diabetes, and breast cancer to 
offer as a starting point. As stated earlier, we are exploring 
conducting a pilot program to test these and other standardized 
measures. One goal of the QIO program is to improve the quality of care 
to Medicare and Medicaid beneficiaries, which is parallel with our 
oversight responsibilities.
    Before proposing new provider requirements, we routinely network 
with healthcare providers, regional and State agency staff, and other 
interested stakeholders so that what is proposed reflects optimal 
provider practices, to yield optimal results. Finally, although the 
majority of commenters favored a standardized approach, opinions varied 
with respect to whom should take the leadership role in the development 
of these standards.
    Comment: Many commenters disagreed with our goal of creating 
standardized performance measures. These commenters stated this 
approach should not be required and strongly felt that a national 
quality assessment database should not be established because 
comparisons between hospitals will not be meaningful or reliable. 
Additionally, other commenters expressed concern that there is no basis 
for recommending one indicator over another, and that reliable and 
valid measures do not currently exist. It was further argued, that the 
infrastructure and data elements for performance standards are not 
available, stating that clear data definitions are needed before a core 
data set may be implemented to increase the hospital's understanding of 
what is being measured and how it is being measured.
    Response: As we stated previously, we believe that standardization 
of these measures is key to assuring comparability of performance and 
to making these measures appropriate for accountability purposes. 
Further refinement and testing of select measures that are suitable for 
public reporting of comparisons of performance among like-providers is 
part of our long-range plan. Ultimately, a continuous process of 
refinement and flexibility in the selection of a core set of 
standardized measures will benefit both hospitals and beneficiaries as 
individual hospital performance on standardized measures will invoke 
appropriate improvement activities to improve overall patient care.
    b. Question 2: How should CMS proceed to develop and implement the 
measures?
    Comment: Several commenters stated that QIOs should formalize a 
national database.
    Response: We plan to utilize all available resources, including 
QIOs and organizations like the NQF, to formalize and finalize a source 
for comparable data to be used nationwide. We currently have some data 
entry software systems that we offer to providers. The systems have 
tutorial help for users to gain an overall understanding of the 
applications, with emphasis on designing data entry systems, explaining 
how to create an analysis, and evaluating the quality of the abstracted 
data.
    Comment: Some commenters were concerned with the impact that the 
requirements would have on rural hospitals and suggested that we defer 
to JCAHO's ORYX. The commenters believe that ORYX recognizes these 
needs.
    Response: We do not agree with deferring to the JCAHO to establish 
a set of standardized performance measures for Medicare- and Medicaid-
participating hospitals. However, we recognize the JCAHO's efforts with 
regard to performance measures and we acknowledge the need to 
collaborate with accrediting bodies to facilitate the most appropriate 
principles for standardizing performance measures. While we are aware 
that there is no single system available for the measurement of a 
hospital's performance, we are also aware of efforts by the hospital 
industry to find ways to increase the use of the systems

[[Page 3446]]

that are currently available. In response to the unique needs of rural 
hospitals, we want to assure these hospitals that our goal for the 
utilization of performance measures considers the hospital's size and 
available resources. We will take into account the special 
circumstances faced by rural hospitals and ensure their needs are 
considered when developing performance standards in the future.
    Meaningful performance programs are often derived from simple 
designs that use direct and uncomplicated measures. One of the factors 
that has impeded this progress is the lack of standardization where 
possible. These comments reinforce the importance of our adoption of a 
national performance measurement strategy.
    Comment: Commenters stated that we should defer to the private 
sector until the field of clinical outcome measures has matured, 
stating there is a lack of consensus in this area. Commenters suggested 
that we clarify our intent by addressing such issues as data element 
definition, risk-adjustment methodologies, audit criteria, and 
modification of existing commercial monitoring systems before mandating 
a Federal requirement.
    Response: We agree that these issues must be addressed before 
proceeding to mandate utilization of a core set of performance 
measures. We plan to work with all of our partners, stakeholders, and 
other interested parties in developing these outcome measures and 
believe this will provide scientific evidence needed for our national 
performance measurement strategy.
    Comment: A commenter stated we must develop an outcomes survey 
process independent of JCAHO, noting current significant 
inconsistencies between JCAHO and State survey agency findings.
    Response: We intend, through our survey process, to assess the 
hospital's success in using performance measures principally in terms 
of whether the hospital can demonstrate with objective data that 
sustained improvements have taken place. We recognize the need for 
surveyor training and education in the area of quality improvement. We 
do not intend and would not be in a position to judge the measures 
ourselves. Instead, we would assess the hospital's use of these 
measures to improve its performance. Whenever the state agency 
surveyors enter the hospital to conduct a survey they will evaluate the 
hospital's program and its own internal evaluation process. When there 
is an onsite review of the hospital's QAPI program, the surveyors 
determine whether or not the hospital is meeting the QAPI CoP 
requirements. Following the existing survey process and procedures, if 
the SA determines that the hospital is significantly out of compliance 
with the QAPI CoP requirements, the hospital will be scheduled for 
termination from the Medicare and Medicaid programs. The hospital is 
then given the opportunity to submit a plan of correction. The SA would 
conduct a follow-up survey to assess whether the hospital is now in 
compliance with all of the requirements, prior to the actual 
termination taking place.
    Regarding the survey process, our survey process is developed 
independent of JCAHO's. In addition, we have an ongoing effort with 
JCAHO to address inconsistency in survey findings.
    c. Question 3: If CMS does assume a leadership role in this area 
and hospitals invest in the development of multiple systems, would the 
overall burden be greater than if a single system had been imposed at 
the outset?
    Comment: The majority of commenters focused on the burden that this 
requirement would impose on hospitals and the healthcare industry. 
These commenters argued that the increased burden is due to the lack of 
standardization among technology companies and programs, not due to 
lack of interest and willingness of providers. These commenters offered 
the suggestion that we develop and require a single set of performance 
measures, but allow hospitals to develop their own system as long as it 
meets established criteria. In like spirit, commenters suggested 
requiring companies that develop approved systems to include specific 
attributes of the prescribed measurement system that will be evaluated. 
The overall tone of the comments genuinely stressed the need for 
adequate time for any system implementation once decided. Commenters 
also requested an exemption for rural hospitals stating the needs of 
these facilities are unique and would not be best served by such a 
standardized system.
    Response: We will consider all possibilities that will reduce 
burden and enhance a hospital's ability to successfully transition to a 
single system. We continue to consider the geographical and financial 
needs of individual hospitals, but we strive to offer the same basic 
protections and safeguards to all patients regardless of the hospital 
in which they receive services.
    Comment: A commenter stated that we should use available resources, 
such as Medicare-contracted utilization and quality assurance 
organizations, QIOs, and other resources. This commenter requested that 
we outline the current resources that are available to hospitals via 
these organizations.
    Response: It is our intention to avail ourselves of quality 
assessment resources. We have considered integrating standardized 
measurement data sets into a system that could provide access, by an 
institution, to data reported to a QIO.
    d. Question 4: If CMS does not assume a leadership role in this 
area and individual hospitals adopt multiple systems that produce 
nonstandardized data, to what extent would it be difficult to make 
comparisons between hospitals?
    Comment: Several commenters strongly disagreed with our proposal to 
allow multiple systems to be used in making comparisons between 
hospitals. They believe that inherent differences in systems and lack 
of uniformity provide too many variables to accurately compare 
hospitals.
    Response: We understand the commenters' concerns. Many hospitals 
will need more experience with data collection methods and in the 
design, implementation, and monitoring of improvement projects. We 
realize the difficulty in assessing comparability of hospital 
performance without the requirement of hospitals to utilize like 
systems. As stated in the December 19, 1997 preamble of the proposed 
rule, we sought comment on establishing evaluation criteria that must 
be a part of the system or systems the hospital may choose.
    Currently, hospitals across the country use a wide variety of 
measurement systems and performance indicators to assess the quality of 
care delivered. The number of these performance measures has increased 
in recent years. Hospitals are committing substantial and increasing 
resources for data collection and measurement, as both consumers and 
purchasers demand greater accountability from their healthcare 
providers. Since the various measures are not standardized, the data 
cannot be used to make accurate comparisons about the quality of care 
among hospitals.
    In December 2002, the American Hospital Association (AHA), the 
Federation of American Hospitals (FAH), and the Association of American 
Medical Colleges launched a national voluntary initiative to collect 
and report hospital quality performance information. This effort is 
intended to make critical information about hospital performance 
accessible to the pubic and to inform and invigorate efforts to

