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Once Health Regulators, Now Partners
Private Groups Limit Patient Access to Medical Files, Rarely Punish Doctors

By Gilbert M. Gaul
Washington Post Staff Writer
Tuesday, July 26, 2005

Last of three parts

For four years the federal government was David Shipp's steadfast opponent, refusing to answer the former textbook salesman's questions and rolling out its attorneys to block his attempts to obtain information.

Shipp wasn't seeking classified secrets. He was simply trying to find out why his wife of 49 years had died.

In December 1999, Shipp filed a complaint with Medicare suggesting that doctors had misdiagnosed his wife's colon cancer. The complaint landed with Health Care Excel, a private group under contract with Medicare to ensure that patients receive quality treatment.

Instead of helping the Louisville man, the nonprofit stonewalled him. Even if it confirmed his complaint, the group told Shipp, under Medicare's rules it could not reveal the results of its review.

A stunned Shipp headed to federal court, where in August 2003 he won the right to an answer. But even then Medicare and its contractor remained stingy with details. In a brief form letter, they acknowledged that Doris Ann Shipp had received substandard care, but they would not say what actions, if any, had been taken against the doctors.

"It was like I was the enemy," said the lanky 75-year-old with a plume of snowy white hair. "Here I thought the government would be on my side."

Shipp's lawsuit provided a rare glimpse inside a little-known network of private contractors called Quality Improvement Organizations, or QIOs. Each year, Medicare pays nearly $300 million to 53 businesses such as Indiana-based Health Care Excel to measure quality, work with hospitals and doctors to improve care, and investigate patient complaints.

The case illustrates how the private groups sometimes play a conflicted and controversial role. By law, QIOs, which are dominated by doctors and health executives, operate in secrecy with little oversight or accountability. Consumers say they are difficult to contact and rarely uphold complaints. At the same time, the number of sanctions QIOs recommend against doctors each year has dwindled from hundreds to a few.

Today, QIOs are also leading proponents of a new brand of regulation that favors cooperation over discipline. QIOs increasingly view themselves not as regulators but as partners of hospitals, nursing homes and doctors, working to improve care. Some have leveraged their positions to become highly profitable businesses, paying generous salaries and perks to executives and board members.

"One of the problems with QIOs is that they are reluctant to do anything that ruins their relationships with providers," said Robert A. Berenson, a Medicare official in the Clinton administration.

"They've made this huge move from being inspectors to being collaborators. It's a blame-free environment," Berenson said. "I'm sympathetic, but . . . you need inspectors."

William C. Rollow, a physician who oversees the QIO program for Medicare, acknowledged that the program has "shortcomings, as any program does." But he said that QIOs provide "a very valuable service in return for the taxpayers' investment" and that their role is "more educational today than regulatory."

In 2003 and 2004, QIOs received about 3,100 complaints from Medicare patients -- or about one for every 14,000 beneficiaries. Rollow agreed that the number appears small considering the swelling ranks of Medicare members and evidence of widespread hospital mistakes and deficient care.

Patients and relatives who do complain have less than a one in four chance of having their complaints upheld, a Washington Post analysis of complaint data found. QIO sanctions against doctors and hospitals around the country have plummeted in the past two decades from an average of 31 a year to one a year. When families do manage to pry out a few details, as Shipp did, they are warned that the findings are confidential.

"The way the QIOs treat the [Medicare] beneficiaries is almost like a Third World country," said David A. Swankin, president of the nonprofit Citizen Advocacy Center in Washington. "It's a culture that says, 'Make as little public as you have to.' "

QIO executives say they are hamstrung by Medicare's decades-old rules, which place a premium on secrecy. Those rules even prohibit them from publicly naming the hospitals they work with unless the facilities agree. Few do.

The private groups also are hindered from releasing the results of their collaborations. That means potentially valuable information that could help patients pick a hospital or nursing home stays locked in the groups' computers.

The president of the trade group representing QIOs said he does not know why more hospitals and nursing homes don't publicize their involvement. "I don't know why they don't shout it from the rooftop," David Schulke said.

Schulke defended the provider-friendly approach of the QIOs, saying most examples of poor care stem from systemwide problems, not a few bad physicians or hospitals. He said the American Health Quality Association, the QIO trade group, does not track complaints or sanctions.

"I can't make a value judgment about the number of complaints," Schulke said. "The process is advertised. I don't know why there aren't more or there aren't fewer."

Each state has a QIO, and there is one each for the District, Puerto Rico and the U.S. Virgin Islands. There is little public accountability. Congress rarely examines the groups' operations. Medicare is supposed to file an annual report about their activities with Congress but hasn't for years. Instead, the insurer includes a few pages in an annual report.

Medicare officials do audit QIO performance but declined to provide copies of the audits and haven't responded to a Freedom of Information Act request submitted 17 months ago.

A Question of Impact

The use of outside contractors to monitor quality dates to the early years of Medicare, when Congress authorized the creation of scores of local groups charged with determining whether care was medically necessary and cost-effective.

