Nursing Homes: Sustained Efforts Are Essential to Realize Potential of
the Quality Initiatives (Letter Report, 09/28/2000, GAO/HEHS-00-197).

Pursuant to a congressional request, GAO provided information on federal
and state initiatives to improve the quality of nursing homes, focusing
on: (1) progress in improving the detection of quality problems and
changes in measured nursing home quality; (2) the status of efforts to
strengthen states' complaint investigation processes and federal
enforcement policies; and (3) additional steps taken at the federal
level to improve oversight of states' quality assurance activities.

GAO noted that: (1) overall, the introduction of the recent federal
quality initiatives has generated a range of nursing home oversight
activities that need continued federal and state attention to reach
their full potential; (2) the states are in a period of transition with
regard to the implementation of the quality initiatives, in part because
the Health Care Financing Administration (HCFA) is phasing them in and
in part because states did not begin their efforts from a common
starting point; (3) efforts at the federal level toward improving the
oversight of states' quality assurance activities have commenced but are
unfinished or need refinement; (4) federal initiatives were introduced
to strengthen the rigor with which states conduct required annual
nursing home surveys; (5) the states GAO visited have begun to use the
new methods introduced by the initiatives to spot serious deficiencies
when conducting surveys, but HCFA is still developing important
additional steps; (6) GAO's results showed a marginal increase
nationwide in the proportion of homes with documented actual harm and
immediate jeopardy deficiencies, although there was considerable
variation across states; (7) the states GAO contacted also have made
strides in improving their investigations of and follow-up to
complaints, but not enough time has elapsed to consider these efforts
complete; (8) for some states, the provision of federal funding to
support the nursing home initiatives came too late in the state budget
cycle for agencies to capitalize on the additional funds for fiscal year
1999; (9) it is too early to assess the effect of the additional funding
on the number of pending appeals because the new staff were only hired
within the past year and other changes in enforcement policy are
expected to increase the volume of nursing home appeals; (10) to improve
nursing home oversight at the federal level, HCFA has made recent
organizational changes to address past consistency and coordination
problems between its central office and 10 regional offices; (11) it
also intends to intensify its use of management information data systems
and reports to verify and assess states' oversight activities and view
more closely the performance of the homes themselves; and (12) GAO's
review showed that an examination of previously available information
could have identified shortcomings in a state's survey activities even
before they came to light as the result of a criminal investigation.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-00-197
     TITLE:  Nursing Homes: Sustained Efforts Are Essential to Realize
	     Potential of the Quality Initiatives
      DATE:  09/28/2000
   SUBJECT:  Elder care
	     Nursing homes
	     State programs
	     Federal/state relations
	     Negligence
	     Noncompliance
	     Patient care services
IDENTIFIER:  HCFA State Agency Quality Improvement Program
	     HCFA Online Survey, Certification, and Reporting System

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GAO/HEHS-00-197

Results in Brief 6

Background 8

Progress Made in Improving Annual Surveys, but Measuring the
Effect Is Problematic 11

Complaint and Enforcement Processes Are Improving, but States
Report Fiscal Year 1999 Federal Initiatives Funding Was Largely
Unspent 21

Improvements Continue in Federal Oversight of State Survey
Activities 36

Conclusions 44

Agency Comments and Our Evaluation 45

Appendix I: Implementation Chronology for Key Nursing Home
Quality Initiatives

48

Appendix II: State Survey Findings for Periods Before and After the
Administration's Nursing Home Initiatives

50

Appendix III: State Efforts to Address Nursing Home Staffing
Shortages

53

Appendix IV: Additional Information on Federal Oversight
Activities

59

Appendix V: Comments From the Health Care Financing
Administration

63

Appendix VI: Comments From California's Department of Health
Services

66

Appendix VII: Comments From Michigan's Department of Consumer
and Industry Services

70

Appendix VIII: Comments From Missouri's Department of Social
Services

74

Appendix IX: Comments From Washington's Department of Social
and Health Services

81

Appendix X: GAO Contact and Staff Acknowledgments

82

83

Table 1: Scope and Severity of Deficiencies 9

Table 2: Predictable Surveys for Nursing Homes in Six States 15

Table 3: Examples of Planned State Funding Increases to Hire
Additional Surveyors and Enhance Oversight of Nursing
Homes 16

Table 4: Homes With Actual Harm and Immediate Jeopardy
Deficiencies Before and After Implementation of the
Quality Initiatives 18

Table 5: State Investigative Time Frames for Complaints Prior
to the Initiatives and Extent to Which States Meet the
10-Day Requirement for Actual Harm 22

Table 6: Federal Medicare and Medicaid Funding for State Survey
and Certification Activities 26

Table 7: Summary of Information Provided by Nine States on Their
Fiscal Year 1999 Nursing Home Initiatives Allocation 28

Table 8: Comparison of Pending Appeals and Increased Staffing
at the Departmental Appeals Board 33

Table 9: Comparison of Per-Instance and Per-Day Fines for Fiscal
Year 2000, as of August 8, 2000 34

Table 10: HCFA Analysis of OSCAR Data and Comparative Surveys
Could Have Raised Questions About the Performance of Oklahoma's State Survey
Agency 40

Table 11: HCFA Analysis of Available Data Could Have Raised
Questions About the Performance of Missouri's State Survey Agency 41

Table 12: Results of Federal Surveys of 16 Nursing Homes in
Oklahoma 43

Table 13: Implementation Chronology for Key Nursing Home
Initiatives 48

Table 14: Percentage of Homes at Each Deficiency Level Before
and After the Nursing Home Initiatives, by State 51

Table 15: States With Programs to Address Nursing Home
Staff Shortages 53

Table 16: GAO Analysis of the Results of Federal Comparative
Surveys Conducted Between October 1998 and May 2000 60

Table 17: New State Performance Standards, Relationship to SAQIP,
and Federal Evaluation Data Sources 61

Figure 1: Comparison of State and Federal Quality-of-Care
Deficiencies for 16 Nursing Homes in Oklahoma 62

CPR cardiopulmonary resuscitation

HCFA Health Care Financing Administration

HHS Department of Health and Human Services

OSCAR On-Line Survey, Certification, and Reporting System

SAQIP State Agency Quality Improvement Program

Health, Education, and
Human Services Division

B-284751

September 28, 2000

The Honorable Charles E. Grassley
Chairman
The Honorable John B. Breaux
Ranking Minority Member
Special Committee on Aging
United States Senate

The Honorable Christopher S. Bond
United States Senate

Since 1997, the Senate Special Committee on Aging has focused considerable
attention on the need to improve the quality of care for the nation's 1.6
million nursing home residents, a highly vulnerable population of elderly
and disabled individuals. In a series of reports and testimonies prepared at
the Committee's request, we found significant weaknesses in federal and
state survey and oversight activities designed to detect and correct quality
problems.1 For example, we reported that about 15 percent of the nation's
17,000 nursing homes--an unacceptably high number--repeatedly had serious
care problems that caused actual harm to residents or placed them at risk of
death or serious injury (immediate jeopardy). Our key findings on the
nursing home survey process included the following:

ï¿½ The results of state surveys understated the extent of serious care
problems, reflecting procedural weaknesses in the surveys and their
predictability.

ï¿½ Serious complaints by residents, family members, or staff alleging harm to
residents remained uninvestigated for weeks or months.

ï¿½ When serious deficiencies were identified, federal and state enforcement
policies did not ensure that the deficiencies were addressed and remained
corrected.

ï¿½ Federal mechanisms for overseeing state monitoring of nursing home quality
were limited in their scope and effectiveness.

Concurrent with the Committee's July 1998 hearing, the President announced a
series of initiatives intended to address many of the weaknesses we
identified. Since that time, the Administration has expanded the number of
initiatives to about 30 and the Congress has appropriated additional funds
to support the increased workload associated with implementing the
initiatives. To determine the effect of the initiatives, you asked us to
assess (1) progress in improving the detection of quality problems and
changes in measured nursing home quality, (2) the status of efforts to
strengthen states' complaint investigation processes and federal enforcement
policies, and (3) additional steps taken at the federal level to improve
oversight of states' quality assurance activities.

In conducting our review, we analyzed data from the federal On-Line Survey,
Certification, and Reporting (OSCAR) System, which compiles the results of
state nursing home surveys. We visited California, Missouri, Tennessee, and
Washington, interviewing officials in state survey agencies and their
district offices.2 California and Missouri represented states that were
about average in terms of the number of actual harm and immediate jeopardy
deficiencies cited in state surveys prior to the initiatives. Tennessee
represented the low end of the range and Washington the high end. We also
contacted officials in Maryland and Michigan, states that were included in
our prior work. In addition, we interviewed Health Care Financing
Administration (HCFA) officials at both headquarters and regional offices.
HCFA, an agency within the Department of Health and Human Services (HHS), is
responsible for ensuring that each state establishes and maintains the
capability to periodically survey nursing homes that receive federal
payments in order to ensure that the homes provide quality care to
residents. Finally, we reviewed relevant documents from both state agencies
and HCFA. We conducted our review from January to August 2000 in accordance
with generally accepted government auditing standards.

Overall, the introduction of the recent federal quality initiatives has
generated a range of nursing home oversight activities that need continued
federal and state attention to reach their full potential. The states are in
a period of transition with regard to the implementation of the quality
initiatives, in part because HCFA is phasing them in and in part because
states did not begin their efforts from a common starting point. Efforts at
the federal level toward improving the oversight of states' quality
assurance activities have commenced but are unfinished or need refinement.

Federal initiatives were introduced to strengthen the rigor with which
states conduct required annual nursing home surveys. The states we visited
have begun to use the new methods introduced by the initiatives to spot
serious deficiencies when conducting surveys, but HCFA is still developing
important additional steps that may not be introduced until 2002 or 2003.
Likewise, efforts to reduce the predictable timing of the surveys--that is,
to minimize the opportunity for homes so inclined to cover up problems--have
been modest to date. To measure the effect of the survey process
improvements, we analyzed the change in the number of nursing homes cited
for serious deficiencies in the periods before and after the introduction of
the quality initiatives. Our results showed a marginal increase nationwide
in the proportion of homes with documented actual harm and immediate
jeopardy deficiencies, although there was considerable variation across
states, with some states experiencing a decrease in homes with these
deficiencies. These results suggest that states may have become more
rigorous in their identification and classification of serious deficiencies.
The results could also indicate that the volume of such deficiencies has
actually increased slightly nationwide, a situation consistent with states'
heightened concerns about potential facility staff shortages during this
same time period.

The states we contacted also have made strides in improving their
investigations of and follow-up to complaints, but not enough time has
elapsed to consider these efforts complete. For example, the states in our
review were not yet investigating all complaints that allege actual harm to
a resident within 10 days, as HCFA now requires, but were working toward
that goal by hiring additional surveyors to staff the investigations,
establishing procedures that make it easier to file complaints, or
developing new tracking systems to improve their oversight of complaint
investigations by local district offices. For some states, the provision of
federal funding to support the nursing home initiatives came too late in the
state budget cycle for agencies to capitalize on the additional funds for
fiscal year 1999. HCFA also has strengthened the enforcement tools available
to sanction nursing homes that are cited for actual harm and immediate
jeopardy violations, but too little time has elapsed to assess the
application of these tools. Early indications from some states are that
their referrals of homes to HCFA for sanctions are on the rise. Finally,
additional funds were provided in fiscal years 1999 and 2000 to hire new HHS
staff in order to reduce the large number of pending appeals by nursing
homes and to collect assessed fines faster. The expectation is that the more
expeditious resolution of appeals will heighten the deterrent effect of
civil fines. It is too early to assess the effect of the additional funding
on the number of pending appeals because the new staff were only hired
within the past year and other changes in enforcement policy are expected to
increase the volume of nursing home appeals.

To improve nursing home oversight at the federal level, HCFA has made recent
organizational changes to address past consistency and coordination problems
between its central office and 10 regional offices. It also intends to
intensify its use of management information data systems and reports to
verify and assess states' oversight activities and view more closely the
performance of the homes themselves. Our review showed that an examination
of previously available information could have identified shortcomings in a
state's survey activities even before they came to light as the result of a
criminal investigation.