[[Page 3447]]

improve quality. Voluntary reporting is an essential first step to 
realize this goal. An important component of this coordinated effort is 
the identification and development of tools for standardizing data 
collection and making these tools readily available to the industry. We 
have tools available for utilization that are refined as needed, to 
include relevant data elements that capture the information needed or 
the clinical area under assessment. For example, data elements used for 
collecting information about a patient's experience with acute 
myocardial infarction would include portions that differ from data 
elements needed to collect information about a patient's experience 
with pneumonia. We recognize that not only are the tools important, but 
even more important are clear definitions to allow consistent 
categorization and counting of events or values for measurement. Future 
priorities and measures will be informed by a forthcoming report from 
the IOM that will identify 15 to 20 priority areas for quality 
improvement. Measures will be drawn from those endorsed by NQF; 
measures will be sought that respond to the six aims set forth in IOM's 
``Crossing the Quality Chasm,'' and where possible will include cross-
cutting measures. The entire spectrum of stakeholders will be engaged 
to work toward focusing national public reporting of hospital 
performance on agreed-upon priorities and NQF-endorsed measures.
    Comment: Some commenters stated that JCAHO and NCQA have 
standardized indicator systems; and therefore, we should not proceed 
unless it can consolidate and remove existing systems. Numerous 
commenters stated that the burden should not be placed on the hospitals 
to invest resources in the development of individual hospital systems, 
in lieu of the increased resources needed for the collection and 
analysis of outcome data.
    Response: We are aware that there may be costs assumed by hospitals 
in choosing different systems. The methods and processes for collection 
of data vary widely. Our interest lies within the ability of hospitals 
to be measured against one another when different systems are used. We 
did not specifically propose that hospitals be required to participate 
with other hospitals in a system of performance measurement. Although 
we stated this was our intention for inclusion in the final rule, 
standardized outcome measures that can be used nationwide have not been 
established; therefore, we have not set forth this requirement in the 
final rule. Regarding the existence of proprietary indicator systems, 
we have no authority to ``remove'' these systems.
    e. Question 5: Should CMS require or encourage hospitals to use 
standardized measures that some accredited hospitals are using?
    Comment: Some commenters supported using standardized measures used 
by accredited hospitals. In contrast, many commenters believed that the 
measures used by accredited hospitals are outdated.
    Response: We intend to require that hospitals use standardized 
measures. We are committed to advancing the scientific effort already 
underway nationally to standardize the specifications of measures (that 
is, the data dictionaries and other elements that define quality 
indicators). We are working in partnership with the QIO program, State 
initiatives, the NQF or similar organizations, and accrediting bodies 
in national efforts being conducted to identify and develop 
standardized specifications. These specifications would then be 
presented to the NQF or similar organizations for endorsement and 
subsequently published in future rulemaking. Our position is that any 
system of measures that incorporates these specifications would be 
acceptable for use by hospitals. Our concern focuses on how a measure 
of quality can be standardized for longitudinal comparative purposes 
among similar hospitals and includes public reporting. Purchasers and 
consumers benefit from the establishment of measures that could be used 
to publicly report hospital-specific performance across the full 
spectrum of hospitals in the United States. Hospitals benefit from a 
reduction in burden in data collection and measurement, and an ability 
to obtain comparative data to evaluate and improve their performance. A 
collaborative effort to develop standardized measures will provide the 
basis for an initial measurement set for assessment and reporting of 
hospital performance. Having purchasers and consumers provide the 
leadership in defining key content areas for the first set of measures 
and obtaining consensus around these validated measures as a 
standardized reporting set would be a major achievement in improving 
the quality of care in the nation. For example, standardized measures 
of medical errors could be used widely as part of a hospital's medical 
error reduction program and ultimately for accountability. We believe 
that requiring standardized data collection and reporting on consensus-
developed, scientifically based measures, is an opportunity for 
hospitals, purchaser and consumers to work jointly to improve the 
quality of hospital care. The precise measures to be required will be 
determined by the Secretary and communicated to the public for comment 
before they are initiated.
    Comment: Some commenters stated that the area of performance 
improvement needs further development before we require specific 
measures.
    Response: We agree that there is not a wide menu of available 
performance measures that have proven to be reliable and valid that 
could be offered to a hospital to use. Currently, we have not set forth 
requirements; therefore, hospitals will be able to evaluate themselves 
on their own data.
    f. Question 6: Would it be appropriate for CMS to include 
``placeholder'' language in the revised CoPs concerning the eventual 
need for hospitals to report relevant data, or is this premature?
    Comment: The majority of commenters agreed with our plan and 
supported the goals and objectives of a core set of standardized 
measures. Some commenters believed that these measures should not 
replace organization-specific projects. They stated that the technical 
issues surrounding data definitions, uniform systems, and burden, 
specifically regarding the ability of hospitals to utilize existing 
information systems, would have to be addressed.
    Response: In the preamble of the proposed rule, we solicited public 
comment on standards regarding the development and implementation of a 
standardized set of performance measures to be used nationwide. At that 
time, we did not propose a requirement for hospitals to participate in 
a system of performance measurement with other hospitals but we stated 
that we intend to in the future. We recognize the specific issues that 
need to be addressed (for example, technical issues surrounding data 
definitions, uniform systems, and costs) before implementation of a set 
of standardized performance measures that can be used nationwide. 
Hopefully, these measures will help hospitals to identify 
organizational-specific projects.
    Comment: Many commenters supported our approach to include 
placeholder language, because commenters believe it will take a minimum 
of 2 years for us to develop standardized measures. Some commenters 
stated placeholder language is premature pending extensive research to 
insure the accuracy of standardized data, concluding that the QAPI 
condition be modified at a later date as necessary. Others felt this 
unnecessary