The groups evolved in the 1980s into state-by-state Peer Review Organizations dominated by doctors, and eventually they were given responsibility for handling complaints from patients about poor care.

In the 1990s, responding to studies that found little evidence of the program's effectiveness, Medicare shifted the focus from weeding out bad doctors to broader efforts to improve care. It renamed the groups Quality Improvement Organizations.

Medicare's last three-year contract with the QIOs cost $1.15 billion, of which about $840 million went to the contractors and the rest to program overhead. The new contract is 10 percent more, nearly $1.3 billion.

Recently, researchers from Johns Hopkins Bloomberg School of Public Health raised questions about the QIOs' impact, noting that previous Medicare studies asserting wide improvements in quality included no control groups, making valid comparisons difficult. The researchers conducted their own study and concluded that hospitals working with QIOs were no more likely to show improvement than hospitals that did not take part.

The QIO trade group attacked the Johns Hopkins study, saying it relied on outdated information and flawed methods.

Schulke, the trade group's president, said QIOs are engaged in many successful activities to improve quality for Medicare patients. He cited projects to help hospitals both measure and improve care, reduce pressure sores in nursing homes and slash the number of surgical site infections.

The secrecy surrounding QIOs often makes it difficult for the public to assess their work. For example, in December 2004 many QIOs put out news releases touting that their work had led to improved nursing home care for Medicare patients.

One -- the Colorado Foundation for Medical Care -- said it could not provide a list of the 32 nursing homes that it worked with because the information was confidential. Other QIOs also said the names and outcomes of their projects are private under their contract with Medicare.

Rollow, of Medicare, said some of the agency's confidentiality rules "were developed a couple of decades ago and may in fact need to be reexamined." He expects the Institute of Medicine to take up the question as part of an ongoing study of QIOs requested by Congress.

In the meantime, some QIO executives say the current rules conflict with the groups' new mission. "We think it is critical for people to know who is . . . actually investing to improve," said Marc Bennett, president of HealthInsight, the QIO for Utah and Nevada.

A Hollow Court Victory

There are striking variations in the number of complaints that are investigated by QIOs from state to state, and in the chances of a complaint being upheld, according to reports examined by The Post.

Medicare patients in Massachusetts are nearly nine times as likely to lodge complaints as patients in Connecticut. The chance of a complaint being substantiated varied from 90 percent in Puerto Rico to none in Nebraska, Delaware, the District and the Virgin Islands, the analysis showed.

Rollow said he could not explain the wide variations. Medicare says its follow-up interviews with patients who complain show that they mostly are content with the process but that only 42 percent are satisfied with the outcome.

Shipp, the Louisville man trying to learn about his wife's death, was dissatisfied from beginning to end.

Before his lawsuit, Medicare took the position that patients are not entitled to know the outcome of their review. Shipp and his attorney, Amanda Frost of Public Citizen, won that concession in 2003, but not before spending four years in federal court.

"They fought us all of the way," said Frost, now a professor at American University's law school. "They were willing to argue clearly-losing issues just to delay us from getting anything."

When the U.S. Court of Appeals for the District of Columbia Circuit upheld a lower-court ruling entitling Shipp to an answer, Medicare said the decision applied only to future complaints. "It was a ridiculous argument," Frost said. "The judge decided with us again."

At the time, Shipp thought he had scored a victory for patients' rights. But when he received the terse August 2003 form letter from his QIO, he wasn't so sure. There were no details. To this day, Shipp is unsure whether anything happened to his wife's doctors.

Debbie Pelkie, who oversees complaint reviews for Shipp's QIO, Health Care Excel, said that Medicare's rules prohibit her group from releasing such details unless the doctors agree. But in this case they didn't.

"If that's what Mr. Shipp is wanting," she said, "that's not possible."

Pelkie said that under the QIO's procedures, the review of the case is written by the staff and then shown to the doctors . A doctor is "not given the power to change the language to his liking," she said, but can opt to keep the details secret.

The letter warned Shipp not to disclose the doctors' names without their consent.

"I guess you can say I opened up the process a little," he said. "But we still can't find out what goes on behind the closed doors."

Shipp said he was discouraged to learn that the system favors health care providers over consumers.

"When the government takes a position, you would expect it to be neutral, that patients would have the same rights as doctors and hospitals," he said.

'Great Question'

Rollow said the complaint process has "improved substantially" since Shipp's lawsuit. QIOs are now required to assign case managers to monitor complaints "and answer any questions that patients have," he said. "I think you would find it's much better than it was."

Why aren't more Medicare patients taking advantage of the improved process? "There seem to be not as many as you might think there should be," Rollow acknowledged. He offered several possible explanations: Patients and families are not aware they can file a complaint. They are aware but think it isn't valuable. The response is not timely. "What the actual explanation is, I don't know," Rollow said.

Maryland's QIO reported reviewing 15 complaints between 2003 and 2004; the District's QIO reviewed two. Both are owned by the Delmarva Foundation, a nonprofit based in Easton, Md. "I don't know why we don't receive more complaints," said Maulik S. Joshi, the group's president. "That's a great, great question."

