	Background

NQF is a nonprofit organization established in 1999 that fosters agreement  on national standards for measurement and public reporting of health care  performance data. Under the cost-plus-fixed-fee contract,  HHS will reimburse NQF for costs incurred under the contract in addition  to a fixed fee that is paid regardless of other costs. NQF Has Begun Work for Each of the Five Duties Required by MIPPA Related to Quality Measures

As of January 13, 2010—the end of the first year of HHS’s 4-year contract  with NQF to implement the MIPPA duties—NQF had begun work for each  of the five duties required by MIPPA related to health care quality  measures: (1) make recommendations on a national strategy and  priorities; (2) endorse quality measures; (3) maintain endorsed quality  measures; (4) promote electronic health records; and (5) report annually  to Congress and the Secretary of HHS. While NQF began work for each of  the duties in the first contract year, HHS determines on an annual basis the  specific work NQF will be expected to perform under the five MIPPA  duties in each contract year. I for a detailed description of NQF’s endorsement process.) The measures were identified by HHS as  being of interest to, or actually used by, HHS programs. While NQF has begun work for each of the duties in the first contract year,  HHS determines on an annual basis the specific work NQF will be  expected to perform under the five MIPPA duties each contract year. NQF Reported about $6.5 Million in Costs and Fixed Fees for the First Contract Year

NQF reported costs and fixed fees totaling approximately $6.5 million for  the first year of its contract with HHS, which ended January 13, 2010. The  amount NQF reported included direct and indirect costs, as well as fixed  fees. Direct costs, which are costs incurred specifically for this contract,  represented the largest percentage—about $3.2 million, or 49 percent—of  the amount NQF reported (see fig. 1). NQF’s reported direct costs were  largely labor costs for NQF employees and payments to subcontractors  and consultants. In addition to direct costs, NQF reported about   $2.9 million in indirect costs for the first contract year. Indirect costs cover  additional items, such as employee benefits, overhead, and administrative  costs. Of the approximately $6.5 million in costs and fixed fees NQF reported for  the first contract year, most were incurred in the second half of the  contract year. NQF and HHS Rely on Reviews of NQF Invoices in Order to Help Ensure That NQF’s Reported Costs Are Proper

NQF reviews invoices and carries out other activities prior to submitting  them to HHS in order to help ensure that reported costs are proper. In particular, NQF officials told us NQF uses an electronic  timesheet system in order to track employee labor hours. HHS Requires Its Officials to Review NQF Invoices following Certain Procedures in Order to Help Ensure That Reported Costs Are Proper

Like NQF, HHS relies on reviews of NQF’s invoices in order to help ensure  that reported costs are proper. Two HHS officials assigned to oversee the  NQF contract, the project officer and the contracting officer, are  responsible for these reviews. Concluding Observations

While NQF has begun work in the first year of its contract for the five  duties related to quality measurement established by MIPPA, it is too early  for us to assess whether, or to what extent, NQF will be successful in  carrying out these duties. This report describes NQF’s work for the first of  4 contract years, and HHS has flexibility to determine on an annual basis  the specific work it expects NQF to perform for each of the MIPPA duties. Therefore, it is not yet known exactly what work NQF will be expected to  complete during the remainder of the contract period. Our second report will  provide another opportunity to review NQF’s performance and costs. Agency and Other External Comments

We provided drafts of this report to HHS and NQF for comment. Both HHS  and NQF provided technical comments, which we incorporated as  appropriate. This project was initiated prior to the NQF contract with  the Department of Health and Human Services (HHS) that was required by  the Medicare Improvements for Patients and Providers Act of 2008.
Why GAO Did This Study

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) directed the Department of Health and Human Services (HHS) to enter into a 4-year contract with an entity to perform five duties related to health care quality measurement and authorized $40 million from the Medicare Trust Funds for the contract. In January 2009, HHS awarded a contract to the National Quality Forum (NQF), under which HHS will reimburse NQF for its costs and pay additional fixed fees. Established in 1999, NQF is a nonprofit member organization that fosters agreement on national standards for measuring and public reporting of health care performance data. This is the first of two reports MIPPA requires GAO to submit on NQF's contract with HHS. In this report, which covers the first contract year--January 14, 2009, to January 13, 2010--GAO describes (1) the status of NQF's work on the five duties under MIPPA; (2) the costs and fixed fees NQF has reported; and (3) what NQF and HHS do in order to help ensure that NQF's reported costs are proper. GAO reviewed relevant MIPPA provisions and reviewed HHS and NQF documents, such as HHS's contract with NQF, monthly progress reports and invoices for the first contract year, and policies and other documents that describe how HHS and NQF review invoices. GAO also interviewed NQF and HHS officials responsible for implementing and overseeing the contract.

What GAO Found

NQF has begun work for each of five duties required by MIPPA related to quality measures: (1) make recommendations on a national strategy and priorities; (2) endorse quality measures, which involves a process for determining which ones should be recognized as national standards; (3) maintain--that is, update or retire--endorsed quality measures; (4) promote electronic health records; and (5) report annually to Congress and the Secretary of HHS. As of January 13, 2010--the end of the first contract year--NQF's work for four MIPPA duties was in progress and it had completed its first annual report for the fifth duty. For example, NQF had begun the duties related to endorsement and maintenance by initiating the endorsement process for three projects HHS selected and by starting maintenance reviews for a set of measures of interest to or used by HHS. While NQF began work for each of the duties in the first contract year, HHS determines on an annual basis the work NQF will be expected to perform under the five duties each contract year. NQF reported costs and fixed fees totaling approximately $6.5 million for the first contract year, including direct and indirect costs as well as fixed fees. Specifically, NQF reported about $3.2 million in direct costs, or 49 percent of the total. These were costs specifically incurred for the NQF contract, such as direct labor for NQF employees. NQF also reported about $2.9 million in indirect costs, which cover additional items such as employee benefits and overhead. Finally, NQF reported about $360,000 in fixed fees for the first contract year. Over $5 million of the reported costs and fixed fees were incurred in the second half of the contract year. NQF and HHS rely on reviews of NQF invoices in order to help ensure that NQF's reported costs are proper. At NQF, officials told us that they review the invoices prior to submitting them to HHS and carry out other activities, such as using an electronic system to track labor hours, in order to help ensure that the costs they report in the invoices are proper. Like NQF, HHS relies on reviews of NQF invoices in order to help ensure NQF's reported costs are proper. These reviews are governed by HHS policies and procedures and by requirements applicable to federal contracts generally. While NQF has begun work under the MIPPA contract, it is too early for GAO to assess whether, or to what extent, NQF will be successful in carrying out the five MIPPA duties. This report describes NQF's work for the first of 4 contract years. In the remaining 3 years of the contract, HHS will determine on an annual basis specific work for NQF to complete under each of the five MIPPA duties. Therefore, it is not yet known exactly what work NQF will be expected to complete during the remainder of the contract period. GAO's second report, which is due in January 2012, will provide another opportunity to review NQF's performance and costs. HHS and NQF reviewed a draft of this report and provided technical comments, which GAO incorporated as appropriate.