[[Page 3448]]

due to the requirement for accrediting bodies to report data.
    Response: We remain committed to developing a core set of 
standardized performance measures but we have decided not to include 
``placeholder'' language in this final rule. A core set of standardized 
performance measures, as well as the method of reporting these 
measures, will be defined in a future rulemaking document.
    g. Question 7: If CMS should include ``placeholder'' language, what 
changes should we make to these proposed requirements to set the stage 
for the development and implementation of such a system?
    Comment: Several commenters wanted to know our projected timeframes 
for implementation. Others requested that we clarify whether 
standardized reporting and performance measures will be based solely on 
standardized clinical data and not on individual programs or projects 
at the hospital level.
    Response: We realize that hospitals will need more experience with 
data collection methods for standardized measurement. Implementation 
timeframes for the standardized performance measures and the data to be 
reported will be presented to the public for comment in a separate 
rulemaking document.
    Comment: Many commenters stated that the primary purpose for 
establishing a core set of measures is not quality improvement, but 
rather public accountability and data comparison. These commenters 
stated that meaningful improvement is best achieved by allowing 
caregivers the flexibility to identify opportunities for improvement. 
Commenters added that our focus should be on the hospital's mission and 
patient quality of care needs.
    Response: We agree that a major reason for reporting on 
standardized data and core measures is public accountability and data 
comparison. However, we do not believe this QAPI regulation prohibits 
the hospital from exploring its own methods and implementing actions 
that are specific to its institution. Furthermore, we are committed to 
increasing consumer and patient awareness and facilitating the use of 
healthcare quality information in making key healthcare decisions.
    Comment: A commenter suggested that we develop a preliminary set of 
measures from data on adverse patient events while a complete set of 
measures is being developed.
    Response: After the release of the IOM report, ``To Err is Human,'' 
as well as the response by the QuIC, the NQF was given the task of 
identifying a list of adverse events that should never occur, however, 
the task has not been completed. We expect, as a part of the hospital's 
error reduction program, that each hospital will assess institutional 
adverse events and incorporate this information into its QAPI. For 
example, if the hospital has had patients that experience adverse 
reactions, serious harm, or death due to the incorrect administration 
of intravenous potassium, the hospital should perform an analysis of 
these events to determine the process that allowed these mistakes and 
initiate a plan to correct the problem.
    Comment: Several commenters stated that we should defer to JCAHO 
and not create a separate system of performance measures for hospitals, 
stating the proposed requirement is not consistent with JCAHO's agenda 
for change.
    Response: Although we value JCAHO's role in hospital oversight and 
quality improvement initiatives, we have responsibility and 
accountability for quality of care in Medicare- and Medicaid-
participating hospitals. We believe that we must directly establish a 
system of performance measurement for hospitals and maintain a 
leadership role in hospital oversight. In addition, we are aware of 
JCAHO's agenda for change. Our representatives sit on key measurement 
committees and on the various JCAHO clinical advisory panels charged 
with selection of the initial set of measures. CMS and JCAHO will 
strive to minimize burden on hospitals through the selection of a 
single set of core measures. Finally, we are incorporating criteria 
that will create a minimum amount of burden on hospitals, especially 
those hospitals that are subject to more than one method of 
surveillance.
5. Nonaccredited Hospital Participation in Performance Measurement
    We also invited comment on whether we should require nonaccredited 
hospitals to participate in one or more performance measurement systems 
as part of their overall QAPI program (both internally and externally). 
We received a number of comments on this provision.
    Comment: Many commenters supported the requirement that these 
hospitals participate in a facility-specific or internal QAPI program. 
They also stated that for external participation (that is, comparison 
against national benchmarks) it is premature to propose a specific set 
of quality indicators or performance measures for nonaccredited 
hospitals.
    Response: We do not expect the same utilization of performance 
measures for small hospitals as we would for large hospitals. We 
recognize that collection and analysis of clinical outcome data may 
represent an increased burden on some hospitals, particularly on the 
nonaccredited hospitals that are routinely subject to our survey 
process. These nonaccredited hospitals typically are smaller than 
accredited hospitals, located in more sparsely populated areas, and may 
not have the resources for extensive data gathering and reporting. 
Given the uncertain readiness of some individual hospitals to comply 
with performance expectations under this final rule, quantitative 
analysis of the effects of these proposed changes is not possible. 
Hospitals with QAPI programs already in place that meet these 
requirements, at a minimum level if not in whole, may see little 
increased burden. However, nonaccredited hospitals are still required 
to follow this CoP as participants in the Medicare and Medicaid 
programs. Rather than mandating specific areas of assessment and data 
collection, this final rule gives hospitals flexibility to identify 
their own measures of performance for the activities they identify as 
priorities.
    Comment: Some commenters offered suggestions that hospitals be 
allowed the option of using measures developed by QIOs because these 
measures will have wider application.
    Response: Although hospitals are not required to participate with 
QIOs on their projects, we recommend that the QIO be used as a 
resource. By working with its QIO, a hospital will reap the benefits of 
a more standardized, streamlined, and cost-effective approach to 
quality improvement.

