PHM Glossary: Q


The degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge.

Quality is a term used frequently in health care delivery systems. Several organizations—for example National Committee for Quality Assurance (NCQA), URAC, The Joint Commission, and other accrediting organizations— exist to set standards for managed care quality and do so by evaluating outcomes and measures (quality indicators) within an insured population. Examples of quality indicators may include clinical outcomes, tests and screening for certain conditions and rates of compliance with certain treatment protocols within a population.

See also patient safety.


“Crossing the Quality Chasm: The IOM Health Care Quality Initiative.” 20 Dec. 2005. Institute of Medicine for the National Academies. 23 Feb. 2006


Quality-Adjusted Life Years

A quality-adjusted life year (QALY) is a measurement index that combines quality and quantity of life. In expressing health status in terms of quantitative measures of well years of life, QALYs integrate mortality and morbidity. The term derives from the field of economics and may be applied to assess humanistic outcomes of disease management programs.


Quantity and quality of life are the two basic outcome components resulting from health care interventions. QALYs help answer basic questions about the impact of a health care intervention in relation to cost.

  1. What is the life expectancy of someone with the condition?
  2. What is the influence of an intervention on number and quality of years of life?
    1. Does the illness/condition or its treatment shorten the duration of an individual’s life?
    2. Does the illness/condition or its treatment make the individual’s life less desirable?
    3. If the individual’s life is shorter or less desirable, by how many years is it reduced?
  3. What is the timing of that influence (e.g., an intervention that improves life 20 years hence does not have the same value as one that improves the quality this year).


There are several simple steps involved in deriving a QALY (and its cost).


The first step is to quantify quality of life associated with a specific health state. The following continuum of possible health states illustrates the values applied to a year of healthy life.

Health State QALY Value
A year with perfect health 1 QALY
A year of ill health <1 QALY
Death 0 QALY
Some undesirable health states that are worse than death <0 QALY

Various approaches are used to measure health status, but individual self-rating tends to be most commonly applied to calculate QALYs. It has been suggested that the QALY valuation may vary depending on the approach or use. The main approaches are:

  • Expert rating based on the opinion of physicians;
  • Individual self-assessment using a standardized rating tool; and
  • More sophisticated approaches such as “standard gamble” (patients make a hypothetical choice between two probabilities) and time trade-off (patients choose between their current health status for a set number of years or perfect health for fewer years).

Sample Health State Valuation

Health State Quality of Life Valuation
Good Health 1.0
No problems with daily activities, some pain or discomfort 0.740
Slight problems with self care, moderate discomfort, somewhat depressed 0.512
Problems with daily activities and self care, moderate to severe pain or discomfort, depressed 0.251
Unable to perform usual activities, moderate to severe pain, severely depressed 0.076
Death 0
Confined to bed, unable to care for self, extreme pain, severely depressed -0.023

Once the individual’s health state has been valued, the next step, QALY calculation, can be undertaken. Presumably, this calculation is applied to the years of extended life due to the intervention. For example, life expectancy could be 1 year (at a high quality of life) without major surgery, or 10 years in pain and discomfort, with surgery. The value of a year of moderate pain and discomfort is 0.251, so the value of the intervention is 10 * 0.251 or 2.51 years.


QALY = v(Q) * Y

Where, Q = quality; Y = years

Example A: Lower limb prosthesis for a middle-aged amputee due to trauma

  • The new limb increases quality of life by 0.3 (i.e., quality of life valuation = 0.3)
  • 30 years of benefit are estimated based on expected life span of patient
  • Extra costs are given as = $2,000 per life year
    QALY = Y * v(Q) = 30 * 0.3 = 9 QALY

Example B: Heart surgery for an 85-year-old diabetic patient

  • Patient would die without surgery; quality of life valuation = 0.5
  • 3 years of benefit are estimated based on evidence of treatment effectiveness and expected life span of patient
  • Costs of treatment are given as $850,000
  • QALY –  3 * 0.5 = 1.5 QALY

Cost/QALY – 85,000/1.5 = $56,666


Costs/QALY can be calculated to help make resource allocation determinations. Three factors are necessary for calculating the cost per QALY:

  1. Reliable evidence of the prognosis of an illness with and without treatment;
  2. Health state values; and
  3. Health care intervention costs.

