Exhibit U. Detail of Performance Analysis

Safety/Quality

Reduce the risk of harm from health care services by promoting the delivery of appropriate care that achieves the best quality outcome.

Increasing the safety and quality of health care for all Americans is a primary emphasis at AHRQ. Patient safety was quickly elevated to national importance in November 1999, when the Institute of Medicine's report, To Err is Human: Building a Safer Health System, estimated that between 44,000 and 98,000 Americans die each year as a result of medical errors. Almost immediately, the Senate Committee on Appropriations began hearings on patient safety issues that resulted in the Committee directing AHRQ to lead the national effort to combat medical errors and improve the quality and safety of patient care. One of AHRQ's leading long-term goals is to prevent, mitigate and decrease the number of errors, risks, hazards and quality gaps associated with health care and their harmful impact on patients.

Consequently, safety and quality are of the highest priorities within AHRQ. Leaders of our health care system have demonstrated a commitment to improve the quality and safety of care for all Americans, and with their help, AHRQ has successfully built the foundation for a national Patient Safety Initiative. The mission of this agency-wide strategic goal is to reduce the risk of harm from health care services by promoting the delivery of appropriate care that achieves the best quality outcome.

The results of investments in patient safety and quality are now being incorporated into practice. Below are examples of how this work is being used.

• Through the first year of the Patient Safety Improvement Corps, AHRQ has trained more than 50 patient safety experts representing 15 States and 13 hospitals/major health care organizations in the use of tools and techniques to analyze health care related errors, risks, and hazards; identify and understand their root causes; and identify and implement effective, evidence-based interventions to make the delivery of health care safer.
• On behalf of the HHS Patient Safety Task Force (PSTF), AHRQ contracted with the Keveric Company, and they have developed a data repository and vocabulary server designed to enhance the functionality of reported medical error event data.
• Through 2004, AHRQ continued support of a monthly peer-reviewed, Web-based journal that showcases patient safety lessons drawn from near misses and actual cases of medical errors called the AHRQ WebM&M (Morbidity and Mortality Rounds on the Web, http://webmm.ahrq.gov).
• On December 22, 2003 AHRQ released the National Healthcare Quality Report (NHQR) and the National Healthcare Disparities Report (NHQR). These two reports represent the first national comprehensive effort to measure the quality of health care in America and differences in access to health care services for priority populations. AHRQ Quality Indicators (QIs) are being used by a variety of organizations in a number of ways, including for internal hospital quality improvement, public reporting by hospitals, and private and public national pay-for-performance initiatives and demonstrations. Following are some examples:
  • Many State and regional hospital associations across the nation have integrated the Inpatient Quality Indicators (IQIs) and the Patient Safety Indicators (PSIs) into their quality programs and performance measurement systems. Some of these associations include the Healthcare Association of New York State, the Missouri Hospital Association, the Georgia Hospital Association, and the Dallas-Fort Worth Hospital Council.
  • A private pay-for-performance initiative that uses the AHRQ QIs is the Anthem Blue Cross Blue Shield of Virginia Quality-In-Sights® Hospital Incentive Program. It is designed to align financial incentives with achievement of specific performance objectives, and includes a patient safety component that relies on the PSIs for monitoring.
  • A public pay-for-performance demonstration is the CMS-supported Premier Hospital Quality Incentive Demonstration, a 3-year project to recognize and provide financial rewards to hospitals that demonstrate a high quality performance. CMS seeks significant improvement in the quality of inpatient care by awarding bonus payments to hospitals with high quality as measured by multiple performance measures in the acute care area, including two of the AHRQ PSIs.
• The AHRQ health IT initiatives include a series of three solicitations issued in FY 2004. The solicitations form an integrated set of activities designed to explore strategies for successful planning and implementation of health IT solutions in communities and to demonstrate the value of health IT in patient safety, quality, and health care costs.
• Adoption of beneficial and timely clinical preventive recommendations is a measure of the Prevention Portfolio's effectiveness. This evidence-based knowledge is generated by the U.S. Preventive Services Task Force (USPSTF). The Task Force is an independent panel of experts in primary care and prevention that systematically reviews the evidence of effectiveness and develops recommendations for clinical preventive services. By identifying how these guidelines can improve the delivery of effective health care, the Prevention Portfolio can facilitate the adoption of the Task Force recommendations among partnership organizations. This process supports the FY 2006 prevention portfolio objective of "increasing the number of partnerships that will adopt and promote evidence-based clinical prevention."