J. Reporting

    As stated earlier, since the standardized measures project would 
involve the Federal government, as well as accrediting bodies and other 
organizations like the NQF, its development would not only lessen the 
burden on hospitals but would also support our goal of developing a 
regulation that would be universally endorsed by all. In that process, 
we would determine how data can be collected, validated, and presented 
to the general public, and determine the impact of providing this type 
of information. In the proposed rule, we considered requiring hospitals 
to report certain data elements (for example, patient falls, injuries, 
and medication errors) to us to serve as the basis of a performance 
database, which could then be used for provider improvement, consumer 
information, and other

[[Page 3449]]

purposes; however, sufficient work in this area has not been performed. 
Therefore, we have not included a requirement for hospitals to report 
certain data elements in this final rule. As standardized measures are 
developed and implemented, they will complement, not replace the QAPI 
process.
    Comment: Commenters cited the importance of the provision requiring 
hospitals to share collected information with patients and consumers, 
and supported information sharing to facilitate decisions based on 
quality. Many of these commenters felt as though it was not only 
prudent, but the Federal government's responsibility to ensure the 
availability of this information.
    Response: We agree. We have the responsibility to increase 
awareness of patient safety issues and the role beneficiaries can play 
in enhancing patient safety in general. We would like to enable 
patients and family members to become more involved in their care and 
to be active participants in the decision-making that impacts their 
care. We support the development of patient safety messages and themes 
that can be used by healthcare purchasers, and consumers to guide their 
choices in the selection of quality healthcare.

V. Provisions of the Final Rule

    Since this final rule sets forth the requirements for the QAPI CoP 
only, we are placing the QAPI CoP with the existing hospital CoPs under 
Subpart C--Basic Hospital Functions at Sec.  482.21 that will replace 
the existing Quality Assurance requirements. The five standards in this 
CoP will set forth the requirements for the development of an effective 
ongoing hospital-wide QAPI program that will focus on indicators 
related to improve health outcomes and prevention, and reduction of 
medical errors. As with the existing CoPs, the enforceability of the 
CoPs will be rooted in the evidence found during the onsite survey. The 
requirements of the QAPI CoP are as follows:

Section 482.21

    This condition requires that hospitals must develop, implement, 
maintain, and evaluate their own QAPI programs. We have retained the 
provision requiring the hospital's QAPI program to reflect the 
complexity of the hospital's services and operations. We state that the 
QAPI program must be hospital-wide, ongoing and focus on indicators 
related to improved health outcomes. We also added language to-- (1) 
stress the importance of the inclusion of measures that foster the 
prevention and reduction of medical errors; and (2) require hospitals 
to maintain and demonstrate evidence of its QAPI program for review by 
CMS.

Section 482.21(a)

    The first standard, Program Scope, requires that a hospital's QAPI 
program include an ongoing program that shows measurable improvements 
in indicators for which there is evidence that they will improve health 
outcomes, and identify and reduce medical errors. There is also a 
provision that the hospital must measure, analyze, and track quality 
indicators, including adverse patient events, and other aspects of 
performance that assess processes of care, hospital service and 
operations. We have deleted the proposed requirement for the mandated 
assessment of 12 minimum areas.

Section 482.21(b)

    The second standard, Program Data, provides the framework and 
clearly defines the expectations for hospitals regarding data the 
hospital must use as part of its QAPI program. It contains the 
provisions presented in the proposed rule, that described the type of 
data to be used including patient care and other data, for example, 
information submitted to, or received from, the hospital's Quality 
Improvement Organization.

Section 482.21(c)

    The third standard, Program Activities, has been added to clarify 
the hospital's responsibilities. This section contains a requirement on 
setting priorities for performance improvement, previously found in the 
proposed rule at Sec.  482.25(a)(5), with some modifications based on 
comments. The first requirement under the program activities standard 
requires hospitals to set priorities for improvement, considering 
prevalence and severity or incidence, or both, of high-risk, high 
volume or problem prone areas, and giving priority to improvement 
activities that affect health outcomes, patient safety, and quality of 
care. A hospital's performance improvement activities should track 
adverse patient events, analyze their causes, and implement preventive 
actions and mechanisms of feedback and learning throughout the 
hospital. This must include incidents of medical errors and adverse 
patient events. Finally, hospitals are required to take actions that 
result in performance improvements. After implementing actions, the 
hospital must measure its success and track its performance to assure 
that improvements are sustained.

Section 482.21(d)

    The fourth standard, Performance Improvement Projects, has been 
added to distinguish the requirements for improvement projects from 
program activities as requested by the commenters. We require that the 
number of distinct improvement projects conducted annually must be 
proportional to the scope and complexity of the hospital's services and 
operations. Demonstration of minimum effort will be achieved by 
requiring hospitals to document what projects they are conducting, the 
reason for conducting these projects, and measurable progress achieved. 
The standard does not require hospitals to participate in a QIO 
cooperative project but its own projects are required to be of 
comparable effort.

Section 482.21(e)

    The fifth standard, Executive Responsibilities, clarifies our 
intent to hold the hospital's leadership responsible and accountable 
for QAPI activities. We have maintained the requirement ensuring that a 
hospital-wide QAPI program addresses priorities and implements, 
maintains, and evaluates all improvement actions. This standard is 
further strengthened by requiring the hospital's governing body to 
provide strong, clear, and visible attention to setting expectations 
for safety and for allocating adequate resources for measuring, 
assessing, improving, and sustaining the hospital's performance and for 
reducing risks to patients.

VI. Regulatory Impact Analysis

A. Introduction

    We have examined the impact of this rule as required by Executive 
Order 12866 and the Regulatory Flexibility Act (Pub. L. 96-354). 
Executive Order 12866 directs agencies to assess all costs and benefits 
of available regulatory alternatives and, when regulation is necessary, 
to select regulatory approaches that maximize net benefits, including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity.
    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612), unless we certify that a final rule would not have a 
significant economic impact on a substantial number of small entities. 
For purposes of the RFA, small entities include small businesses, 
nonprofit organizations, and government agencies. We consider most 
hospitals small entities, either by nonprofit status or by

[[Page 3450]]

having revenues between $6 million and $29 million. Individuals and 
States are not considered small entities. We certify that this final 
rule will not have a significant impact on small entities.
    Also, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. That 
analysis must conform to the revision of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. We certify that this 
final rule will not have a significant impact on a substantial number 
of small rural hospitals.
    Section 202 of the Unfunded Mandate Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits for any 
rule that may result in an expenditure in any 1 year by State, local, 
or tribal governments, in the aggregate, or by the private sector, of 
$110 million. This final rule has no mandated effect on State, local, 
tribal governments, or on the private sector that reach the threshold 
of section 202.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct compliance costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications.
    In 1994, we invited all interested parties to a town hall meeting 
to discuss our plans to set forth regulations to establish a new 
approach to improving the quality of healthcare provided in hospitals. 
Parties from the Association of Health Facility Survey Agencies, 
hospital associations, and other stakeholders were in attendance. These 
agencies were given the opportunity to provide input and were generally 
in favor of our plans.
    We welcomed comments on our December 1997 proposed rule. We 
received a number of comments on our QAPI CoP but we did not receive 
any comments indicating that States would be adversely affected by this 
rulemaking.
    Thus, we have examined this final rule and have determined that 
this final rule will not have a negative impact on the rights, rules 
and responsibilities of State, local or tribal governments.