Example A: Lower limb prosthesis for a middle-aged amputee due to trauma (continued from above)

Total costs = Y * C/Y = 30 years * $1,000/year = $30,000

Cost per QALY = Total cost/ QALY = 30,000/9 = $3,333

Example B: Heart surgery for an 85-year-old diabetic (continued from above)

Cost/QALY – 85,000/1.5 = $56,666


QALYs are relative, requiring that health states be compared with one another. This comparability allows cost per QALY to be ranked across various health care interventions. When ranked by cost/QALY, provision of the lower limb prosthesis ($3,333) is a much more efficient use of resources than the heart surgery ($56,666), even though the 85-year-old patient would die without the surgical intervention.

The incremental cost per QALY or the incremental cost-effectiveness ratio is often used to make determinations between two interventions for the same condition when resources or health care budgets are restricted. The formula is:

Incremental Cost Effectiveness Ratio =

Cost a – Cost b  
QALY a – QALY b  

QALYs help make explicit resource allocation choices for limited medical resources. They are, however, limited in their sensitivity to subtle differences in treatment of less severe health problems and health dimensions that vary by age.


Kaplan, R. “Utility Assessment for Estimating Quality Adjusted Life Years.” Valuing Health Care: Costs, Benefits and Effectiveness of Pharmaceuticals and Other Medical Technologies. Cambridge: Cambridge University Press (1996).

Maynard, A. “Rational Pharmacology” Health Economics.

Phillips, C., and Thompson, G. “What is QALY?” 23 Feb. 2006

Van Praag, B. and Carbonell, A. “Age-Differentiated QALY Losses.” June 2001. Social Science Research Network. 23 Feb. 2006


Quality Improvement

Quality improvement is a fundamental goal of population health management. Quality improvement is accomplished through the core elements of population health management:

  • Support the physician or practitioner/patient relationship and plan of care;
  • Emphasize prevention of exacerbations and complications utilizing evidence-based practice guidelines and patient empowerment strategies; and
  • Evaluate clinical, humanistic, and economic outcomes on an ongoing basis with the goal of improving overall health.


Quality improvement begins with the measurement of the current state of care or service (establishing a baseline quality measure) using established quality measures. Once the baseline is established, an improvement goal is set and subsequent improvements are measured to determine the impact of quality improvement efforts on outcomes.

Meaningful outcome results should improve the overall quality of all programs as it becomes clear which population health management program designs are most effective and efficient. Adoption and compliance should also improve as providers and health plan members become educated on the benefits of these programs. Ultimately, the development of best practices in population health management will lead to increased confidence in projected outcomes, thereby eliminating skepticism and ensuring the increased availability of quality programs to support both patients and their physicians.

The use of established metrics is essential in developing and improving meaningful outcomes. Several organizations have developed quality measures (e.g., National Committee for Quality Assurance, Institute of Medicine).

See quality measures.


Johns Hopkins/American Healthways. “Standard Outcome Metrics and Evaluation Methodology for Disease Management Programs.” Disease Management 6(3)(Fall 2003) 121-138.

NCQA Home Page. National Committee for Quality Assurance. 23 Feb. 2006

IOM Home Page. 2006. Institute of Medicine of the National Academies. 23 Feb. 2006

Quality Measures

Quality measures are those reporting metrics that indicate individual and population progression and improvement.


  • The Joint Commission accredits and certifies health organizations and programs in the United States and has endorsed specifications for quality core measures and hospital inpatient quality measures, for example.
  • The National Committee for Quality Assurance (NCQA) Healthcare Effectiveness Data and Information Set (HEDIS) is a tool to measure performance on important dimensions of care and service.
  • National Quality Forum (NQF) endorses national consensus standards for measuring and publicly reporting on performance.
  • National Quality Measures Clearinghouse is a public resource for evidence-based quality measures and measure sets.


Agency for Healthcare Research and Quality (AHRQ). National Quality Measures Clearinghouse.

Johns Hopkins/American Healthways. “Standard Outcome Metrics and Evaluation Methodology for Disease Management Programs.” Disease Management 6(3)(Fall 2003) 121-138.

National Committee for Quality Assurance (NCQA). HEDIS & Quality Measurement.

National Quality Forum (NQF). Home Page.

The Joint Commission. Performance measurement.