In FY 2004, as a result of the PART review, AHRQ's pharmaceutical outcomes portfolio adopted a goal of reducing hospitalizations for upper gastrointestinal bleeding due to the adverse effects of medication or inappropriate treatment of peptic ulcer disease, in those between 65 and 85 years of age. Hospitalization rates for GI bleeding should improve with upcoming portfolio involvement in the following areas:

• Enhancing strategies in effectively facilitating the adoption and implementation of evidence-based guidelines and educational programs related to osteoarthritis that recommend acetaminophen-based regimens, which are safer and often as effective as NSAIDs.
• Second, anticoagulants are commonly used for the prevention of stroke. These products, although valuable, require close monitoring via frequent lab tests. In the absence of this monitoring, these patients also may experience bleeding episodes.
• Finally, the diagnosis and treatment of ulcer disease has improved with the discovery that ulcer disease is caused by infection due to the bacteria H. Pylori. Appropriate diagnosis and treatment of this organism should reduce the sequelae of ulcer disease and bleeding.

Efficiency

Achieve wider access to effective health care services and reduce health care costs.

American health care should provide services of the highest quality, with the best possible outcomes, at the lowest possible cost. Striving to reach this ideal is a primary emphasis of AHRQ's mission with many of its activities directed at improving efficiency through the design of systems that assure safe and effective treatment and reduce waste and cost. The driving force of this agency-wide strategic goal is to promote the best possible medical outcomes for every patient at the lowest possible cost.

A significant factor that reduces the efficiency of our modern-day health care system is waste caused by systems that do things that don't improve care, processes that could be designed to do things better and systems that fail to do things that would assure more effective treatment. AHRQ's investments include efforts to develop ways to (1) measure and report on the efficiency of systems, procedures, and processes, (2) assess the scope, nature, and impact of waste in health care systems, and (3) design techniques, methods, and technology to improve treatment outcomes and reduce associated costs.

AHRQ's Medical Expenditure Panel Survey (MEPS) is the only national source for annual data on the specific health services that Americans use, how frequently the services are used, the cost of the services, and the methods of paying for these services. MEPS data have been used by researchers both within and outside the Federal Government to examine issues of importance to policymakers, consumers, and providers.

• The MEPS has been used to estimate the impact of the recently passed Medicare Modernization Act (MMA) by the Employee Benefit Research Institute (the effect of the MMA on availability of retiree coverage), by the Iowa Rural Policy Institute (effect of the MMA on rural elderly) and by researchers to examine levels of spending and copayments (Curtis et al, Medical Care, 2004).
• The MEPS has been used in congressional testimony on the impact of health insurance coverage rate increases on small businesses.
• The MEPS-IC has been used by a number of States in evaluating their own private insurance issues including eligibility and enrollment by the State of Connecticut; and community rating by the State of New York. As part of the Robert Wood Johnson Foundation's State Coverage Initiative, MEPS data was cited in 69 reports, representing 27 states.
• MEPS data have been used in DHHS Reports to Congress on expenditures by sources of payment for individuals afflicted by conditions that include acute respiratory distress syndrome, arthritis, cancer, chronic obstructive pulmonary disease, depression, diabetes, and heart disease.
• MEPS data are used to develop estimates provided in the Consumers Checkbook Guide to Health Plans, of expected out of pocket costs (premiums, deductibles and copays) for Federal employees and retirees for their health care. The Checkbook is an annual publication that provides comparative information on the health insurance choices offered to Federal workers and retirees.
• MEPS data has been extensively used to examine the pharmacological treatment of many conditions including depression (in both adults and children), back pain, ADHD, obesity, hypertension and cardiovascular diseases.
• MEPS data has been used by CDC and others to evaluate the cost of common conditions including arthritis, injuries, diabetes and cancer.
• MEPS data has been used to examine quality of care, including the receipt of preventive care and barriers to that receipt.