Oversight of nursing homes is a shared federal and state responsibility. On
the basis of statutory requirements, HCFA defines standards that nursing
homes must meet to participate in the Medicare and Medicaid programs and
contracts with states to assess whether homes meet these standards through
annual surveys and complaint investigations. The "annual" standard survey,
which must be conducted on average every 12 months and no less than once
every 15 months at each home, entails a team of state surveyors spending
several days in the home to determine whether care and services meet the
assessed needs of the residents and whether the home is in compliance with
long-term-care facility requirements. HCFA establishes specific protocols,
or investigative procedures, for state surveyors to use in conducting these
comprehensive surveys. In contrast, complaint investigations, also conducted
by state surveyors but following the individual state's procedures, within
certain federal guidelines and time frames, typically target a single area
in response to a complaint filed against a home by a resident, the
resident's family or friends, or nursing home employees. Quality-of-care
problems identified during either standard surveys or complaint
investigations are classified in one of 12 categories according to their
scope (the number of residents potentially or actually affected) and their
severity. An A-level deficiency is the least serious and is isolated in
scope, while an L-level deficiency is the most serious and is considered to
be widespread in the nursing home (see table 1). At some homes, state
surveyors identify no deficiencies.

                                      Scope
 Severity                             Isolated  Pattern  Widespread
 Immediate jeopardya                  J         K        L
 Actual harm                          G         H        I
 Potential for more than minimal harm D         E        F
 Potential for minimal harmb          A         B        C

aActual or potential for death/serious injury.

bNursing home is considered to be in "substantial compliance."

Ensuring that documented deficiencies are corrected is likewise a shared
responsibility. HCFA is responsible for enforcement actions involving homes
with Medicare certification--about 86 percent of all homes.3 The scope and
severity of a deficiency determines the applicable enforcement action and
whether it is optional or mandatory. Enforcement actions can involve, among
other things, requiring corrective action plans; monetary fines; denying the
home Medicare and Medicaid payments; and, ultimately, terminating the home
from participation in these programs. Sanctions are imposed by HCFA on the
basis of state referrals. HCFA normally accepts a state's recommendations
for sanctions or other corrective actions but can modify them. Before a
sanction is imposed, federal policy generally gives nursing homes a grace
period of 30 to 60 days to correct a deficiency. States may also use their
state licensure authority to impose state sanctions, and some prefer to do
so because they may impose them immediately, without giving the home a grace
period to correct the deficiency.4 States are responsible for enforcing
standards in homes with Medicaid-only certification--about 14 percent of the
total. They may use the federal sanctions or rely upon their own state
licensure authority and nursing home sanctions.

HCFA also is responsible for overseeing each state survey agency's
performance in ensuring quality of care in its nursing homes. Its primary
oversight tools are the federal comparative and observational surveys
conducted annually in at least 5 percent of the nation's certified Medicare
and Medicaid nursing homes. A comparative survey involves a federal survey
team conducting a complete, independent survey of a home within 2 months of
the completion of a state's survey in order to compare and contrast the
findings.5 In an observational survey, one or two federal surveyors
accompany a state survey team to a nursing home to watch the team conduct
survey tasks, give immediate feedback, and later rate the team's
performance. The vast majority of federal surveys are observational.
Additionally, in 1996 HCFA initiated the State Agency Quality Improvement
Program (SAQIP), which requires states to self-report their compliance with
seven performance standards and to implement quality improvement plans to
address any deficiencies identified in their survey processes.

In its federal monitoring role, HCFA directs the states' implementation of
the Administration's nursing home initiatives, which are intended to improve
nursing home oversight and quality of care. Many of the initiatives address
previous problems identified by us, HCFA, and others. This report focuses on
selected initiatives from the following three areas:

ï¿½ Improving nursing home reviews. These initiatives are intended to
strengthen states' periodic surveys and complaint investigations, enabling
surveyors to better detect quality-of-care deficiencies.

ï¿½ Ensuring compliance. These initiatives are intended to ensure that homes
with serious deficiencies or homes that repeatedly cause harm to residents
promptly correct deficiencies and sustain compliance with federal
requirements thereafter.

ï¿½ Improving federal monitoring. These initiatives are intended to ensure
that HCFA and its regional offices use appropriate oversight mechanisms and
data systems to assess the effectiveness of states' survey activities.

Appendix I provides a chronology of and summarizes the key quality
initiatives discussed in this report. Though many initiatives were announced
in July 1998, some important changes were not implemented until the second
half of 1999 and others are still in the planning phase.

Is Problematic

HCFA and the six states we contacted have taken important steps toward
improving the rigor of nursing home surveys. HCFA has begun a major redesign
of its nursing home survey methodology, but only phase one of the overall
plan has been implemented by state survey agencies. When phase two is
completed, HCFA should have significantly improved the tools for effectively
identifying the scope and severity of care problems. However, the second
phase is not expected to be implemented until 2002 or 2003. Despite the
progress to date in improving surveyors' ability to detect deficiencies, the
timing of nursing home surveys in some states continues to be predictable,
allowing facilities to mask certain deficiencies if they choose to do so.
Recognizing the need for self-improvement in the type and extent of
oversight, the states we visited are beginning to identify and address other
weaknesses in the survey process not covered by the Administration's
initiatives. Consistent with the expectation that improvements in the survey
process would lead to the identification of more problems, the proportion of
homes with serious deficiencies increased in many states after the
introduction of survey methodology improvements. Although the identification
of more deficiencies could be the result of better detection, growing
reports of problems with nursing home staffing raise concerns that the
actual proportion of homes with deficiencies may have increased. This
possibility underscores the importance of adequate federal and state
oversight of nursing homes.

Planning Phase

Annual standard surveys provide states the opportunity to systematically and
comprehensively assess nursing home quality. In our prior work, we found
that surveyors often missed significant care problems--such as pressure
sores, malnutrition, and dehydration--because the methods they used lacked
sufficient rigor.6 In addition, problems went undetected because nursing
homes were able to predict the timing of their next survey and, if so
inclined, conceal problems such as routinely having too few staff to care
for residents.

Sampling Methodology

In response to survey methodology weaknesses, HCFA planned a two-phase
revision of the survey process. Phase one introduced a new tool to help
surveyors do a better job of selecting a resident sample, instructed states
to increase the sample size in areas of particular concern, and required the
use of investigative protocols intended to make the survey process more
systematic. Still in the planning stages, phase two improvements will tackle
problems that remain, such as ensuring rigor in the augmentation of the
initial sample selected off-site and improving the thoroughness of the
on-site investigations.

Surveyors' assessment of the quality of care provided to a sample of
residents serves as the basis for evaluating nursing homes. Effective July
1999, HFCA instructed state survey agencies to begin using "quality
indicators" to review information on the care provided to a home's residents
before actually visiting the home. Quality indicators are essentially
numeric warning signs of the prevalence of care problems, such as
greater-than-expected instances of weight loss, dehydration, or pressure
sores. They are derived from nursing homes' assessments of residents and
rank a facility in 24 areas compared with other nursing homes in the state.7
By using the quality indicators to select a preliminary sample of residents
before the on-site review, surveyors are better prepared to identify
potential care problems.8 Surveyors augment this preliminary sample with
additional resident cases once they arrive at the nursing home. In
conjunction with the introduction of quality indicators, HCFA also
instructed surveyors to (1) increase the sample size in areas such as
maintaining proper body weight (nutrition), fluid intake (dehydration), and
pressure sores and (2) begin using a series of investigative protocols in
these and other areas. The protocols are procedural instructions intended to
provide greater standardization and make the on-site surveys thorough. Our
prior work noted that the sample typically included an insufficient number
of different types of resident cases to adequately identify serious quality
problems.

The need to provide training in the use of quality indicators to the
approximately 3,500 state nursing home surveyors delayed implementation.
HCFA held four training sessions for about 800 supervisory-level
staff--state survey directors, state trainers, and lead surveyors--during
April through June 1999. In turn, these individuals trained surveyors in
their local offices.

Though the use of quality indicators and protocols introduced more rigor
into the survey process, they are not a panacea for all survey methodology
problems. Because the basis for quality indicators is self-reported data by
nursing homes, there needs to be confidence that the data are accurate. In
addition, some portion of the residents selected using the quality
indicators may no longer be in the nursing home--a problem frequently
identified by the surveyors we interviewed. These problems highlight the
importance of on-site augmentation of the sample. Finally, the current
protocols are a starting point, but additional steps need to be taken to
ensure that surveyors thoroughly and systematically assess the care areas
targeted using the quality indicators.

To address these remaining problems with sampling and the investigative
protocols, HCFA is planning a second revision of its survey methodology to
be implemented in 2002 or 2003. The focus of phase two is (1) improving the
on-site augmentation of the preliminary sample selected off-site using the
quality indicators and (2) strengthening the protocols used by surveyors to
ensure more rigor in their on-site investigations. We continue to believe
that implementation of this phase is necessary for HCFA to fully respond to
our recommendation to significantly improve the ability of surveys to
effectively identify the existence and extent of deficiencies.

Survey Predictability

To address the predictability problem, HCFA required states to start at
least 10 percent of standard surveys outside the normal workday--either on
weekends, in the early morning, or in the evening--beginning January 1,
1999. HCFA also instructed the states to avoid, if possible, scheduling a
home's survey for the same month as the one in which the home's previous
standard survey was conducted.

Tracking states' progress in implementing surveys that begin outside the
normal workday has been problematic for HCFA. The agency did not modify its
data system to allow states to identify such surveys in OSCAR until August
1999--8 months after the requirement to conduct such surveys was
implemented. In February 2000, HCFA instructed states to begin identifying
off-hours surveys in OSCAR for those conducted on or after October 1, 1999.
HCFA data for the period October 1, 1999, through June 30, 2000, indicate
that nationally about 10 percent of surveys were started outside normal
working hours. However, in August 2000, HCFA sent letters to states
performing well below the 10-percent target, reminding them of the
requirement, asking them to confirm the accuracy of OSCAR data, and asking
how they intend to increase their percentage of off-hour surveys.9

Though varying the starting time of surveys may be beneficial, this
initiative is too limited in reducing survey predictability. Our analysis of
the most current survey data shows that between 29 percent and 56 percent of
the surveys conducted in six states were predictable (see table 2). Many
surveys could be viewed as being predictable because they were conducted
within a month of the 15-month limit between annual surveys. As the 15-month
limit approaches, homes are aware that the survey will soon occur. Both
California and Maryland officials attributed delays in conducting annual
surveys to the increased emphasis on investigating complaints more promptly,
which required delaying many annual surveys. In fact, a third of the surveys
in Maryland as well as 10 percent of California and 7 percent of Michigan
surveys were late--that is, conducted after the 16th month.

Surveys that occur at nearly the same time each year may also be considered
predictable. As table 2 shows, over half the surveys in Tennessee were
conducted within 15 days of the anniversary of the previous standard survey.
Tennessee officials told us that their predictability problem resulted in
large part from a state law requiring homes to be surveyed at least every 12
months instead of the maximum 15 months permitted by federal law.10 We
continue to believe that our July 1998 recommendation to make annual surveys
less predictable by segmenting them into more than one review throughout the
year has merit. Such an approach would give surveyors more opportunities to
observe problematic homes and initiate broader reviews when warranted.

                    Surveyed within Surveyed
                    15 days of      between      Surveyed      Predictable
            Number  1-year                       between 15
 State      of      anniversary of  14 and 15    and 16 months surveys
            homes   last survey     months after after last
                                    last survey  survey        (percent)
                    (percent)a      (percent)    (percent)
 California 1,301   8.0             31.4         15.0          54.4
 Maryland   243     4.9             14.8         9.0           28.7
 Michigan   434     14.0            14.3         9.9           38.2
 Missouri   476     11.1            13.9         8.8           33.8
 Tennessee  351     56.1            0            0             56.1
 Washington 278     15.1            17.6         1.0           33.7

Note: Data were extracted from OSCAR in August 2000. Homes not showing a
prior survey date were not included in this analysis.

aFor the "15-day" analysis, we included homes whose current survey was
conducted between 15 days preceding and 15 days following the 1-year
anniversary of the prior survey.

bFor Missouri, hospital-based nursing homes were e xcluded (see footnote 2).