B. Anticipated Effects

    In December 1997, we proposed to revise all of the hospital CoPs 
that emphasized lessening Federal regulations to eliminate unnecessary 
structural and process requirements, to focus on outcomes of care, to 
allow greater flexibility to hospitals and practitioners to meet 
quality standards, and to place a stronger emphasis on QAPI.
    Within this newly revised CoP we proposed to establish a QAPI 
program that encompasses all hospital services and operations. We 
solicited comments on the QAPI provisions and received overwhelming 
support for its establishment. There was consensus among, provider, 
public, professional organizations, accrediting organizations, and the 
Congress that supported its establishment. The need again arose for a 
program due to serious concern regarding patient safety and medical 
errors after publication of the 1999 IOM's report along with the 
response to the report. These factors led us to set forth this final 
rule to ensure high quality of care in a safe environment in our 
nation's hospitals.
1. Effect on Hospitals
    Given the shift to regulatory flexibility, for the most part, we 
are not prescribing the exact process hospitals must follow to meet the 
regulatory requirements of the QAPI CoP. However, the following 
components must be established and maintained in the development of a 
QAPI program: hospitals will be required to have a QAPI program 
encompassing all services and operations that focuses on indicators 
related to improved health outcomes and the prevention and reduction of 
medical errors.
    Some hospitals may need to revise their existing programs to 
conform to this regulation; however, we do not believe this CoP will 
impose a significant economic burden above what hospitals are already 
doing to meet the current quality assurance CoP.
    Currently under Sec.  482.21, hospitals must ensure that there is 
an effective, hospital-wide quality assurance program to evaluate the 
provisions of patient care. Under the existing requirement hospitals 
must have a written plan of implementation, this plan must include all 
organized services and contractors. The hospital is also required to 
document appropriate remedial actions to address deficiencies found 
through the quality assurance program, as well as the outcome of the 
remedial actions. However, as a hospital's QAPI program matures, we 
expect that hospitals will be engaging in quality improvement 
activities in an expanding number of areas as resources are redirected 
from areas of program success to new areas, but existing improvements 
are sustained.
    This QAPI CoP focuses provider efforts on the actual care delivered 
to the patient, the performance of the hospital as an organization, and 
the impact of the treatment furnished by the hospital on the health 
status of its patients. In developing this CoP, we have included 
structure and process-oriented requirements only where we believe they 
are essential to achieving desired patient outcomes or preventing 
harmful outcomes. This approach is intended to incorporate into our 
regulations current best practices in well-managed hospitals, relying 
on each hospital to identify and resolve its performance problems in 
the most effective and efficient manner possible.
    This QAPI CoP is in fact an extension and modification of the 
existing quality assurance CoP found at Sec.  482.21. We anticipate 
that hospitals, both large and small, rural and urban, will or already 
use a variety of data to inform their internal QAPI programs. Some of 
these data may be measures designed by the hospital itself, while 
others will be developed through research or by consensus groups or 
other sources outside the hospital. Thus, the impact will vary 
according to each hospitals current quality improvement activities and 
programs. The impact will also vary and is subject in large part to 
their decision-making, current policies and procedures, and level of 
compliance with existing quality assurance regulations. It is important 
to note that due to the flexibility of these provisions, the extent of 
the economic impact of most of these requirements is dependent upon 
decisions made by the hospital. We believe that this CoP will minimize 
the administrative burden on hospital's to comply with detailed Federal 
requirements. Instead, this QAPI CoP will provide hospitals with more 
flexibility to determine how best to pursue our shared quality of care 
objectives in the most cost-effective manner.
    We expect hospitals to develop different approaches to compliance 
based on their varying resources, patient populations and other 
factors. There are several provisions that will impact the hospital's 
processes to a greater or lesser degree. Specifically, this CoP does 
introduce a new concept that the hospital will have to develop an 
internal error prevention and reduction program to ensure optimum 
outcomes for its patients.
    The requirements of the rule effect current industry practice. 
Therefore, hospitals with QAPI programs already in place that meet 
these requirements, at a minimum level if not in whole, may see little 
increased burden. Hospitals

[[Page 3451]]

that do not meet the current QA CoP, may encounter an increased burden 
in the short-term because resources would have to be devoted to the 
development of a QAPI program that covers the complexity and scope of 
the particular hospital's services. Based upon information that we do 
possess, small and rural hospitals may be the least prepared and may 
experience an increased burden in implementation of a QAPI program. 
However, even in the situations where the proposed requirements could 
result in some immediate costs to an individual hospital (that is, the 
development and utilization of performance measures to be used in their 
QAPI program), we believe the changes the hospital would make would 
produce real but difficult to estimate long-term economic benefits to 
the hospital, such as cost-effective performance practices or higher 
patient satisfaction that could lead to increased business for the 
hospital. Additionally, as hospitals are encouraged to choose projects 
that reflect the scope of their services, it will become increasingly 
difficult to quantify the burden of data collection. As QAPI projects 
vary within each hospital and amongst all hospitals, so will the 
quantity of and the time required for data collection. Overall, we 
believe that the benefits of complying with the QAPI CoP will outweigh 
any associated burden.
    For the sake of quantitative analysis, we have based our figures on 
all hospitals having to develop or update their QAPI program. The 
projected training time for staff is expected to cost an average 
hospital allocating a group of 10 clinicians with various duties and 
responsibilities, approximately $840 based on a average hourly rate of 
$28 per hour (3 hours x $28 per hour x 10 clinicians = $840). We have 
proposed 12 hours of training for the QAPI coordinator, which is 
projected to cost $360, based on a average salary of $30 per hour (12 
hours x $30 per hour x 1 coordinator). The total hourly burden for each 
hospital is projected to be 42 hours (3 hours x 10 staff) and (12 hours 
x 1 coordinator).