Our Prevention Portfolio is seeking to support the goal of efficiency by creating the ability to provide timely knowledge of clinical prevention that can promote wider access to effective health care services and thus reduce health care costs. The United States Preventive Services Task Force (USPSTF) generates evidence-based recommendations on clinical preventive services based on the benefits and harms to the patient. These recommendations can guide others in prioritizing resources for clinical prevention that could lead to increased access and decreased cots. By "increasing the timeliness and responsiveness of the USPSTF to emerging needs in clinical prevention," the Prevention Portfolio can support the Agency's overall goal of efficiency.

Within the pharmaceutical outcomes portfolio, trend analysis and baseline measures have been developed through the use of MEPS and HCUP and in consultation with the AHRQ research community. As a result of this planning and evaluation activity, all relevant AHRQ-funded activities have been compiled and summarized and ten-year goals for improvement have been established. Work with partners is planned to support the achievement of these targets. Work is ongoing for the development of an efficiency goal related to improved prevention of rehospitalization for congestive heart failure.

Effectiveness

Assure that providers and consumers/patients use beneficial and timely health care information to make informed decisions/choices.

To assure the effectiveness of health care research and information is to assure that it leads to the intended and expected desirable outcomes. Supporting activities that improve the effectiveness of American health care is one of AHRQ's strategic goals. Assuring that providers and consumers get appropriate and timely health care information and treatment choices are key activities supporting that goal.

One significant AHRQ investment focuses on how best to define and measure the effectiveness of health care services. Other areas of work focus on disease prevention and assuring that health care providers and consumers have the information they need to adopt healthy life styles. Additional AHRQ efforts include providing reliable information when health care providers and patients must consider the relative effectiveness of various treatment protocols and the appropriateness of alternative pharmaceutical choices. Following is more specific information on these program areas:

CAHPS® initially stood for the Consumer Assessment of Health Plans. However, in the current CAHPS® program—known as CAHPS II—the products have evolved beyond health plans. CAHPS® is an easy-to-use kit of survey and reporting tools that provides reliable information to help consumers and purchasers assess and choose among health plans, providers, hospitals and other health care facilities. Data are provided from CAHPS® surveys that measure the consumers' perspective on their health care. The CAHPS® team and AHRQ work closely with the health care industry and consumers to ensure that the CAHPS® tools are useful to both individual consumers and to employers and other institutional purchasers of health plans.

The Healthcare Cost and Utilization Project (HCUP) is a family of health care databases and related software tools and products developed through a Federal-State-Industry partnership. HCUP databases bring together the data collection efforts of State data organizations, hospital associations, private data organizations, and the Federal government to create a national information resource of patient-level health care data. HCUP includes the largest collection of longitudinal hospital care data in the United States, with all-payer, encounter-level information beginning in 1988. These databases enable research on a broad range of health policy issues, including cost and quality of health services, medical practice patterns, access to health care programs, and outcomes of treatments at the national, State, and local market levels.

Americans die prematurely every year as a result of diseases that often are preventable, such as heart disease, diabetes, some cancers, and HIV/AIDS. To address these issues, AHRQ convenes the U.S. Preventive Services Task Force, an independent panel of experts in primary health care and prevention. The mission of the task force is to conduct comprehensive assessments of a wide range of preventive services to include screening tests, counseling activities, immunizations, and preventive therapies. Recommendations about which services should be provided routinely as part of primary health care are made based on these assessments. The evidence-based recommendations developed by the Task Force are then used by a diverse audience interested in clinical prevention.

The appropriate use of pharmaceutical agents is critical to effective, high quality, affordable health care. Understanding which agents work, for which patients, and at what cost, can inform programs to manage the selection, utilization, and cost of pharmaceutical therapies and services within a changing health care environment. Since 1992, AHRQ has funded pharmaceutical research. Our studies focused on patient outcomes related to medications, medication safety, strategies intended to improve the efficiency of drug use, and ways to control medication costs. Findings from AHRQ pharmaceutical research projects have yielded important insights for the health care system. Some key issues and recent findings from our research include:

• ACE inhibitors and beta-blockers reduce deaths in a broad range of patients with heart disease.
• Antibiotic use by U.S. children fell by almost 25 percent from 1996 to 2000, and more than half of the decrease came from decreased use of antibiotics for ear infections.