State Initiatives

States are also undertaking their own initiatives to improve the survey
process. In some cases, these changes are under way but not complete. Some
states plan to hire new surveyors (see table 3) and have made efforts to
improve the monitoring of their local survey offices. California plans to
hire 200 new surveyors in 2000 in order to increase the frequency and
unpredictability of surveys and to expand its oversight of poorly performing
homes. In Maryland, the number of surveyors is projected to reach 59 by
January 2001--a 100-percent increase since July 1999. Prior to the
initiatives, local district offices in California had generally operated
with considerable autonomy and with little centralized control. When we
visited in April 2000, California was in the process of increasing the
number of district offices and realigning existing districts to obtain a
more appropriate balance between workload and staffing. To facilitate
oversight, each office will report to one of four field coordinators (north,
central, south, and Los Angeles) who report directly to the assistant deputy
director of the state survey agency. California is also expanding its
quality assurance reviews of survey findings after identifying significant
problems in survey documentation, including the scope and severity of
deficiencies classified lower than the evidence in the survey documentation
warranted and errors in survey procedure. Missouri officials told us that by
the end of 2000, they plan to establish a new quality assurance unit that
will be responsible for reviewing a largely random sample of completed
surveys and complaint investigations from each of its seven district
offices. Tennessee increased oversight and control of district office
operations by hiring a full-time quality inspector to conduct targeted
reviews in each of the state's three district offices. These reviews have
resulted in the identification of serious weaknesses in the survey process
and the scheduling of remedial training sessions for surveyors.

 State      Objective of state funding increase
            California's 2000-2001 budget contained an "Aging With Dignity
            Initiative." It provided over $15 million to hire more than 200
            new surveyors to (1) increase the frequency and
            unpredictability of nursing home surveys, (2) expand reviews of
            poorly performing nursing homes, and (3) guarantee a rapid
 California response to nonemergency complaints. This initiative also
            included substantial funding for nursing home quality-of-care
            enhancements such as providing $10 million for cash awards to
            exemplary nursing homes. California officials estimate that
            about one-third of these increases respond to Medicare
            requirements.
            Maryland plans to provide $1.1 million for increased state
 Maryland   oversight in a supplemental budget for fiscal 2001. Of that,
            about $600,000 would hire 20 additional inspectors, allowing
            the state to visit nursing homes twice a year instead of once.
            Missouri's state legislature provided $318,000 in appropriation
 Missouri   authority to help fund 27 positions to meet new or enhanced
            state and federal mandates related to survey, licensure, and
            complaint activities at long-term-care facilities.

Serious Deficiencies, but Range Is Beginning to Narrow

Consistent with the expectation that improvements in the survey process
would lead to the identification of more problems, the proportion of homes
identified with serious deficiencies increased in a majority of states after
the introduction of survey methodology improvements. The variation in actual
harm and immediate jeopardy deficiencies is still great--ranging from 10.5
percent of homes in Maine to 58 percent in Washington--but appears to be
narrowing.

Table 4 shows the change in actual harm and immediate jeopardy deficiencies
in states where a minimum of 100 nursing homes was surveyed since January
1999.11 In some states, these shifts were significant:

ï¿½ Seventeen states had a 5 percentage point or greater increase in the
proportion of homes identified with actual harm and immediate jeopardy
deficiencies. Most were states with the lowest proportion of homes with such
serious deficiencies before the initiatives.

ï¿½ Eight states experienced a 5 percentage point or greater decrease in the
identification of serious deficiencies. These states generally cited a high
proportion of homes with serious deficiencies before the initiatives (well
above the national average), and some were still near or above the national
average after the initiatives.

ï¿½ The remaining 13 states were relatively stable--experiencing approximately
a 3-percentage-point change or less.

Our analysis suggests that the extent of the variation across states in
actual harm and immediate jeopardy citations has begun to narrow. This
outcome is consistent with the initiatives' intent to reduce the
considerable inter-state variation through a strengthened and more
consistent survey process.

                                  Percentage of homes with
  State (includes   Number of    actual harm and immediate
   only those in      homes        jeopardy deficiencies
 which 100 or more                                              Percentage
     homes were      surveyed      Before          After          point
   surveyed since    (1/99 to   initiatives     initiatives    difference
       1/99)          7/00)
                               (1/97 to 7/98)  (1/99 to 7/00)
 Increase of 5 percentage points or greater
 Arizona            125a       17.2           36.8            19.6
 Arkansas           253a       14.7           30.8            16.1
 New York           606        13.3           27.6            14.3
 Tennessee          353        11.1           24.1            13.0
 North Carolina     409        31.0           42.1            11.1
 New Jersey         336a       13.0           23.8            10.8
 Oregon             157        43.9           53.5            9.6
 Massachusetts      541        24.0           32.9            8.9
 West Virginia      144        12.3           20.1            7.8
 Indiana            581        40.5           48.2            7.7
 Louisiana          365a       12.7           20.3            7.6
 Georgia            364        17.8           25.0            7.2
 Mississippi        196a       24.8           31.6            6.8
 Oklahoma           394a       8.4            15.0            6.6
 Colorado           229        11.1           16.6            5.5
 Maryland           188a       19.0           24.5            5.5
 Missourib          565        21.0           25.7            4.7
 Change of less than 5 percentage points
 Maine              124        7.4            10.5            3.1
 Minnesota          437        29.6           32.5            2.9
 Texas              1,313      22.2           24.9            2.7
 Michigan           442        43.7           45.9            2.2
 Nation             16,854     27.7           29.5            1.8
 Pennsylvania       774        29.3           30.7            1.4
 Illinois           891        29.8           31.1            1.3
 South Carolina     176        28.6           29.5            0.9
 Connecticut        260        52.9           53.5            0.6
 Montana            105        38.7           39.0            0.3
 California         1,301a     28.2           28.2            0.0
 Wisconsin          424        17.1           14.6            -2.5
 Ohio               995        31.2           28.6            -2.6
 Kentucky           306        28.6           25.2            -3.4
 Decrease of 5 percentage points or greater
 Virginia           282        24.7           19.5            -5.2
 Washington         281        63.2           57.7            -5.5
 Nebraska           241        32.3           26.6            -5.7
 Alabama            225        51.1           41.3            -9.8
 Kansas             404a       47.0           36.9            -10.1
 South Dakota       112a       40.3           29.5            -10.8
 Florida            746        36.3           21.7            -14.6
 Iowa               428a       39.2           22.7            -16.5

aCompared with the period before the initiatives, there was more than a
10-percent difference in the number of homes analyzed for these states. In
part, these differences are explained by the fact that some states have
still not recorded the results of a home's most recent survey in OSCAR.

bAlthough our work in Missouri focused on the agency responsible for
oversight of non-hospital-based nursing homes, hospital-based facilities in
the state were included in developing this table.

Maintaining Adequate Facility Staffing

Although increased deficiencies could be the result of better detection,
reports from states of problems with nursing home staffing raise concerns
that actual deficiencies may have increased. In July 2000, HCFA released a
report that found a direct relationship between low nursing home staffing
levels and poor quality of care.12 Recruiting and retaining staff for
nursing homes has been a long-term concern. According to state officials and
nursing home surveyors we interviewed in the spring of 2000, however,
recruiting and retaining nursing home aides has become more difficult, a
situation that they also believe has affected the quality of care provided
to nursing home residents. We were told that nursing homes often have
difficulty filling vacancies, resulting in an inadequate number of qualified
and trained staff. Reasons cited for the growing staffing problems include a
highly competitive job market resulting from the robust economy; increased
demand for staff from alternatives to nursing homes, such as assisted living
facilities; and lower wages and benefits for nursing aides compared with
other health- and non-health-sector opportunities.13

A significant number of states have taken steps that attempt to improve the
recruitment and retention of direct care staff. We identified 16 states that
have increased and 4 others that plan to increase Medicaid payments to
supplement nursing home staff wages and/or benefits by a specific amount,
commonly referred to as a "wage pass-through."14 For example, Michigan's
current wage pass-through provides for a maximum increase of 75 cents per
hour for staff. Maine has implemented a one-time supplement to its payments,
which gives nursing homes the flexibility to either establish new positions
or to increase the wages of direct care staff. Some states are requiring
that facilities maintain minimum staffing levels in order to receive the
additional funding through their wage pass-through programs. In Arkansas,
facilities are required to maintain state established minimum staffing
levels based on the number of facility residents if they choose to receive
the $4.93 increase in Medicaid reimbursement per patient day. (See app. III
for a brief description of each state's program.)

Fiscal Year 1999 Federal Initiatives Funding Was Largely Unspent

In addition to taking steps to improve the detection of serious deficiencies
during annual surveys, the Administration's nursing home initiatives
instructed states to investigate complaints that allege actual harm more
promptly. Recognizing that this change and others required by the
initiatives, such as the introduction of quality indicators and
investigative protocols, would increase the workload of state survey
agencies, the Congress appropriated additional funds for their
implementation. States reported that their fiscal year 1999 initiatives
funds were not fully used, in part due to their late distribution. This
situation, in turn, slowed down the hiring of additional staff needed to be
fully responsive to the initiatives, including investigating complaints more
promptly. Finally, it is too early to determine whether the changes in
federal enforcement policy intended to make it harder for nursing homes to
avoid sanctions will achieve their goal of encouraging facilities to sustain
compliance with federal requirements.

Have Been Unable to Meet New Investigative Time Frames

Complaint investigations provide an opportunity for state surveyors to
intervene promptly if quality-of-care problems arise between surveys.
However, in our prior work we found numerous problems in states' complaint
investigation processes. For instance, some states were making it
unnecessarily complicated for individuals to file complaints; some were
inappropriately classifying complaints of actual harm as low priority for
investigation; and some frequently did not investigate complaints within
required time frames, potentially prolonging harm to residents.15 HCFA had
historically played a minimal role in providing states with guidance and
oversight of complaint investigations.16

In March 1999, HCFA took a major step to strengthen state complaint
procedures by instructing the states to investigate complaints alleging
actual harm to a resident within 10 working days of receiving the complaint.
Previously, states could set their own investigative time frames, except
that they were required to investigate within 2 working days all complaints
alleging immediate jeopardy conditions. Two of the six states we contacted
previously had requirements for investigating complaints alleging actual
harm that exceeded 10 days, but have since formally modified their complaint
criteria in response to HCFA's instruction.17 Despite modifying their
complaint investigation time frames to include a 10-day requirement, states
generally have not been able to investigate all such complaints on time. For
instance, Tennessee was able to investigate about one-fourth of its actual
harm complaints within 10 days, while Washington was able to investigate
more than three-fourths on time. (See table 5.) State officials we
interviewed generally attributed their inability to investigate all actual
harm complaints in 10 days to an increase in the number of complaints
received, limited staff, and competing priorities, particularly the need to
complete standard surveys on time.

            Had a 10-day
            requirement
                                 Number of 10-day   Percentage of 10-day
 State                           complaints         complaints investigated
            prior to HCFA's
            March 1999           received in 1999   timely in 1999
            instruction?
 California Yes                  6,484              56b
 Maryland   Yes                  547a               33c
 Michigan   No--30 days          17a                100d
 Missouri   e                    2,577a             74f
 Tennessee  No--60 days          563a               About 25f
 Washington Yes                  2,614              76

aData for Maryland, Michigan, and Tennessee represent the last 6 months of
1999 and thus do not portray all complaints received in 1999. Data for
Missouri are for the 12-month period ending June 30, 2000.

bCalifornia's low percentage is due in part to state regulations that permit
only two categories of complaints: (1) complaints alleging immediate
jeopardy requiring investigation within 2 days and (2) all other complaints
that must be investigated within 10 days. To ensure that actual harm
complaints are investigated within 10 days, California officials told us
that they first attempt to identify such complaints and then triage those to
ensure that the most serious are promptly investigated.

cThis represents a substantial improvement from early 1998, when it
investigated only 1 of 18 complaints--about 6 percent--within 10 days.

dAlthough Michigan investigated all actual harm complaints timely, it
categorized only 17 of 902 complaints received in the last half of 1999 as
actual harm. It categorized 67 complaints as immediate jeopardy, requiring
investigation in 24 hours, and 818 as nonpriority, requiring a visit to the
home within 15 days.

ePrior to Missouri's adoption of the 10-day requirement, complaint
investigations were initiated within 24 hours if there was "imminent danger"
to a resident or a "direct or immediate relationship to the health, safety
or welfare of any resident, but which did not create any imminent danger."
Missouri officials told us that some actual harm complaints fell into this
latter category but that not all could be initiated within 24 hours. Those
not investigated within 24 hours would have slipped into the next category,
which at the time was 90 days. In addition to creating a 10-day category,
Missouri no longer allows complaint investigations of less serious
complaints to be delayed as long as 180 days. The maximum time for
investigating complaints is now 60 days.

fOfficials told us that this is an estimate because the state's ongoing
transition to a new complaint tracking system makes it difficult to
determine the exact percentage.

Source: State survey agency officials.