------------------------------------------------------------------------
 Hours/ Estimated salary/Number      Annual burden        Annual cost
          of hospitals                   hours             estimate
------------------------------------------------------------------------
10 clinicians x 6,069 hospitals   182,070...........  $5,097,960
 x 3 hours x $28 per hour.
1 coordinator x 6,069 hospitals   72,828............  2,184,840
 x 12 hours x $30 per hour.
                                 ---------------------
    Subtotal....................  254,898...........  7.3 million
------------------------------------------------------------------------

    We estimate that the burden associated with updating and in some 
instances, writing the internal policies would be an average of 8 hours 
annually. If the updating or writing of the internal policies is done 
by the nurse coordinator, we estimate the cost at $240 a year (8 hours 
X 30 per hour). However, we believe that this figure may be much lower, 
since many hospitals have existing internal quality improvement 
programs.

------------------------------------------------------------------------
                                                            Annual cost
       Hours/ Estimated salary/Number of hospitals           estimate
------------------------------------------------------------------------
1 coordinator x $30 per hour x 8 hours x 6,069 hospitals      $1,456,560
------------------------------------------------------------------------

    We also note that the following factors may also affect the costs 
of updating and writing of the internal policies:
    [sbull] Additional Staff Costs. Examples of these costs include-- 
(1) physician or other professional staff reviewing the internal 
policies; and (2) clerical staff providing typing, printing, or copying 
support.
    [sbull] Staff Training Costs. Staff may need additional training to 
write, update or review the hospital's internal policies.
    [sbull] Printing and Copying Costs. These costs are dependent upon 
the magnitude of the hospital's changes to its internal policies and 
the number of copies of the policy that are made available to staff.
    Policy development is necessary to patient health and safety 
because the by-laws provide the framework within which all patient care 
services are furnished. The initial development of the by-laws will 
take approximately 2.5 hours. Not more than 2 hospitals a year become 
certified under Medicare and Medicaid.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of     Annual hours    Annual burden
                           Requirement                               hospitals     per hospital        hours
----------------------------------------------------------------------------------------------------------------
Policy Development..............................................           6,069               8          48,552
----------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------
    Hours/Estimated salary/Number of       Annual burden    Annual cost
                hospitals                      hours         estimate
------------------------------------------------------------------------
2.5 hours x 2 hospitals.................               5  ..............
5 physicians x .40 hours each x $65 per   ..............         $260.00
 hour x 2 hospitals.....................
1 clerical x .50 hours x $6 per hour x 2  ..............            6.00
 hospitals..............................
                                         -----------------
    Subtotals...........................               5          266.00
------------------------------------------------------------------------

2. Effect on Beneficiaries
    The Federal Government plays many important roles that affect the 
quality of healthcare Americans receive. In fact, the Federal 
Government is the largest purchaser and provider of healthcare services 
in the United States. Our goal is to improve the care delivered by 
providers and purchased on behalf of Federal beneficiaries, and to 
facilitate hospitals in developing the infrastructure needed to improve 
their hospital services. The implementation of the QAPI CoP will 
benefit and protect not only Medicare and Medicaid beneficiaries, but 
all patients receiving care in any of the approximately 6,100 Medicare-
participating hospitals (that is, short-term, psychiatric, 
rehabilitation, long-term, children's, and alcohol-drug), including 
small rural hospitals. We believe the patient will benefit from the 
hospital establishing a QAPI program, making quality of care and 
patient safety

[[Page 3452]]

priorities. We also believe the implementation of the QAPI CoP will 
lead to an increase in quality care, optimal patient outcomes and a 
reduction in the number of medical errors.
3. Effect on the Medicare and Medicaid Programs
    We do not expect the implementation of the new QAPI CoP to generate 
any significant cost to the Medicare or Medicaid programs. As our 
budget pays for survey and certification activities by the States and 
States already survey hospitals for compliance with the existing 
hospital quality assurance CoP, surveyors will only change their focus 
when surveying from a quality assurance approach to a QAPI approach. 
Surveyors will be trained on the QAPI approach during their normally 
scheduled training on the hospital CoPs. Therefore, we believe that 
there will be no additional costs associated with this training. 
However, as the QAPI program progresses in individual hospitals, 
surveyors may have to spend more time evaluating an increasingly robust 
quality program. These efforts are difficult to quantify.

C. Alternatives Considered

    We considered adding requirements that were more prescriptive in 
nature. However, in response to public comments, and in recognition 
that this requirement will apply to hospitals of varying size, 
operating in wide ranges of localities, serving diverse populations, we 
opted not to utilize this approach. Development of more detailed 
strategies and policies to comply with the requirement will be left to 
the discretion of each hospital.
    We originally proposed that hospitals use 12 minimum performance 
areas as the foundation for the QAPI program. However, after analysis 
of public comments and literature, we agreed with commenters that 
specifying 12 minimum areas for analysis as part of a hospital's QAPI 
program was too prescriptive. These commenters argued it would be more 
effective to allow hospitals to assess, measure, and analyze 
themselves, but concurred with the identification of hospital processes 
and functions that could produce valuable information. Alternatives 
were given, such as, the adaptation of JCAHO's standards, or by us 
merely providing the components of the QAPI program and giving the 
hospital the flexibility to create a program of its own design. Some 
commenters suggested that nonaccredited hospital be exempt from QAPI 
requirements until we provide scientific evidence that participation in 
such programs improves patient care.
    Based on public comments, we have deleted the proposed requirement 
for hospitals to assess their performance in 12 specific areas. We 
agree that hospitals should be able to pursue quality improvement in a 
manner of their choosing. Regarding the exemption of nonaccreditied 
hospitals, we cannot relinquish our responsibility for assuring quality 
healthcare for all patients. We believe that we have provided hospitals 
with enough flexibility and have identified enough resources for 
improving the process of patient care to facilitate the development of 
an effective QAPI program by a hospital of any size. Therefore, we do 
not believe there is a need to differentiate our expectations for 
accredited and nonaccredited hospitals.
    In the proposed rule, we also solicited comment on standards 
regarding the development and implementation of a set of evidence-based 
standardized performance measures. At that time, we did not propose a 
requirement for hospitals to participate in a system of performance 
measurements with other hospitals, but we stated that we intend to do 
so in the future. Many commenters supported our approach to include 
placeholder language, because commenters believe it will take a minimum 
of 2 years for us to develop standardized measures. Some commenters 
stated placeholder language is premature pending extensive research to 
insure the accuracy of standardized data, concluding that the QAPI 
condition be modified at a later date as necessary. In this final rule, 
we have considered public comments and are not setting a requirement 
for using and reporting on a core set of performance measures. Once the 
evidence and methodologies to support a set of performance measures 
that can be used nationwide are available, we will inform hospitals and 
the public of the specifics of and the methods for reporting these 
performance measures for future rulemaking. This will give the public 
the opportunity to comment on the core measures before implementation.
    Our goal is to foster and stimulate a culture of shared learning 
that will help to identify processes, systems, and even events that 
potentially or actually lead to error or poor quality care and less 
than optimal patient outcomes. We believe that this final rule will 
enable hospitals to identify and resolve performance problems specific 
to their situations in the most effective and efficient manner 
possible.
    Although we view the anticipated results of this regulation as 
beneficial to the Medicare and Medicaid programs, as well as to 
Medicare beneficiaries and Medicaid recipients and State governments, 
it is impossible to quantify meaningfully a projection of the future 
effects of this standard in the event of noncompliance issues.
    We believe that the foregoing analysis concludes that this 
regulation would not have any significant impact on the aforementioned 
providers. Also, the burden associated with this requirement will vary, 
in some instances be greater, depending on the sophistication of the 
hospital current QA program.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.