Organization Excellence

Develop Efficient and Responsive Business Processes

AHRQ has instituted a systematic approach to addressing and implementing the President's Management Agenda. The five government-wide agenda reforms—Strategic Management of Human Capital; Competitive Sourcing; Improve Financial Performance; Budget and Performance Integration; and Expanding Electronic Government—are teamed with other program reforms with which the Department has been charged. In a realignment announced in May 2003, the AHRQ Director created a new organizational entity—an Office of Performance, Accountability, Resources and Technology—to better manage the Agency's progress against these reforms as well as other management initiatives that cross-cut Agency components.

Over the past year, AHRQ has taken advantage of automation to streamline processes and increase efficiency where feasible. Examples include:

• Automating the annual OGE 450 (Confidential Financial Disclosure Report) filing process. Instead of sending each employee a paper copy of the required memo and OGE-450, employees are notified via e-mail of the reporting requirements as well as link to the on-line form and accompanying instructions. This reduces staff time needed to create the documents, collate, and disseminate to staff.
• AHRQ staff is systematically being trained on the "sign in" and "sign out" feature of the Integrated Time and Attendance System (ITAS). This will allow employees greater control over their time and attendance reporting and will allow us to reduce the number of timekeepers from 14 to three.
• Ninety percent of Agency vacancies are filled through the automated QuickHire staffing mechanism. This has reduced the amount of paperwork generated for each announcement and also created a standardized approach to recruiting positions.
• AHRQ has begun deploying the Enterprise Human Resource Program (EHRP) to select Offices and Centers in AHRQ. This allows designated staff to independently generate documents (e.g., award nomination forms, SF-52 [Request for Personnel Action]) without having to contact either the Rockville HR Center or program staff in the Office of Performance, Accountability, Resources and Technology (OPART) for HR-related information (e.g., position title, series, grade, salary, etc.). In FY 2005, AHRQ will begin the process of using the automated SF-52 process in select Offices/Center. This will minimize the number of people involved in the routing/clearance of an SF-52.

In FY 2003, AHRQ conducted eleven streamlined competitive sourcing studies in the functional areas of accounting, visual information, program/management analysis, information technology, and program assistance. The performance decision for each of these studies was in favor of the agency. In FY 2004, AHRQ conducted a streamlined (with MEO) competitive sourcing study in the functional area of secretarial/program assistance. This study encompassed 20 FTEs and the performance decision made was for the agency, which utilized a Most Efficient Organization. The Most Efficient Organization is in the process of being staffed and implemented.

AHRQ's major activities regarding the integration and implementation of the President's Management Agenda (PMA) through e-Government technologies within the Agency include:

• Government Paperwork Elimination Act (GPEA).
• Security.
• Full participation in HHS PMA activities that intersect with the mission of the Agency, Patient Safety, and Consolidated Health Informatics initiatives that cross Government Agency boundaries.

In line with these program initiatives, AHRQ's Information Technology (IT) services team explicitly defined its mission and vision, buttressed by three strategic goals:

• Provide quality customer service to AHRQ developed applications and operations support to AHRQ's centers, offices and outside stakeholders.
• Ensure AHRQ's IT initiatives are aligned with departmental and agency enterprise architectures.
• Ongoing development of IT systems that link AHRQ's IT initiatives directly to the mission and performance goals of the Agency by developing an electronic planning system that allows selection and tracking of business investments (Grants, Contracts and Intramural research) that link directly to the Agency mission and GPRA goals and budget performance.

Financial accountability is a cornerstone of the "Improved Financial Performance" initiative of the President's Management Agenda. Federal managers continue to experience growing pressures from their executive leaders, Congress, the public, and their customers to achieve more under the programs they manage. To that end, this initiative asks agencies to evaluate their financial management capabilities to ascertain if sufficient internal controls are in place to safeguard against the misuse of federal funds, and to ensure that these controls provide the accountability required to make certain funds are spent as intended. The essential goal of this initiative is for managers to have access to and use financial information to make informed program and management decisions on a "day to day" basis. The following highlights AHRQ's progress on the "Improved Financial Performance" goal for the President's Management Agenda.