The increased attention HCFA and the states have placed on conducting
complaint investigations in the past 18 months has had some positive
results. For example, among the states we visited, as well as Maryland and
Michigan, we noted the following improvements:

ï¿½ Increased survey resources. Several states have increased, or plan to
increase, the number of surveyors, some of whom will be assigned to
complaint investigations. The increased staff will enable states to devote
more attention to complaint investigations. Some states also have dedicated
staff to conducting complaint investigations. For instance, Michigan has
created a complaint investigation team of 11 surveyors representing about 10
percent of the state's total surveyors. Washington also plans to increase
its number of complaint investigators from 8 to 13.

ï¿½ Improvements in classifying complaints and setting investigation
priorities. All the states in our study require that the seriousness of
complaints be determined by an experienced surveyor, and Tennessee and
Washington further require that the surveyor be a licensed nurse. In
Missouri, individuals without survey experience had been responsible for
classifying complaints, but now an experienced district office surveyor,
normally a nurse, does so. While positive, these changes do not obviate the
need for centralized oversight by state survey agency management. Thus, the
low number of actual harm complaints in Michigan compared with other states
raises a question about whether complaints are being appropriately
classified. We noted a similar issue in one of Tennessee's three district
offices.

ï¿½ Organizational changes. To improve control and oversight of complaint
investigations, both Maryland and Michigan have consolidated their nursing
home complaint and survey activities into one office under a single manager.
In addition, Michigan added a manager responsible for direct oversight of
the complaint investigation team. Missouri created a state complaint
coordinator to ensure that complaints are handled in a timely manner.

ï¿½ Upgraded information systems. Several states now are automating their
information systems to help track complaints more effectively. Such data
systems are necessary to ensure compliance with HCFA guidance on complaint
investigation prioritization and timeliness. For example, Missouri plans to
implement a new automated system in 2001 that is expected to significantly
improve management's ability to track the status and results of complaint
investigations. Tennessee is implementing a new system that will replace the
manual tracking of complaints. Also, in early 1999, Washington modified its
complaint tracking system to permit its district offices to better track
complaints during the investigation process.

HCFA intends to issue more detailed guidance to the states in 2001 as part
of its complaint investigation improvement project. Among other things, the
project will (1) identify complaint investigation processes that all states
could implement, (2) establish elements of a national reporting system, (3)
identify methods for HCFA to monitor state complaint investigation
processes, and (4) identify model programs or practices that make complaint
investigations more effective and prevent abuse and neglect. Our comparison
of six states' complaint processes also identified variations in practices
and results that HCFA could address in any additional guidance it issues.
For instance, although there is no federal requirement that states operate a
toll-free complaints line, Tennessee was the only state among those we
visited that has chosen not to provide this service. Tennessee received only
about half as many complaints per nursing home in 1999 as Missouri and
Washington, both of which have a consumer-friendly toll-free service that is
an integral part of the complaint intake process. Maryland partially
attributes a recent 250-percent increase in the number of complaints
received to its new toll-free number. In addition, some significant
differences appear to exist in how states classify complaints. For instance,
during the last 6 months of 1999, Maryland categorized 62 percent of the
complaints it received as potential actual harm, while Michigan put only 2
percent of its complaints in this category during the same period.

Home Initiatives Were Largely Unspent During Fiscal Year 1999

The Administration and the Congress recognized that additional resources
were needed to address expanded workloads associated with implementing the
nursing home quality initiatives.18 However, the distribution of initiatives
funding late in the fiscal year contributed to implementation delays. The
Medicare survey and certification budget was increased significantly in
fiscal years 1999 and 2000 (see table 6). About $8 million of a $21 million
fiscal year 1999 increase and $23.5 million of a $34.7 million fiscal year
2000 funding infusion were for workload growth attributable to the nursing
home initiatives. However, the initial federal allocation of fiscal year
1999 money to the states occurred in March 1999 and the final federal
allocation in June 1999.19 Although several reporting discrepancies are
evident, a majority of states reported not using (that is, expending or
obligating) their full fiscal year 1999 initiatives allocation. However,
interviews with state officials sometimes contradicted information provided
in these reports, raising questions about the actual disposition of these
funds. According to state officials we interviewed, other factors that
contributed to some or all of the initiatives funds not being used in fiscal
year 1999 included (1) the need for state legislative authorizations to
raise staffing ceilings and to use the new federal funds and (2) problems in
meeting HCFA's requirement to account for initiative funds separately from
other survey and certification funding.20 States have not yet submitted
final expenditure reports for their fiscal year 2000 initiative allocations.

Dollars in millions

 Fiscal    Medicare    Medicare funding        Medicaid      Total federal
 year      funding     associated with
                       initiatives             fundinga      funding
 1994      $145.8                              $130.4        $276.2
 1995      145.8                               133.0         278.8
 1996      147.6                               136.2         283.8
 1997      158.0                               127.4         285.4
 1998      154.0                               136.2         290.2
 1999      175.0       $8.0b                   135.1         310.1
 2000      209.7c      23.5                    149.0         358.7
 2001d     234.1       29.7                    Not available Not available

Note: The state survey and certification budget is used to ensure that
institutions providing health care services to Medicare and Medicaid
beneficiaries meet federal health, safety, and quality standards.
Institutions covered include hospitals, home health agencies, and end-stage
renal disease facilities, as well as nursing homes. The federal government
funds 100 percent of costs associated with certifying that nursing homes
meet Medicare requirements and 75 percent of the costs associated with
Medicaid standards. States usually pay additional costs associated with
ensuring that nursing homes meet state-established licensing standards.

a Medicaid funding is reported retrospectively on state expenditure reports.
The 2000 level is projected on the basis of the expenditure reports that
have been received to date (the first 2-3 quarters of fiscal year 2000).

bIn fiscal year 1999, the Congress appropriated $4 million for
initiative-related costs (P.L. 105-277, Oct. 21, 1998). Subsequently, HCFA
reprogrammed another $4 million to help the states cover four key
initiatives.

cFor fiscal year 2000, Medicare funding to states included about $5 million
that was reprogrammed from the Medicare contractor termination budget. The
$5 million reprogramming was primarily intended to support additional
complaint investigations required by one of the initiatives.

dPresident's budget request.

Source: Center for Medicaid and State Operations, HCFA.

According to fiscal year 1999 initiatives expenditure reports, only six
states used their full fiscal year 1999 initiatives allocation, and less
than $4 million of the $8 million available for the initiatives was spent.21
Discrepancies between the initiatives expenditure reports and the separate
reports that capture all survey and certification expenditures (including
the initiatives) raise the possibility that some states may have spent their
initiatives funding but failed to account separately for initiatives
expenditures as required by HCFA.22 Overall, however, the two reports
indicated that 28 states did not use their full fiscal year 1999 initiatives
or survey and certification funding allocations, suggesting that a
substantial portion of the $8 million was not used for the nursing home
initiatives during fiscal year 1999.

We attempted to clarify these issues by contacting nine states, including
seven that HCFA officials indicated had not filed a nursing home initiatives
expenditure report. Officials in three states told us that, essentially,
these funds were used even though their initiatives expenditure reports
showed otherwise. Officials in the other six states said that they did not
expend their full fiscal year 1999 initiatives allocation. (See table 7.) In
some cases, however, what state officials told us appears inconsistent with
their other survey and certification expenditure reports. Neither HCFA nor
state officials were able to explain these discrepancies. For example, two
Missouri budget officials told us that none of the state's $262,000 fiscal
year 1999 initiatives funding was used, while an official at the state
survey agency was certain that an undetermined amount had been expended on
initiatives related training. This latter interpretation is supported by the
state's survey and certification expenditure report that suggests that
$161,000 of these funds may have been spent during fiscal year 1999.

 State        Allocation     Amount reported  Summary of remarks by state
              amount         as not expended  officials
                                              State officials told us that
                                              the full nursing home
                                              initiatives allocation was
 California   $1,002,400     $277,508         used and indicated a
                                              supplemental expenditure
                                              report would be submitted to
                                              HCFA.
                                              None of the state's
                                              allocation was used because
 Delaware     24,540         24,540           of reorganization issues,
                                              existing surveyor vacancies,
                                              and late availability of
                                              funds.
                                              The full allocation was not
                             325,544a         used because of the late
 Illinois     432,316                         availability of funds and the
                                              provision of more funds than
                                              were needed for new mandates.
                                              The full allocation was not
                             67,700a          used because start-up of
 Kansas       125,245                         several initiatives was
                                              delayed past originally
                                              expected dates.
                                              Only part of the allocation
                             Someb            was used because of the late
 Missouri     261,958                         availability of funds and the
                                              difficulty meeting accounting
                                              requirements.
                                              HCFA did not have the state's
                                              initiatives expenditure
                                              report and believed the state
                                              had not used any of these
 Nebraska     70,179         1,604            funds. The state was able to
                                              provide a copy of its report
                                              showing that all but a small
                                              amount of its allocation had
                                              been used.
                                              The full allocation was not
                                              used because of delays in the
                             154,200a         start-up of initiatives (July
 Pennsylvania 286,030                         1999). Labor relations issues
                                              related to surveys initiated
                                              outside normal work hours
                                              were also a problem.
                                              Although the late
                                              availability of initiatives
                                              funding was a problem, most
                                              of the money was used. The
 Tennessee    100,974        94,530a          state would have preferred
                                              using the money to hire
                                              additional surveyors but,
                                              because of late availability,
                                              used most of the funds for a
                                              surveyor pay increase.
                                              The full allocation was not
 Utah         49,351         24,675           used because of late
                                              availability of funds.

aThough state officials said some of their initiatives allocation was not
used, the state's survey and certification expenditure report showed that
the entire budget was used during fiscal year 1999, including the allocation
targeted for the initiatives.

bMissouri's survey and certification expenditure report showed only $101,000
unspent, suggesting that it may have spent $161,000 of its initiatives
allocation in fiscal year 1999.

In Missouri, state officials said that the initiatives placed new
requirements on the state agency but did not provide resources quickly
enough to support these initiatives in fiscal year 1999. The state survey
agency's budget authority is set legislatively and cannot be used for new
requirements, such as the initiatives, without legislative approval (unless
the agency's appropriations bill allows for spending unanticipated federal
funds up to a preestablished spending level).23 Missouri officials also
stated that there was insufficient time to implement system adjustments to
separately account for the fiscal year 1999 initiatives dollars, as HCFA
required. The timing of the fiscal year 1999 increase was considered
problematic by several other states, though they were able to use some of
these funds. States were not aware of the initiatives when their
legislatures met in early to mid-1998 as the initiatives were not announced
until July 1998. In addition, officials told us that the availability of
funds late in the fiscal year limited their efforts to respond to the new
initiatives.

A primary objective of the initiatives funding was to enable states to hire
additional nursing home surveyors, particularly to perform complaint
investigations. Generally, state officials told us that hiring in the
current competitive economy is difficult, that state hiring processes are
lengthy and may require legislative authorizations, and that new surveyors
are not fully trained for up to a year after they are hired. For example, a
Missouri official told us that the time needed to hire surveyors made it
hard for the state to use initiatives funds during fiscal year 1999 for this
purpose. A Tennessee official said that because of the need for legislative
approval to increase staffing the state was unable to use initiatives funds
during fiscal 1999 for this purpose. Even with such approval, we were told,
it takes 6 months to hire--assuming suitable candidates are available.
Instead, Tennessee used the bulk of its initiatives funding for pay
increases for long-term-care facility surveyors.

Overall, it is too early to tell whether the improvements in federal
enforcement policies will have their intended effect of encouraging nursing
homes to sustain compliance with federal requirements. The weaknesses in
federal enforcement policies we identified in previous reports were
essentially attributable to the ability of nursing homes to evade sanctions.
For example, our prior work found that the threat of federal sanctions did
not prevent homes from cycling in and out of compliance. In virtually every
case of noncompliance, homes were granted a grace period to correct
deficiencies before sanctions were recommended or imposed, even when homes
had been cited repeatedly for actual harm violations. HCFA guidance also
allowed states to accept, in some cases, a home's assertion that it had
returned to compliance rather than confirming the correction of serious
deficiencies through an on-site visit ("revisit"). Under these
circumstances, most deficient homes, even those with repeated deficiencies
that harmed residents, did not have sanctions that actually took effect.

