May 2004

What types of quality improvement activities are required for managed care organizations providing services to Medicaid eligible individuals?

Recent regulations issued by CMS specify internal and external performance measurement and quality improvement requirements for MCOs. These regulations are similar to those of the National Committee for Quality Assurance (NCQA) and the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), among others. Managed care organizations, including those serving commercial populations and those serving public sector populations (Medicare and Medicaid), have successfully obtained accreditation from NCQA, JCAHO, or both.

Internal Quality Improvement

Internal quality improvement (QI) requirements include the use of evidence-based practice guidelines within the MCO. These practice guidelines must be based on reliable clinical evidence published in peer-reviewed health care literature. The guidelines must be adopted or adapted on the basis of the needs of the membership served by the MCO. The guidelines should be reviewed and adopted in conjunction with the providers who participate in the MCO and be updated when necessary. The MCO must have ongoing QI activities that focus on clinical and non-clinical activities. QI projects may include, but are not limited to the following:

•  Measuring performance using objective quality indicators

•  Implementing system interventions to achieve improvements in quality

•  Evaluating the effectiveness of the interventions

•  Planning and initiating activities for increasing or sustaining improvements

QI activities must be implemented in all states with managed care contracts. Each state Medicaid agency must review annually the impact and effectiveness of these activities and provide feedback to the MCO so that further improvements may be made.

External Quality Review

The state Medicaid agency must engage in an external quality review of MCOs at least annually. The states must contract with an independent external organization with the expertise to perform a review of the quality of services provided. The organization must demonstrate a variety of capabilities, including corporate and individual staff experience with QI, data collection, Medicaid policies and procedures, managed care delivery systems, organizations and financing, research design, and implementation. The review organization may not deliver health care services, and it must be independent of the MCO in terms of management and financial or contractual relationships.

The review of MCO activities must include:

•  Validation of MCO internal QI activities

•  Validation of performance measures and compliance with those measures

•  Review of the previous three-year activities to determine provider and other MCO staff compliance with the performance standards

Additional review activities can include

•  Validation of encounter data reported by the MCO

•  Administration or validation with member satisfaction activities

•  Conduction of performance improvement activities in addition to those of the MCO