AHRQ submitted its Improper Payment Risk Assessment in accordance with the Improper Payment Information Act (IPIA) of 2002 to the Department in FY 2004. This assessment looks at whether AHRQ's Research on Healthcare Costs, Quality and Outcomes (HCQO) program activities are susceptible to significant erroneous payments. The report focuses on identifying the types of erroneous payments (i.e., whether the errors are administrative in nature such as user errors or are due to system/process limitations, as opposed to the more consequential causes such as lack of internal controls, oversight, and/or monitoring; inadequate eligibility controls; and fraud, waste and abuse) and evaluating the related internal controls. The report offers the opinion that AHRQ's HCQO program is at low risk of incurring significant erroneous payments.

AHRQ continues to gather evidence of erroneous payments encountered by using a standard form to pinpoint their exact nature and extent. The information collected will be evaluated in November, and used to determine what corrective action is appropriate.

AHRQ responded to the Department's survey requesting information on how/if the Agency uses performance and financial information on a day to day basis to support routine decisions. The purpose of the survey was to highlight the best practices already in place and to identify areas for improvement, with the ultimate goal of enhancing the utility of the Unified Financial Management System (UFMS) once implemented. AHRQ's responses included examples of: efficiency measures in our current Performance Plan, financial and performance reports used by managers to support management decisions, actions/decisions made based on performance and financial data, and how efficiency measures are integrated into senior management's individual performance plans.

AHRQ continued to support the Department's efforts to develop and implement UFMS by participating in the Steering Committee and the Planning and Development Committee meetings.

AHRQ continued to work on enhancing our information systems and developing new applications to create an Agency-wide enterprise financial network to improve our access to relevant programmatic and budgetary information. Our long-range plan is to interface AHRQ systems with The Department's Unified Financial Management System (UFMS) to help management substantially reduce the cost of providing accounting services through the Department while enabling program administrators to make more timely and informed decisions regarding their operations. AHRQ's automated system captures electronic funding decisions for extramural research grants and ties financial resources to the Agency's strategic plan goals, GPRA goals and measures, budget execution and formulation, and financial management activities. The system interfaces with IMPAC II and interconnects with the existing Agency budget system through a shared research/financial data base. Funding modules for contracts and interagency agreements were tested and integrated into the system in the 3rd quarter of FY 2004. A module for capturing intramural research projects was also completed and put into production in the 3rd quarter.

General program direction and budget and performance integration is accomplished through the collaboration of the Office of the Director and the offices and centers that have programmatic responsibility for portions of the Agency's research portfolio. The Agency links budget and performance management through its focus on the Annual Performance Plan.

As a result of the increased emphasis on strategic planning, the Agency has shifted from a focus on output and process measurement to a focus on outcome measures. These outcome measures are being developed to cascade down from our strategic goal areas of safety/quality, effectiveness, efficiency and organizational excellence. Portfolios of work (combinations of activities that make up the bulk of our investments) support the achievement of our highest level outcomes.

In continuing AHRQ's commitment to budget and performance integration, we reorganized the management structure. This new structure aligns those who are responsible for budget formulation, execution and providing services and guidance in all aspects of financial management with those who are responsible for planning, performance measurement and evaluation. These functions are now within one office.

Current and future efforts include continuing the development of a software application that maps each AHRQ funded activity to the portfolio structure and associated performance. This is a work in progress and we look forward to sharing our success as we continue this journey.

Finally, AHRQ completed comprehensive program assessments on five key programs within the Agency: The Medical Expenditure Panel Survey (MEPS); the Healthcare Cost and Utilization Project (HCUP); the Consumer Assessment of Healthcare Plans Survey (CAHPS®); the grant component of the Agency's Translation of Research into Practice (TRIP) activity; and, the Patient Safety program. The Pharmaceutical Outcomes Portfolio was the latest program to undergo a PART review. These reviews provide the basis for the Agency to move forward in more closely linking high quality outcomes with associated costs of programs. Over the next few years, the Agency will focus on fully integrating financial management of these programs with their performance.

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