HCFA and HHS have attempted to put more teeth into enforcement options by
(1) requiring immediate imposition of sanctions without a grace period for
homes that repeatedly cause harm to residents, (2) issuing new guidance on
revisits, (3) increasing funding for the board that handles nursing home
appeals to reduce the backlog of cases, (4) introducing a new type of civil
monetary penalty, (5) taking measures intended to reduce delays in imposing
a denial of payment for new admissions, (6) closing loopholes associated
with its most severe sanction--termination from Medicare and Medicaid, and
(7) increasing oversight of certain facilities with histories of providing
poor care. In addition, HCFA's Long Term Care Enforcement Tracking
System--the first comprehensive national database on federal enforcement
actions against nursing homes--became operational in all regions in January
2000 and includes data beginning with fiscal year 2000.24

Denial of a Grace Period

The denial of a grace period for serious repeated deficiencies was
implemented in two stages. In September 1998, HCFA modified its policy to
require that states refer for immediate imposition of a sanction any nursing
home with a pattern of harming a significant number of residents on
successive surveys (levels H and above in HCFA's scope and severity grid).
Effective December 15, 1999, HCFA expanded this policy to include
deficiencies that harmed only one or a small number of residents (level G

deficiencies) on successive standard surveys.25 In an earlier report, we
estimated that this change could increase the percentage of homes referred
immediately for sanctions from approximately 1 percent to as many as 15
percent of homes nationally.26 The regional offices we visited in 2000
reported an increase in enforcement referrals over a similar period during
the previous year. For example, HCFA's Kansas City office reported that
between January and June 2000, almost one-half of the 127 referrals were due
to HCFA's elimination of a grace period for certain homes. Washington, where
about 50 percent of nursing homes have been cited for isolated actual harm,
began implementing this policy in March 2000. For the period March 1 through
August 17, 2000, the state recommended 63 enforcement actions that it would
not have a year earlier--23 percent of surveyed homes, compared with our
national estimate of 15 percent. Because Washington has historically cited
actual harm deficiencies at a greater percentage of nursing homes than any
other state, referrals under HCFA's new policy were expected to be high.
According to state officials, this large number of referrals created a
significant additional workload for the state survey agency.

Revisits

In August 1998, HCFA began requiring states to perform revisits to ensure
that homes with serious deficiencies had in fact returned to compliance. In
some cases, states were previously allowed to accept a nursing home's
"credible allegation"--a declaration that it was back in compliance--without
on-site verification. HCFA's new guidance requires state survey agencies to
conduct one or more revisits at a nursing home for any deficiency originally
classified as having caused actual harm or placed residents in immediate
jeopardy (G-level or higher), until the agency has verified that the home is
in full compliance for each deficiency cited. The policy applies even if the
severity of the original deficiency was reduced during a prior revisit.

Departmental Appeals Board

HCFA has taken actions intended to reduce delays in collecting fines--called
civil monetary penalties--from nursing homes. A fine is the only federal
sanction that can be imposed retroactively against a nursing home, making it
impossible for a home to avoid having the sanction become effective.
However, if a nursing home appeals its fine, payment is automatically
suspended until the appeal is resolved. Before the initiatives, insufficient
staffing at the HHS Departmental Appeals Board and HHS Office of General
Counsel resulted in delayed resolution of pending cases and corresponding
delays in collection of fines, enabling nursing homes to indefinitely
postpone payment of fines by filing an appeal. To provide for the more
timely processing of nursing home appeals, the Congress, at HHS' request,
increased funding for the Appeals Board by a total of $2.8 million in fiscal
years 1999 and 2000.27 Many of the 15 new positions created with this
increased funding were only filled within the past year. In addition, the
HHS Office of General Counsel received $4.4 million in fiscal year 2000 to
hire 33 additional regional office attorneys to handle appeal cases. After
increasing rapidly between September 1996 and September 1998, the number of
pending nursing home appeals decreased in 1999 and then rose again in 2000
(see table 8). It is unlikely, however, that many enforcement actions
resulting from the new policy of denying a grace period to homes that
repeatedly harm residents have yet reached the point of appeal; when they
do, this may result in a significant increase in the volume of nursing home
appeals.28

         Pending       Appeals Board staffing
         nursing
 Date                  Administrative law            Paralegals and
         home          judges              Attorneys clerical staff  Total
         appeals
 Sept.
 30, 1996234
 Sept.
 30, 1997472
 Sept.
 30, 1998605
 Sept.
 30, 1999555           4                   9         4               17
 Sept.
 25, 2000698           8                   13        11              32

Note: Staffing data for fiscal years 1996-98 are not available. Staffing
levels are for the component of the Board that hears nursing home cases. The
1999 staffing levels do not include individuals who were temporarily
assigned to the Board.

Per-Instance Fines

In May 1999, HCFA issued regulations giving states an additional enforcement
option--a per-instance fine--that is imposed immediately. In the past, fines
could only be levied for each day of noncompliance. The per-instance
authority allows states to recommend a fine for a specific instance of
non-compliance. Such fines may be more easily applied, particularly in
circumstances in which states find it difficult to determine the number of
days the home was noncompliant.29 HCFA reported that the number of
per-instance fines is increasing, from 33 between May and September 30,
1999, to 354 for the period October 1, 1999, through August 31, 2000.30 In
comparison, per-day fines for the first 10 months of fiscal year 2000
totaled 1,359 (see table 9). Per-instance fines are capped at $10,000 and
therefore may not be as effective a deterrent to noncompliance as per-day
fines, which can rise to higher dollar amounts.31 For example, the average
per-instance fine was about $2,000, while the average per-day fine totaled
almost $8,000.

                                Number                Amount
 Type of civil monetary penalty          Amount duea
                                imposed               collected
 Per-instance                   354      $749,436     $312,548
 Per-day                        1,359    $10,722,899  $4,023,795

aAmount due excludes cases where (1) the nursing home's 60-day period to
appeal the fine had not yet expired or (2) the fine had been appealed.

Source: HCFA.

Denial of Payment for New Admissions

HCFA has also made efforts to ensure that the sanction of denial of payments
for new admissions is imposed in a timely manner, as required by law.
Modified regulations now permit states to provide the notice to the nursing
home within 2 days of submitting a recommendation to HCFA (if not
disapproved). HCFA also encourages states to meet referral deadlines so that
the denial of payment can be imposed within 3 months as required by statute.
One of the four regional offices we visited was piloting an optional
expedited notice provision. HCFA is considering whether to make such an
expedited notice mandatory in all cases. We found, however, that some states
still had problems meeting the deadline for imposing the sanction.

Termination

HCFA took two actions to increase the deterrent effect of its most severe
sanction--termination from the Medicare and Medicaid programs. First, it
altered its policy to require pretermination performance to be considered in
determining any future enforcement actions against terminated homes
subsequently readmitted to Medicare. Second, it gave additional guidance to
HCFA regional offices about the length of the so-called "reasonable
assurance period" during which terminated homes must demonstrate that they
have corrected the deficient practices that led to their terminations.32

Special-Focus Facilities

In January 1999, HCFA instructed each state to begin enhanced monitoring of
2 nursing homes that historically had records of providing poor care (some
states selected an additional one or two homes). Surveys were to be
conducted at 6-month intervals rather than annually. Known as focused
enforcement, the initiative was modeled after a similar California program.
In September 2000, HCFA reported that semiannual surveys had only been
conducted at a little more than half of the original 110 facilities. HCFA
indicated that both state survey agencies and HCFA regional offices have
been reminded, in writing, of the semiannual survey requirements for
special-focus facilities and that its regional offices are now working
closely with states to achieve better compliance. Of the 60 homes that
received semiannual surveys

ï¿½ 12 have been terminated or have voluntarily withdrawn from the Medicare
and Medicaid programs,

ï¿½ 31 have had civil monetary fines imposed and 18 have received a denial of
payment for new admissions sanction, and

ï¿½ 28 are now in substantial compliance.

In addition, the most recent surveys show that the percentage of homes with
deficiencies that harmed residents (G or higher) decreased from 66 percent
to 50 percent.

Although this initiative is worthwhile, we believe that its narrow scope
excludes many homes that provide poor care. In contrast, California's state
focused enforcement program, which began in June 1998, was significantly
larger, initially covering 36 of the state's facilities with the worst
compliance histories.33 Based on the program's success to date, California
plans to expand the number of closely monitored homes to 100 by June 2001.
Rather than selecting two homes per district office, the expansion will
identify facilities throughout the state with the worst compliance history.
Of the original 36 facilities, 14 continue to be closely monitored. The
remainder have left the program because they returned to compliance (11),
changed ownership (10), or closed (1).

Nursing Home Chains With Performance Problems

HCFA has not yet implemented an initiative that would deny a grace period to
homes belonging to nursing home chains with performance problems, but it
recently circulated draft guidance to states for implementing this
initiative. Problems with defining a chain and determining which homes
belong to each chain contributed to the delay and remain a problem. As a
result, HCFA's draft guidance is applicable only to chains with over 100
homes nationally. The policy will be phased in for all remaining chains when
data on chains' ownership of homes become available on a broader basis.

Activities

In our prior work, we found that HCFA's oversight of state efforts had
serious limitations that prevented it from developing accurate and reliable
assessments of state survey agency performance. HCFA regional offices'
policies, practices, and oversight were inconsistent, a reflection of
coordination problems between HCFA's central office and its regional staffs.
Moreover, in important areas such as the adequacy of complaint
investigations or surveyors' findings, HCFA relied on self-evaluation under
the SAQIP program that essentially allowed states to write their own report
cards. Though OSCAR data were available to monitor state performance, they
were infrequently used, and neither states nor HCFA regional offices were
held accountable for failing to meet or enforce established performance
standards. Finally, HCFA rarely conducted federal comparative surveys that
allowed a comprehensive look behind the state survey process but instead
relied primarily on limited, direct observation of state surveyors--called
an observational survey.

HCFA's initial efforts to improve federal oversight were limited.34 However,
the agency recently embarked on a major overhaul of its oversight strategy.
In the late spring of 2000, it introduced several organizational changes
intended to improve consistency, coordination, and accountability. In
addition, effective October 2000, direct federal oversight using a new
series of periodic reports based largely on OSCAR data will replace states'
self-evaluation of their survey activities. According to HCFA, many
implementation details are still being worked out. In addition, HCFA is
exploring the feasibility of conducting more comparative surveys and
contemplating changes in the way it allocates funds for state survey and
certification activities. Because these changes are either recent or have
not yet been introduced, it is too soon to tell how effective they will
prove in resolving past problems.

Federal Oversight

HCFA has established several coordinating mechanisms to improve the
consistency of federal oversight of state survey activities and to provide
greater accountability. In earlier work, we raised concerns about the lack
of a direct link between HCFA's central and regional office components
regarding nursing home oversight. HCFA's Medicaid and State Operations
Director was responsible for establishing national oversight policy, and the
10 regional offices were charged with day-to-day monitoring of state survey
agency activities.35 Both the director and the regional office
administrators answered separately to the HCFA Administrator without any
formal reporting links. These organizational reporting lines complicated
coordination and communication, weakened oversight, and blurred
accountability when problems arose. For example, we reported significant
differences in the nature and extent of the oversight provided by regions.
Recent or planned changes to improve consistency, coordination, and
accountability include the following:

ï¿½ National Oversight Policy. In May 2000, HCFA established a Nursing Home
Survey and Certification Oversight Board. The Oversight Board, which meets
monthly, will make recommendations on oversight policy to the HCFA
administrator. Recent meetings involved the survey and certification budget.
Chaired by the Director of the Center for Medicaid and State Operations, the
Oversight Board includes two regional office administrators as well as other
central office representatives.36 Its composition is intended to improve
communication and coordination among senior HCFA managers responsible for
nursing home oversight.

ï¿½ Managing Day-to-Day Oversight. HCFA designated two co-leaders--the
director of the Survey and Certification Group (who reports to the Medicaid
and State Operations Director) and the Philadelphia Regional Office
Administrator--to manage and coordinate day-to-day survey and certification
activities. The former is responsible for providing a national perspective
on oversight activities, while the latter works directly with associate
regional administrators--individuals with day-to-day responsibility for
nursing home oversight--to help ensure greater consistency across regions.37

ï¿½ Regional Office Focal Points. By October 2000, each HCFA region will
assume the lead for ensuring consistency in 1 of 10 policy areas, such as
data collection and analysis, training, and survey and certification
budgets.38 HCFA is still working out details as to the specific duties in
each area and establishing coordination procedures. In the past, there was
inconsistency across regions, but the new focal points are expected to
overcome this problem. For example, concerning data collection and analysis,
some regions had the capability to use OSCAR data in their monitoring
efforts and others did not. The data tracking coordinator will be
responsible for ensuring that regions have the necessary trained personnel
and that regional administrators and the central office are apprised of the
results of tracking efforts.