VII. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, agencies are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved, section 43506(c)(2)(a) of the Paperwork Reduction Action of 
1995 requires that we solicit comment on the following issues:
    [sbull] Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
    [sbull] The accuracy of the agency's estimate of the information 
collection burden;
    [sbull] The quality, utility, and clarity of the information 
collection burden; and
    [sbull] Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Therefore, we are soliciting public comment on each of these issues 
for the information collection requirements summarized and discussed 
below.
    The title and description of the individual information collection 
requirements are shown below with an estimate of the annual reporting 
and recordkeeping burden. Included in the estimate, is the time for 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the QAPI process, including 
education and feedback.

[[Page 3453]]

Section 482.21 Condition of Participation: Quality Assessment and 
Performance Improvement

    This revised section requires the hospital to develop, implement, 
and maintain an ongoing effective hospital-wide, data driven, QAPI 
program. The current requirements provided for the operation of an 
internal quality assurance program to evaluate the provision of patient 
care. The revised condition further requires hospitals to examine its 
methods and practices of providing care, identify opportunities to 
improve its performance, and then take actions that result in higher 
quality of care and improved safety for hospital patients. We have not 
prescribed the structures and methods for implementing this requirement 
and have focused the condition toward the expected results of the 
program. This provides flexibility to the hospital, as it is free to 
develop a creative program that meets the needs of the hospital and 
reflects the scope of its services. We believe that developing the data 
systems necessary to implement a QAPI program and internal policies 
governing the hospitals approach to the development, implementation, 
maintenance, and evaluation of the QAPI program will impose minimal 
burden, depending somewhat on the level of compliance with the existing 
quality assurance requirements. Flexibility is provided to the 
hospitals to ensure that each program reflects the scope of its 
services and operations. We believe this requirement provides a 
performance expectation of hospital's setting their own goals and using 
information to continuously strive to improve their performance over 
time. Given the variability across the hospitals in size and experience 
and the flexibility provided by the regulation, we believe the burden 
associated with these requirements governing the approach to the 
development, implementation, and evaluation of the QAPI program will 
reflect that diversity. We want to provide flexibility and do not want 
to be prescriptive in defining hourly parameters; however, we need to 
quantify the burden Sec.  482.21 associated with this requirement.
    We estimate that the burden associated with updating and in some 
instances, developing a QAPI program would be an average of 80 hours 
annually (although this figure may be much lower, since many hospitals 
have existing internal quality improvement programs).

----------------------------------------------------------------------------------------------------------------
                                                                     Number of     Annual hours    Annual burden
                           Requirement                               hospitals     per hospital        hours
----------------------------------------------------------------------------------------------------------------
QAPI Program Development........................................           6,069              80         485,520
----------------------------------------------------------------------------------------------------------------

Section 482.21(b) Standard: Program Data

    This regulation would require data collection and necessitates 
staff training on data collection. Again, we estimate the burden 
associated with this requirement would vary, depending on the 
sophistication of the hospital's quality assurance programs currently 
in place.

----------------------------------------------------------------------------------------------------------------
                                      Number of personnel per                            Number of      Annual
             Requirement                      hospital               Annual hours        hospitals      burden
----------------------------------------------------------------------------------------------------------------
Training............................  10 clinicians..........  3 hours................        6,069      182,070
                                      1 coordinator..........  12 hours...............        6,069       72,828
Data Collection and Analysis........  .......................  80 hours...............        6,069      485,520
                                                                                                    ------------
    Subtotal........................  .......................  .......................  ...........      740,418
----------------------------------------------------------------------------------------------------------------

Section 482.21(c) Standard: Program Activities

    The current QA CoP requires hospitals to document appropriate 
remedial actions, and address deficiencies found through its QA 
program. The new QAPI CoP replaces the existing QA CoP by focusing on 
the continuous improvement of the hospital as an organization requiring 
hospitals to track incidents, analyze their causes, and share and 
implement preventive actions and mechanisms of feedback and learning 
throughout the facility. We realize it is neither practical nor 
economically feasible to collect data and analyze all areas, processes, 
and systems of the hospital. Therefore, we are requiring the hospital's 
governing body to ensure the priorities set by the QAPI program are 
reflective of the hospitals services, ensure quality of care, and 
protect the safety of the patients. The burden associated with these 
requirements are captured above in sections 482.21 (a) and (b).

Section 482.21(d) Standard: Performance Improvement Projects

    This new requirement reflects an interdisciplinary, coordinated 
approach to performance improvement. The proposed new performance 
improvement projects requirement sets forth the requirement that each 
hospital must establish a mechanism that further explores the specific 
needs identified in the organization's assessment. This mechanism of 
action is a performance improvement project. These projects demonstrate 
the hospital's ability to: identify problems; evaluate and track 
quality indicators, or other aspects of performance; and implement 
actions or adopt changes that reflect processes of care and hospital 
operations. The hospital must be able to document and demonstrate to 
the SA what quality improvement projects are being conducted, the 
reasons for conducting these projects, and the measurable progress 
achieved on these projects.
    We believe, that in order to comply with this QA CoP, hospitals, 
for the most part, are already documenting their efforts as remedial 
actions. Nevertheless, we are estimating the QAPI coordinators document 
the projects being conducted, the reason for the projects, and the 
measurable progress on these projects.