Some QIO spokesmen acknowledge that the complaint process is not as well publicized as it could be. Most QIOs include a description on their Web sites, but not all Medicare patients use the Internet or know where to look.

Government investigators looked into the complaint system in 2001, posing as patients and calling hotlines at 10 QIOs. They found that only four provided accurate information, said the report by the inspector general's office of the Department of Health and Human Services. They also found that QIOs did not routinely interview the parties involved in complaints, relying instead on reviews of medical charts.

In extreme cases, QIOs may recommend that the inspector general sanction a provider, ranging from a fine to exclusion from Medicare. From 1986 to 1994, QIOs recommended 278 sanctions against all providers, mostly doctors. From 1995 to 2003, they recommended 12 sanctions, according to the inspector general's office. In four of the nine years, there were none at all.

Schulke said QIOs still suggest sanctions in egregious cases. But with the emphasis now on helping doctors and hospitals, "a lot of times the problems are better addressed by not punishing the provider," he said.

Some QIOs have gone years without recommending a sanction. The contractor in North Carolina hasn't filed one in 10 years, spokeswoman Peg O'Connell said. She added that the number of sanctions declined sharply when the focus of the program shifted to collaborating with providers.

"The QIOs are continually downplaying their role of oversight," said Arthur A. Levin, director of the nonprofit Center for Medical Consumers. "They don't want to do anything that upsets the doctors and hospitals. To me, it seems like an obvious conflict. Sometimes you have to punish providers for doing bad things."

Joshi, of the Delmarva Foundation, said it is valid to ask if the QIO partnership mission conflicts with its investigative role. "We need to have a discussion," he said. "Does it fit or not fit?"

Well-Paid Executives

As they work more closely with health care providers, many QIOs also have leveraged their positions and experience to compete aggressively for other government and private health care contracts.

As a group, QIOs have been collecting nearly as much from their outside work as from Medicare. In fiscal 2004, the most recent year data are available, their total revenue topped $500 million, according to tax documents examined by The Post.

Most QIOs are nonprofit but a few are for-profit companies. Some have merged or expanded into other states. In 2002, the for-profit Health Services Advisory Group, the QIO for Arizona, acquired its Florida counterpart for an undisclosed sum. The Arizona organization has contracts to review care provided to Medicaid patients in 10 states from Hawaii to Michigan, and last year had revenue of about $25 million.

The West Virginia Medical Institute Inc., based in Charleston, owns the QIOs in Delaware and Pennsylvania and has a multimillion-dollar contract with the Department of Veterans Affairs. Delmarva has government contracts in California, Florida, West Virginia and Virginia.

The QIOs' expanding mission has been lucrative for some executives and board members. Eleven QIO executives collected $300,000 or more in salary and benefits, according to the latest tax records. Thirty others received more than $200,000. Highest-paid was Martin Margolies, chief executive of PRONJ in New Jersey. He received $519,084 and had the use of a 2001 BMW, according to records and interviews.

Jim Anderson, chief financial officer for the New Jersey QIO, who was paid $309,860, offered several reasons for Margolies's pay package. He said the 58-year-old executive, who has worked at PRONJ since 1977, was "one of, if not the longest-serving" QIO managers. In addition, Anderson said, Margolies works 75 hours a week and is responsible for four affiliates, including a for-profit company.

PRONJ also is generous with its trustees. In 2003, it paid more than $500,000 to its directors, including 13 physician board members who received between $34,000 and $45,000 each, tax records show. Only two members of the QIO's 21-person board weren't paid something that year, according to the records.

"Our board has been with us a very long time," Anderson said. "It's not just a show-up-once-a-quarter board. They're into the operation of the business."

Anderson said that as part of their board pay, some of the physician-trustees get $250 an hour to conduct the QIO's medical reviews. Others "answer correspondence or attend meetings, such as the hospital association or the medical society," he said.

Nationally, only 2 percent of all nonprofit groups pay board members, according to BoardSource, a Washington organization.

Most QIO boards are dominated by doctors and other health care providers. Consumers appear to play little, if any, role. By law, QIOs are required only to have a single consumer member on their boards -- and that is what most have, one consumer.

An analysis of the latest filings shows that two-thirds of all QIO board members are physicians. At three QIOs, 90 percent or more are doctors.

All but one of the 21 board members of New Jersey's QIO are physicians. The board counts several retired doctors as consumer members. Margolies said the board sees no reason to change. "We're clearly a physician-controlled organization," he said. "That's the way they want to keep it."

But some QIO executives say change may be overdue.

"I don't think it's acceptable anymore to have so little consumer input," said Bennett of HealthInsight, where half of the board members are doctors. "Our work has changed," he said. "It's much more about bringing communities together to work on difficult health care issues. We believe consumers need a voice."

That would suit critics such as Swankin, of the Citizen Advocacy Center, who contends that the "history of QIOs is one of tokenism" when it comes to consumers.

"You don't regulate the airlines by having the board made up of airline pilots," he said. "But that's pretty much what QIOs do."

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