ï¿½ Policy Clearinghouse. Effective in June 2000, HCFA established a
seven-member policy clearinghouse, with representatives from the HCFA
central office, the four HCFA regional office consortia, and the states, to
ensure that regional office directives to states are consistent with
national policy.39 For example, the clearinghouse ordered the withdrawal of
guidance issued by the Dallas and Chicago regional offices to state
surveyors on how to determine the oral and dental health of nursing home
residents because of concern about the resource implications. HCFA is now
considering whether it should develop national guidance on this issue.
Achieving an appropriate balance between the need to apply consistent
national policy and fostering an environment that encourages regional
offices to develop improved practices will be an ongoing effort.

Information Systems Should Improve State and Regional Office Accountability

HCFA will require regional offices to begin producing periodic reports on
state survey activities and, effective October 2000, these reports will be
used to assess state performance in key areas. HCFA officials recognized
that neither the central office nor the regional offices had made the most
effective use of existing data to monitor state activities and to take
appropriate action when serious state survey agency problems were
identified. For example, while the Atlanta regional office used OSCAR data
to actively monitor state performance and required state survey agencies to
correct problems, the other regions we visited did not. Recent state
experiences illustrate the opportunity to use OSCAR and other available data
to monitor state activities, including variations among local district
offices. HCFA is also examining ways to increase its use of comparative
federal surveys.

Standardized Reports to Assess State and Regional Office Performance

To provide both the central and regional offices with the basic data needed
to improve federal oversight, HCFA has directed its 10 regional offices to
periodically prepare 18 "tracking" reports on areas that measure both state
and regional office performance. Examples of reports that will track state
activities include pending nursing home terminations (weekly), oversight at
problem facilities selected for more frequent surveys (monthly), meeting
OSCAR data entry timeliness (quarterly), tallies of state surveys that find
homes deficiency-free (semiannually), and analyses of the most frequently
cited deficiencies by states (annually). Examples of reports that will track
regional office performance include those on the results of comparative
surveys (semiannually) and on the processing of enforcement cases (monthly).
These reports, in standard format, will enable comparisons within and across
states and regions and should help to surface problems and identify the need
for intervention--either by HCFA's central office or regional offices.

Tables 10 and 11 provide examples of how available data could have been used
to identify potential performance problems in state survey agencies and
district offices.

                      In May 2000, the state official responsible for
                      nursing home survey activities was indicted for
                      bribery. Allegedly, in exchange for payments, the
 Background           director gave some nursing homes preferential
                      treatment, such as notifying homes in advance about
                      the date of their annual surveys so the homes had
                      time to prepare for them.
                      Although existing data from OSCAR or federal
                      comparative survey results would not have uncovered
 Issue                bribery, HCFA officials acknowledged that this
                      information could have alerted them to shortcomings
                      in Oklahoma's survey activities.
                      Compared with the national average, Oklahoma had a
                      higher percentage of deficiency-free homes (22
 Deficiency citations percent versus 16 percent) and a lower percentage of
                      homes with actual harm or immediate jeopardy
                      deficiencies (15 percent versus 30 percent).
                      About 20 percent of the state's annual nursing home
                      surveys reported in OSCAR were from 1998 and some
 OSCAR data entry     were up to 2 years old, an apparent violation of the
                      federal requirement to inspect each nursing home at
                      least once every 15 months.a
                      Since early 1999, the state had not entered any data
                      on nursing home revisits into OSCAR, raising a
 Revisits             question as to whether the state had conducted the
                      required on-site review to determine that cited
                      deficiencies had been corrected.
                      Four 1999 federal comparative surveys in Oklahoma
                      cited a total of 45 deficiencies, compared with the
                      state's total of 3. Eight of the 45 federal citations
 Comparative surveys  involved quality of care, some at the actual harm
                      level. In contrast, none of the state surveys found
                      any quality-of-care deficiencies. In fact, state
                      surveyors found two of the homes to be
                      deficiency-free.

Note: The HHS Office of Inspector General, the Federal Bureau of
Investigation, the Internal Revenue Service, and the Oklahoma Attorney
General's Medicaid Fraud and Control Unit participated in an investigation
leading to the May 2000 legal charges brought against the Oklahoma State
Department of Health's Deputy Commissioner, who was responsible for state
nursing home survey activities. It has been alleged this individual received
payments from nursing homes in exchange for preferential state survey
treatment.

aAt our request, HCFA's Dallas regional office determined that surveys had
been conducted for some of these homes in 1999 but that the results had not
been entered into OSCAR--a violation of HCFA's guidance that states promptly
enter survey results into OSCAR.

                                Of the four states we visited, Missouri had
                                the highest percentage of deficiency-free
                                homes--both before and after the
                                introduction of the nursing home
                                initiatives. For example, 3 percent of
                                California nursing homes were found
                                deficiency-free on their most recent
                                survey, compared with about 16 percent in
                                Missouri. To gain a better understanding of
                                the adequacy of state surveys in Missouri,
                                we reviewed the results of 368 complaints
 Issue                          registered against 34 of 84 homes found to
                                be deficiency-free during the period
                                January 1999 through January 2000.a Our
                                hypothesis was that deficiency-free homes
                                should have few complaints. Missouri's 84
                                deficiency-free homes received 605
                                complaints, an average of 7 complaints per
                                home (compared with an average of 2 per
                                deficiency-free home in California). The
                                number of complaints against Missouri's
                                deficiency-free homes ranged from 1 to 39,
                                and 19 homes had 10 or more complaints.
                                Twenty-two of the 34 deficiency-free homes
                                had substantiated complaints. For example,
 Complaints against             one home with a total of 39 complaints had
 deficiency-free homes          17 actual harm deficiencies substantiated,
                                including 3 substantiated at the immediate
                                jeopardy level, during complaint
                                investigations.
                                The rate of substantiation of complaints
                                was generally much lower in one of the
                                state's seven district offices--one of the
                                two districts that had a significantly
                                higher percentage of deficiency-free homes
                                (34 percent, compared with a statewide
                                average of slightly less than 16 percent).
                                In reviewing complaints investigated by
                                this district over the past 3 years, we
                                noted several anomalies and problematic
                                investigations:

                                Regarding one complaint, the district
                                office wrote the complainant a letter
                                indicating that the investigation had
                                substantiated the allegations and action
                                was being taken. In fact, however, the
                                district found the allegation to be invalid
                                and took no action against the nursing
                                home.

                                In another case, the district investigated
 Adequacy of complaint          a complaint about a resident who died
 investigations                 without being provided CPR (cardiopulmonary
                                resuscitation), even though her husband had
                                signed a form asking that CPR and all other
                                necessary measures be taken in the event of
                                a medical crisis. The investigation
                                concluded that there was no evidence to
                                suggest that the home's staff did not act
                                appropriately during the crisis, but it
                                failed to address the issue of whether the
                                nursing home had a system in place to alert
                                staff to a resident's desire for
                                resuscitation. Instead, the investigation
                                focused on whether performing CPR would
                                have made a difference in the resident's
                                outcome. The file also indicated that,
                                during the course of the investigation, the
                                home advised the surveyors that it would
                                have its lawyer present a seminar to the
                                home's staff about complying with
                                residents' wishes for resuscitative
                                measures. However, there is no indication
                                in the file that the surveyors verified
                                that the home actually took such action.
                                In February 2000, a federal comparative
                                survey was conducted at a nursing home that
                                was found to have had no care-related
                                deficiencies in its prior two annual
                                surveys. The state surveys had been
                                conducted by surveyors assigned to the same
                                district office discussed above.

                                The comparative survey found 11
                                deficiencies, including actual harm to
                                residents because of failure to ensure that
                                residents maintain their ability to perform
                                normal daily functions and failure to
 Federal comparative surveys    provide adequate nutrition.

                                Federal surveyors told us that these care
                                problems should have been detected by the
                                state's survey 1 month earlier, which found
                                this home to be in substantial compliance
                                with federal quality standards.

                                Missouri's state auditor had questioned the
                                circumstances surrounding the deletion of
                                all 11 deficiencies from this same home's
                                1998 survey, including deficiencies similar
                                to those found in the federal comparative
                                survey.

aWe examined the results of all complaints against deficiency-free homes
that received 10 or more complaints and a random sample of all complaints
against 25 percent of deficiency-free homes that received fewer than 10
complaints.

HCFA's 18 new standardized status reports should help to track the states'
compliance with an initial set of seven state performance standards,
including survey timing, deficiency documentation, complaints investigation,
conduct of surveys in accordance with guidance, and OSCAR data entry (see
app. IV, table 17). In areas such as deficiency documentation and
complaints, the regional offices will go beyond examining computerized data
and review actual records. For example, the appropriate documentation of
survey findings will involve regional office reviews of samples of survey
reports from each state. As noted earlier, a state that conducted similar
reviews of a sample of its own surveys found both an understatement of
deficiencies and investigative weaknesses. Regional offices will also
conduct an on-site review of each state's complaints system and procedures.
The seven standards are drawn largely from those used under the SAQIP
program, which will be discontinued as of October 2000. HCFA is developing
protocols to ensure that the regions consistently enforce the seven
standards.

HCFA is in the process of redesigning its on-line management information
system, OSCAR. OSCAR's new nursing home module is projected to be available
in the summer of 2001. While OSCAR currently provides extensive information
about state surveys, including when surveys are conducted, the deficiencies
cited, and the length of time between a home's annual survey, generating
analytical reports from OSCAR is difficult, and most regions lack the
expertise to do so. The new nursing home module in OSCAR will be more
user-friendly because it will require less computer-programming experience
to conduct data analysis.

Reevaluation of Comparative and Observational Surveys

In October 1998, HCFA acknowledged the need to do more comparative surveys
than the 21 conducted in the previous 2 years. As a result, it required
regional offices to perform between one and three comparative surveys per
state annually, depending on the number of nursing homes. Comparative
surveys now account for about 10 percent of federal surveys. The remaining
90 percent are observational.

HCFA currently is exploring the adequacy of the number of comparative
surveys and is considering either (1) increasing the number of federal
surveyors available to conduct them or (2) narrowing their scope to allow
more surveys to be done. Increasing the proportion of federal surveys that
are comparative would respond to our 1999 recommendation.40 We believe that
the results offer a more accurate picture of the adequacy of state survey
activities than do observational surveys, which primarily are used to help
identify training needs. Seventy percent of the 157 comparative surveys
conducted between October 1998 and May 2000 found more serious care problems
than did the corresponding state survey. On average, state surveyors
identified 3 deficiencies per home, while federal surveyors found almost 10.
Currently, however, too few comparative surveys are completed in each state
to assess whether the state appropriately identifies serious deficiencies.
Although most do not meet the timing requirement to be classified as
comparative surveys, the results of 16 federal surveys recently conducted in
Oklahoma underscore the value of increasing the number of comparative
surveys per state (see table 12).41 More comparative surveys in Oklahoma
could have provided HCFA with broader evidence about the adequacy of state
survey activities.

                          Between April and June 2000, HCFA conducted
                          federal surveys at the 16 nursing homes suspected
 Issue                    of bribing the state survey agency director. This
                          number is significant because most states have
                          only one or two federal surveys each year.
                          In 8 of the 16 surveys, federal surveyors found a
                          minimum of 20 more deficiencies than were cited
 Number of deficiencies   on the most recent state survey for the same
                          homes. In one of the more glaring examples, the
                          federal survey cited 37 deficiencies and the most
                          recent state survey cited only 1.
                          In 15 of 16 surveys, federal surveyors also cited
 Scope and severity       deficiencies at higher scope and severity levels
                          than did state surveyors.
                          Overall, federal surveyors found significantly
                          more quality-of-care problems than did state
 Quality-of-care problems surveyors--averaging 5.3 versus 1.5
                          quality-of-care deficiencies (see app. IV, fig.
                          1).