[[Page 3454]]



----------------------------------------------------------------------------------------------------------------
                                     Number of personnel      Annual hours per       Number of
            Requirement                  per hospital             hospital           hospitals     Annual hours
----------------------------------------------------------------------------------------------------------------
PIP Documentation.................  Coordinator..........  32 hours.............           6,069         194,208
                                                                                                 ---------------
    Subtotal......................  .....................  .....................  ..............         194,208
----------------------------------------------------------------------------------------------------------------

Section 482.21(e) Standard: Executive Responsibilities

    The participating hospitals must have in writing by-laws governing 
the medical staff and the governing body. This incorporation of 
executive responsibilities pertaining to QAPI would be a one-time 
development by an administrative team consisting of medical staff or an 
appointed committee of 5 physicians and one clerical personnel. We are 
not associating burden with this requirement, as by-laws should be 
updated regularly as a normal function of the hospital. This 
requirement is necessary to patient health and safety because the by-
laws provide the framework within which all patient care services are 
furnished. The initial development of the by-laws will take 
approximately 2.5 hours. Not more than 2 hospitals a year become 
certified under Medicare and Medicaid. Therefore, since this 
requirement impacts less than 10 hospitals on an annual basis this 
requirement is exempt from the PRA.
    We have submitted a copy of this final rule to OMB for its review 
of the information collection requirements in Sec.  482.21.
    If you have any comments on any of the information collection and 
record keeping requirements, please mail the original and three copies 
directly to the following:

Centers for Medicare & Medicaid Services, Office of Information 
Services, Standards and Security Group Division of CMS Enterprise, 
Standards Room N2-14-26, 7500 Security Blvd., Baltimore, Maryland 
21244-1850, Attention: John Burke CMS-3050-F; and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attention: Brenda Aguilar, CMS Desk Officer CMS-3050-F.

List of Subjects in 42 CFR Part 482

    Grant programs-health, Hospitals, Medicaid, Medicare, Reporting and 
recordkeeping requirements.

    For the reasons stated in the preamble of this final rule, 42 CFR 
chapter IV is amended as set forth below:

PART 482--CONDITIONS OF PARTICIPATION FOR HOSPITALS

    1. The authority citation for part 482 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart C--Basic Hospital Functions

    2. In Sec. 482.21 the heading and text are revised to read as 
follows:


Sec.  482.21  Condition of participation: Quality assessment and 
performance improvement program.

    The hospital must develop, implement, and maintain an effective, 
ongoing, hospital-wide, data-driven quality assessment and performance 
improvement program. The hospital's governing body must ensure that the 
program reflects the complexity of the hospital's organization and 
services; involves all hospital departments and services (including 
those services furnished under contract or arrangement); and focuses on 
indicators related to improved health outcomes and the prevention and 
reduction of medical errors. The hospital must maintain and demonstrate 
evidence of its QAPI program for review by CMS.
    (a) Standard: Program scope. (1) The program must include, but not 
be limited to, an ongoing program that shows measurable improvement in 
indicators for which there is evidence that it will improve health 
outcomes and identify and reduce medical errors.
    (2) The hospital must measure, analyze, and track quality 
indicators, including adverse patient events, and other aspects of 
performance that assess processes of care, hospital service and 
operations.
    (b) Standard: Program data. (1) The program must incorporate 
quality indicator data including patient care data, and other relevant 
data, for example, information submitted to, or received from, the 
hospital's Quality Improvement Organization.
    (2) The hospital must use the data collected to--
    (i) Monitor the effectiveness and safety of services and quality of 
care; and
    (ii) Identify opportunities for improvement and changes that will 
lead to improvement.
    (3) The frequency and detail of data collection must be specified 
by the hospital's governing body.
    (c) Standard: Program activities. (1) The hospital must set 
priorities for its performance improvement activities that--
    (i) Focus on high-risk, high-volume, or problem-prone areas;
    (ii) Consider the incidence, prevalence, and severity of problems 
in those areas; and
    (iii) Affect health outcomes, patient safety, and quality of care.
    (2) Performance improvement activities must track medical errors 
and adverse patient events, analyze their causes, and implement 
preventive actions and mechanisms that include feedback and learning 
throughout the hospital.
    (3) The hospital must take actions aimed at performance improvement 
and, after implementing those actions, the hospital must measure its 
success, and track performance to ensure that improvements are 
sustained.
    (d) Standard: Performance improvement projects. As part of its 
quality assessment and performance improvement program, the hospital 
must conduct performance improvement projects.
    (1) The number and scope of distinct improvement projects conducted 
annually must be proportional to the scope and complexity of the 
hospital's services and operations.
    (2) A hospital may, as one of its projects, develop and implement 
an information technology system explicitly designed to improve patient 
safety and quality of care. This project, in its initial stage of 
development, does not need to demonstrate measurable improvement in 
indicators related to health outcomes.
    (3) The hospital must document what quality improvement projects 
are being conducted, the reasons for conducting these projects, and the 
measurable progress achieved on these projects.
    (4) A hospital is not required to participate in a QIO cooperative 
project, but its own projects are required to be of comparable effort.
    (e) Standard: Executive responsibilities. The hospital's governing 
body (or organized group or individual who assumes full legal authority 
and responsibility for

[[Page 3455]]

operations of the hospital), medical staff, and administrative 
officials are responsible and accountable for ensuring the following:
    (1) That an ongoing program for quality improvement and patient 
safety, including the reduction of medical errors, is defined, 
implemented, and maintained.
    (2) That the hospital-wide quality assessment and performance 
improvement efforts address priorities for improved quality of care and 
patient safety; and that all improvement actions are evaluated.
    (3) That clear expectations for safety are established.
    (4) That adequate resources are allocated for measuring, assessing, 
improving, and sustaining the hospital's performance and reducing risk 
to patients.
    (5) That the determination of the number of distinct improvement 
projects is conducted annually.

    (Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; Program No. 93778, Medical Assistance)

    Dated: March 28, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: September 23, 2002.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-1293 Filed 1-23-03; 8:45 am]
BILLING CODE 4120-01-P