HCFA is also examining how its regional offices conduct observational
surveys and how the current scoring system may be improved to assess a
state's performance on such surveys. First, HCFA is completing 10
cross-regional surveys to identify differences in how regions conduct
observational surveys. Each HCFA cross-regional team consists of surveyors
from two regional offices who join the federal surveyors in a third region
to watch how they conduct an observational survey. Differences are already
emerging among regions, such as how a particular nursing home is selected
for a federal survey and the extent to which federal surveyors identify
nursing home deficiencies. During the fall of 2000, a report together with
recommendations will be sent to the HCFA Oversight Board concerning changes
to ensure consistency in the federal monitoring survey process. Second, the
current methodology for scoring the results of observational surveys only
indicates whether a state team performed a required survey task--not the
quality of the survey or of the judgment exercised by the state surveyors.
HCFA has contracted for the design of a scoring mechanism that would allow
federal surveyors to better and more consistently assess the quality of a
state survey. Due in part to concerns about the scoring system, HCFA has not
issued a planned report on the results of observational surveys conducted in
fiscal year 1999.

Oversight

HCFA is exploring options for better distributing future survey and
certification funding. The current survey and certification budget process
bases funding requests and state funding allocations on past state practices
and costs, rewarding states that spent substantial amounts in the past by
establishing those expenditures as a budget baseline. Conversely, states
that spent less for survey and certification activities may have baseline
costs that are too low. Differences in state survey and certification
budgets may be a significant factor in the variations in time devoted to
performing surveys. A 1998 study by the Center for Health Systems Research
and Analysis identified significant imbalances in survey time and resource
utilization among the survey teams--imbalances that still exist. Our recent
analysis of OSCAR data showed that Tennessee surveyors spent an average of
94 hours to perform a nursing home survey, whereas Washington surveyors
spent an average of about 162 hours. Differences such as these may
significantly affect the quality of oversight, because the Center's study
showed a correlation between the average survey time and the number of
deficiencies identified.

HCFA officials reported that efforts are ongoing to identify better options
for distributing future survey and certification funding. The agency's
Fiscal Year 2001 Annual Performance Plan establishes a performance goal of
moving from the current budget process to a price-based process. HCFA
proposes developing national standard survey measures and costs that would
be used to price the workload for each state survey agency.

Sustained efforts by HCFA and the states are essential to realizing the
potential of the nursing home quality initiatives. For example, better
detection and classification of serious deficiencies through the standard
survey process will require further refinement of survey methods and a
reduction in survey predictability to limit the opportunities for homes to
prepare for these reviews. In the states we reviewed, efforts to expedite
complaint investigations and systematize the reporting of investigation
results are at various stages of implementation and remain incomplete. As
for the application of strengthened federal enforcement policies, more time
must elapse before progress in this area can be assessed. Similarly, with
respect to improved federal oversight, the effectiveness of recent internal
HCFA reorganizations and management information reporting enhancements can
only be judged in the months to come. In short, the current momentum should
neither be taken for granted nor relaxed. The extent of the progress in
improving quality of care is uncertain, but fully and effectively
implementing the initiatives is an essential component in securing the
necessary improvements.

We provided a copy of our draft report to HCFA and the states included in
the scope of our work. We received written comments from HCFA; the
California Department of Health Services; the Division of Aging, Missouri
Department of Social Services; the Michigan Department of Consumer and
Industry Services; and Residential Care Services, State of Washington Aging
and Adult Services Administration, Department of Social and Health Services.
Maryland and Tennessee had no comments other than that they believed the
report was fair.

HCFA generally agreed with our findings and conclusions. Recognizing that
progress had been made in improving the quality of care in nursing homes,
HCFA stated that it agreed with us that it is still too early to draw
definitive conclusions about the impact of various nursing home initiatives
from the preliminary data available. HCFA likewise agreed that sustained
federal and state actions are necessary to realize the full potential of the
initiatives. HCFA said that it was committed to taking additional steps on a
number of issues raised in our report such as (1) survey predictability, (2)
the continued variability across states in citing serious deficiencies, (3)
discrepancies in state reports regarding the expenditure of nursing home
initiatives funding, (4) the timeliness requirements for completing
complaint investigations, (5) regional office consistency in implementing
enforcement initiatives, (6) consistency in the monitoring of state
performance, and (7) refining data systems to provide more timely, useful,
and customer-friendly information. HCFA also indicated that it is committed
to specific actions that would help strengthen and build upon the nursing
home initiatives, including exploring ways to make optimal use of available
remedies as well as exploring the need for additional authorities, working
with states to meet the 10-percent goal for off-hour surveys, and developing
more streamlined methods for investigating serious complaints. (HCFA's
comments are in app. V.)

California, Missouri, Michigan, and Washington also generally agreed with
our findings and conclusions. Washington reflected that the full
implementation of the nursing home initiatives is ongoing. California,
Michigan, and Missouri elaborated on the improvements made in their
oversight of nursing homes but also noted that implementation is not yet
complete. For example, California is in the process of implementing recently
enacted state legislation that will significantly increase survey staff, and
Missouri has not yet completed implementing its overhaul of complaint
investigations.

Missouri identified several areas where it believed continued dialogue
between HCFA and states would be fruitful, such as modifying the survey
process to focus on noncompliant homes, the use of the OSCAR system as the
primary data source on survey results, improvements needed in resource
planning, potential expansion of the special focus facilities initiative,
and consistency in surveyor training. It also believed that refinements were
required in federal comparative surveys because they are conducted with
criteria different from that set forth by HCFA for use by state agencies and
are not required to be legally defensible. While our report acknowledges
steps recently taken by HCFA to ensure consistency in federal oversight,
Missouri's assertion that federal comparative surveys are not required to be
legally defensible is erroneous. Federal comparative surveys must meet the
same documentation standards as state surveys, and the federal survey may be
subject to administrative appeals if HCFA takes enforcement action on the
basis of the survey's findings. Missouri also said that the periods of time
surveyed are not the same. Consistent with our November 1999 recommendation,
HCFA has directed its regional offices to initiate comparative surveys
within 14 to 28 days after the completion of the state's survey rather than
within two months as specified in statute. This step should further ensure
that conditions in a home are as similar as possible for both the state and
federal survey. We had also recommended that federal surveyors should
include as many of the same residents as possible in their comparative
survey sample as the state included in its sample.42 The similarities
between the initial results of Missouri's November 1998 survey of a nursing
home and the findings of a February 2000 federal comparative survey of that
same home also suggest that identified deficiencies can continue to exist
over an extended period of time. (Comments from the four states are included
in apps. VI through IX.)

Technical comments provided by HCFA and the states were also incorporated as
appropriate.

As agreed with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after
its issue date. At that time, we will send copies of this report to the
Honorable Nancy-Ann Min DeParle, Administrator of HCFA, and others upon
request.

Please contact me or Kathryn G. Allen, Associate Director, at (202) 512-7114
if you or your staffs have any questions. GAO staff acknowledgments are
listed in appendix X.
William J. Scanlon
Director, Health Financing
and Public Health Issues

Implementation Chronology for Key Nursing Home Quality Initiatives

The implementation dates in this chronology generally reflect HCFA's
issuance of final guidance to states. Actual implementation of many of the
Administration's nursing home initiatives is dependent upon state action.
During our work, we encountered examples where state implementation did not
coincide with the HCFA "implementation" dates shown below in table 13. Other
activities to promote the consistency and effectiveness of HCFA oversight of
state survey activities are not being formally tracked as initiatives.

    Initiative and date                  Implementation status
 Survey procedures
                            Staggered surveys: State survey agencies
 January 1999               required to initiate 10 percent of annual
                            surveys outside normal work hours.
                            Survey methodology, phase one: HCFA instructed
                            states to incorporate quality indicators into
                            the survey process. Quality indicators are
                            derived from nursing homes' assessments of
                            residents and rank a facility in 24 areas with
                            other nursing homes in the state. By using the
 July 1999                  quality indicators to select a preliminary
                            sample of residents before the on-site review
                            begins, surveyors are better prepared to
                            identify potential care problems. Concurrently,
                            HCFA published new investigative protocols for
                            use by surveyors on key issues such as abuse
                            prevention, pressure sores, hydration, and
                            unexplained weight loss.
                            Survey methodology, phase two: As a follow-up
                            to the quality indicator and protocol
                            initiative mentioned above, HCFA plans to (1)
 Projected completion date  improve the on-site augmentation of the
 2002 or 2003               preliminary sample selected off-site using the
                            quality indicators and (2) strengthen the
                            protocols used by surveyors to ensure more
                            rigor in their on-site investigations.
 Complaints
                            Actual harm complaints: Within 10 workdays,
                            state survey agencies are to begin
 March 1999                 investigating complaints that allege actual
                            harm by conducting an on-site visit (when
                            necessary).
 Enforcement
                            Revisits: Revised revisit policy by requiring
                            states to actually visit nursing homes to
 August 1998                ensure that serious deficiencies have in fact
                            been corrected and that facilities have
                            returned to compliance.
                            Grace period for H- and I-level deficiencies:
                            HCFA eliminated the grace period for homes with
 September 1998             repeated serious violations (H- and I-level
                            deficiencies). Now states are required to refer
                            such homes to HCFA for immediate sanctions.
                            Special-focus facilities: State survey agencies
 January 1999               instructed to begin enhanced monitoring of two
                            nursing homes per state--facilities with
                            histories of providing poor care.
                            Per-instance civil monetary penalties: States
                            allowed to impose per-instance civil monetary
 May 1999                   penalties when period of noncompliance is
                            unclear or in other appropriate circumstances.
                            States may not impose both a per-instance and
                            per-day fine for the same survey.
                            Appeals backlog: For fiscal years 1999 and
                            2000, the HHS Departmental Appeals Board
                            received a $2.8 million funding increase to
                            hire more personnel to help reduce the backlog
                            of nursing home appeals. The fiscal year 1999
 May 1999                   increase was in the form of a supplemental
                            appropriation. The HHS Office of General
                            Counsel also received a funding increase of
                            $4.4 million in fiscal year 2000 to hire 33
                            regional office attorneys to represent the
                            government in cases appealed to the Board.
                            Reasonable assurance: States instructed to
                            ensure adequate "reasonable assurance" period
                            for terminated homes seeking readmission to
 December 1999              Medicare. Typically, two surveys are required
                            within this period to verify that the reason
                            for termination no longer exists and that the
                            provider has maintained substantial compliance
                            with all applicable participation requirements.
                            Considering pretermination history: States
 December 1999              instructed to consider a nursing home's
                            pretermination history when taking enforcement
                            actions after a home has been readmitted.
                            Grace period for G-level deficiencies: HCFA
                            eliminated the grace period for homes with
 December 1999              repeated violations at the G level, and states
                            are required to recommend such homes to HCFA
                            for immediate sanctions.
                            Poorly performing nursing home chains: HCFA has
                            developed and released for comment draft manual
                            instructions that provide criteria for defining
                            a nursing home chain with performance problems.
                            The instructions would require states to deny
 Projected completion date  an opportunity to correct (grace period) before
 of late 2000               sanctions are imposed on facilities that are
                            part of a chain with performance problems. The
                            instructions would only be applicable to chains
                            having over 100 homes nationally. The policy
                            would be phased in for all remaining chains
                            when data on chains become available on a
                            broader basis.
 Oversight
                            Federal oversight surveys: Standardized
                            protocols were issued for observational
                            surveys, and the number of comparative surveys
                            was increased. HCFA now requires a minimum of
 October 1998               one comparative survey in states having fewer
                            than 200 nursing homes, two in states with 200
                            to 599 nursing homes, and three in states with
                            600 or more homes. Ninety percent of federal
                            monitoring surveys will continue to be
                            observational.
                            OSCAR redesign: HCFA is in the process of
                            redesigning its on-line management information
                            system, OSCAR. While OSCAR currently provides
                            extensive information about state surveys,
                            including when surveys are conducted, the
 Projected completion date  deficiencies cited, and the length of time
 of summer 2001             between a home's annual surveys, generating
                            analytical reports from OSCAR is difficult, and
                            most regions lack the expertise to do so. The
                            new nursing home module in OSCAR will be more
                            user-friendly because it will require less
                            computer programming experience to conduct data
                            analysis.

State Survey Findings for Periods Before and After the Administration's
Nursing Home Initiatives

In order to compare trends in nursing home deficiency citations, we analyzed
data from HCFA's OSCAR System. We compared results for two time periods--one
before and one after implementation of the nursing home initiatives: (1)
January 1, 1997 through June 30, 1998 (base) and (2) January 1, 1999 through
July 10, 2000 (current). Because surveys are conducted at least every 15
months (with a required 12-month state average), it is possible that a
facility was surveyed twice in either time period. To avoid double counting
of facilities, we included only the most recent survey from each of the two
time periods. Because some states do not enter survey results promptly, the
current period did not include all surveyed facilities. The results of our
analysis are presented in table 14.

                               Actual     Potential
                               harm/      for more    Potential
                Number of                   than     for minimal Deficiency-free
                  homes      immediate     minimal       harm       (percent)
                              jeopardy      harm      (percent)
                             (percent)   (percent)
    State     Before After  Before AfterBefore After Before After Before  After
 Alabama      227    225    51.1   41.3 32.2   52.9  6.6    0.9  10.1     4.9
 Alaska       16     15     37.5   33.3 43.8   46.7  0.0    6.7  18.8     13.3
 Arizona      163    125    17.2   36.8 71.8   56.8  4.9    2.4  6.1      4.0
 Arkansas     285    253    14.7   30.8 56.8   57.7  22.8   5.9  5.6      5.5
 California   1,435  1,301  28.2   28.2 65.0   65.7  4.0    3.0  2.7      3.1
 Colorado     234    229    11.1   16.6 38.5   49.8  5.1    3.9  45.3     29.7
 Connecticut  263    260    52.9   53.5 19.4   30.8  0.4    0.4  27.4     15.4
 Delaware     44     41     45.5   53.7 36.4   34.1  6.8    2.4  11.4     9.8
 District of
 Columbia     24     18     12.5   5.6  37.5   61.1  41.7   33.3 8.3      0.0
 Florida      730    746    36.3   21.7 51.1   62.5  1.6    1.7  11.0     14.1
 Georgia      371    364    17.8   25.0 41.8   46.4  10.2   7.7  30.2     20.9
 Hawaii       45     46     24.4   23.9 33.3   67.4  33.3   4.3  8.9      4.3
 Idaho        86     83     55.8   54.2 36.0   37.3  1.2    0.0  7.0      8.4
 Illinois     899    891    29.8   31.1 55.2   51.9  6.8    7.0  8.2      10.1
 Indiana      602    581    40.5   48.2 46.2   40.1  4.8    2.4  8.5      9.3
 Iowa         525    428    39.2   22.7 42.9   55.6  1.0    3.0  17.0     18.7
 Kansas       445    404    47.0   36.9 32.6   45.8  1.8    0.0  18.7     17.3
 Kentucky     318    306    28.6   25.2 37.1   61.4  7.9    3.9  26.4     9.5
 Louisiana    433    365    12.7   20.3 31.6   50.4  27.5   6.3  28.2     23.0
 Maine        135    124    7.4    10.5 62.2   64.5  7.4    5.6  23.0     19.4
 Maryland     258    188    19.0   24.5 34.1   37.2  8.9    8.5  38.0     29.8
 Massachusetts576    541    24.0   32.9 24.0   34.2  3.3    4.4  48.8     28.5
 Michigan     451    442    43.7   45.9 51.7   49.5  1.8    1.4  2.9      3.2
 Minnesota    446    437    29.6   32.5 40.4   45.1  6.7    5.5  23.3     16.9
 Mississippi  218    196    24.8   31.6 44.0   50.5  8.3    8.2  22.9     9.7
 Missouri     595    565    21.0   25.7 43.7   55.8  6.2    3.0  29.1     15.6
 Montana      106    105    38.7   39.0 39.6   50.5  5.7    1.9  16.0     8.6
 Nebraska     263    241    32.3   26.6 24.7   48.5  3.0    3.7  39.9     21.2
 Nevada       49     50     40.8   24.0 55.1   64.0  2.0    4.0  2.0      8.0
 New Hampshire86     82     30.2   35.4 25.6   32.9  14.0   4.9  30.2     26.8
 New Jersey   377    336    13.0   23.8 24.4   38.1  15.4   11.0 47.2     27.1
 New Mexico   88     82     11.4   30.5 44.3   45.1  11.4   1.2  33.0     23.2
 New York     662    606    13.3   27.6 38.4   41.3  7.9    5.4  40.5     25.7
 North
 Carolina     407    409    31.0   42.1 33.2   37.9  4.7    2.9  31.2     17.1
 North Dakota 88     89     55.7   24.7 35.2   52.8  2.3    5.6  6.8      16.9
 Ohio         1,043  995    31.2   28.6 41.3   50.3  4.9    3.3  22.6     17.8
 Oklahoma     463    394    8.4    15.0 55.7   58.6  6.7    4.6  29.2     21.8
 Oregon       171    157    43.9   53.5 26.3   27.4  2.9    0.0  26.9     19.1
 Pennsylvania 811    774    29.3   30.7 44.4   47.7  3.6    3.2  22.7     18.3
 Rhode Island 102    96     11.8   13.5 54.9   45.8  3.9    5.2  29.4     35.4
 South
 Carolina     175    176    28.6   29.5 65.7   64.8  0.6    0.6  5.1      5.1
 South Dakota 124    112    40.3   29.5 37.1   55.4  3.2    4.5  19.4     10.7
 Tennessee    361    353    11.1   24.1 58.4   65.4  3.6    2.5  26.9     7.9
 Texas        1,381  1,313  22.2   24.9 36.4   42.7  19.7   14.1 21.7     18.4
 Utah         98     93     15.3   17.2 61.2   65.6  0.0    1.1  23.5     16.1
 Vermont      45     45     20.0   13.3 35.6   48.9  11.1   2.2  33.3     35.6
 Virginia     279    282    24.7   19.5 34.8   39.4  4.7    6.4  35.8     34.8
 Washington   288    281    63.2   57.7 32.3   37.7  1.0    1.4  3.5      3.2
 West Virginia130    144    12.3   20.1 63.8   65.3  16.2   11.8 7.7      2.8
 Wisconsin    438    424    17.1   14.6 53.7   50.5  5.3    3.3  24.0     31.6
 Wyoming      38     41     28.9   34.1 55.3   46.3  2.6    2.4  13.2     17.1
 Nation       17,897 16,854 27.7   29.5 43.8   49.8  7.1    4.7  21.3     16.0

State Efforts to Address Nursing Home Staffing Shortages

We identified 20 states that have enacted legislation that establish wage
pass-throughs, wage supplements, or related programs to provide supplemental
wages, fringe benefits, or funds for additional nursing home staff. Fourteen
of these state programs were implemented since January 1998--3 in 1998; 9 in
1999; and 2 in 2000. Two other states--Michigan and Utah--enacted wage
pass-throughs prior to 1998. The remaining four states only recently enacted
legislation and have not yet implemented their programs. To identify these
20 states, we began with a September 1999 study based on a 50-state survey
that identified seven state programs.43 To update this study, we contacted
the National Conference of State Legislatures, the Paraprofessional
Healthcare Institute, and the Service Employees International Union and
conducted an Internet search on "wage pass-through programs" during the
summer of 2000. Because we did not survey all 50 states, there may be
additional state programs. Table 15 provides a general description of each
state's program.

    State        Time period    Amount appropriated    Program description
                                                      The wage pass-through
                                                      provided an increase
                                                      of $4.93 on the
                                                      facility's daily
                                                      rate; requires
                                                      participating
                                                      facilities to
                                                      maintain minimum
                                                      staffing levels.
                                                      Facilities will be
                                                      required to submit
                                                      quarterly staffing
                                                      reports to the
                                                      Arkansas Department
                                                      of Human Services for
                                                      review to determine
                               The wage pass-through  compliance with the
                               appropriation was $25  minimum staffing
               Program began   million ($7 million    requirements. The
 Arkansas                      state and $18 million  Department may also
               July 1, 1999.   federal dollars) for   perform periodic
                               the nursing home staff on-site
                               wage enhancement.      reviews--which may be
                                                      unannounced--to
                                                      determine the
                                                      correctness and
                                                      completeness of the
                                                      quarterly reports.
                                                      Failure to meet
                                                      minimum staffing
                                                      requirements will
                                                      result in the
                                                      repayment by the
                                                      facility of 100
                                                      percent of the
                                                      enhancement payments
                                                      received for services
                                                      occurring in that
                                                      quarter.
                                                      The 1999 wage
                                                      pass-through provided
                                                      funds for salary,
                                                      wage and benefit
                                                      increases for nursing
                                                      facility direct care
                                                      staff--registered
                                                      nurses, licensed
                                                      vocational nurses,
                                                      and nurse assistants.
                                                      The second wage
                                                      pass-through in 2000
                               For the 1999           was expanded to
                               pass-through, the      include other staff
               First wage      estimated annual total such as housekeeping
               pass-through    cost was $51.2 million and dietary staff.
               implemented on  ($25.6 million state   The pass-through is
                               and $25.6 million      calculated on a
 California    August 1, 1999. federal dollars); for  per-patient-day basis
               A second wage
               pass-through wasthe 2000 pass-through, and added to the per
               implemented     the estimated annual   diem rate paid to
               August 1, 2000. total cost was $148.4  each facility.
                               million ($74.2 million Compliance of
                               state and $74.2        facilities will be on
                               million federal).      a retrospective
                                                      basis, with a sample
                                                      of facilities being
                                                      audited. Facilities
                                                      that did not comply
                                                      with the wage
                                                      pass-through
                                                      provisions will be
                                                      subject to recoupment
                                                      of the undistributed
                                                      wage pass-through
                                                      funds plus a 10
                                                      percent penalty.
                                                      The facility's share
                                                      of the enhancement
                                                      program funds is
                                                      based upon its
                                                      percentage of total
                                                      direct and indirect
                                                      costs in relation to
                               The state legislature  all facilities,
                               appropriated a wage    adjusted for Medicaid
                               enhancement for        days. Enhancement
                               nursing homes of $75   payments can be used
                               million ($37.5 million for wage, benefit,
                               state and $37.5        and staffing
                                                      increases for a
 Connecticut   State fiscal    million federal) for   nursing home. The
               year 2000       state FY 2000. The
                               state has appropriated Commissioner of the
                               $77 million ($38.5     Connecticut
                               million state and      Department of Social
                               $38.5 million federal) Services may require
                               for the state FY 2001  facilities to file
                               wage enhancement.      cost reporting forms,
                                                      in addition to the
                                                      annual cost report,
                                                      to verify the
                                                      appropriate
                                                      application of wage,
                                                      benefit, and staffing
                                                      enhancement rate
                                                      adjustment payments.
                                                      The funds are to be
                                                      used to reimburse
                                                      nursing facilities
                                                      for the costs of
                                                      hiring additional
                                                      certified nursing
                                                      assistants and
                                                      licensed nurses or
                                                      for the cost of
                                                      salary or benefit
                                                      enhancements to
                                                      retain such staff.
                                                      All providers
                               Appropriated           receiving the
                               approximately $32      additional funds must
                               million ($13.9 million provide documentation
                                                      of direct care
 Florida       Program began   state and $18.1        expenditures over
               April 1, 2000.  million federal)
                               annually for a "direct that time period. The
                               care staff             documentation is to
                               adjustment."           be submitted to the
                                                      Florida Agency for
                                                      Health Care
                                                      Administration in a
                                                      format similar to the
                                                      base data period
                                                      documentation. Any
                                                      amount deemed not to
                                                      have been
                                                      appropriately
                                                      expended is to be
                                                      reimbursed to the
                                                      Agency. Cost report
                                                      audits will be
                                                      conducted.
                               $4.3 million
                               (approximately $1.7
                               million state and
                               approximately $2.6
                               million federal) was   Funds are targeted
                               awarded in total funds for nursing facility
                               for state FY 2000 to   front-line staff.
                               establish a wage       Providers apply for a
                               pass-through program   per diem add-on to
                               for nursing            the Medicaid rate and
 Kansas        Program began infacilities. Another    are responsible for
               September 1999.                        documenting
                               $4.2 million
                               (approximately $1.7    legitimate use of
                               million state and      funds through
                               approximately $2.5     quarterly reports.
                               million federal) was   Statistics are being
                               appropriated for FY    collected on
                               2001, but it is        turnover.
                               contingent upon HCFA's
                               approval of a state
                               plan amendment.
                                                      A portion of the
                                                      earnings on the
                                                      investment from the
                                                      state's Medicaid
                                                      Trust Fund for the
                                                      Elderly are to be
                                                      used for providing
                                                      for a wage
                                                      enhancement for
                                                      direct care personnel
                                                      working in
                                                      Medicaid-certified
               Legislature                            nursing homes in
               passed a bill   Louisiana's wage       accordance with a
               during the firstpass-through is        plan established by
 Louisiana     special session contingent upon HCFA's the Department of
               of 2000; programapproval of a state    Health and Hospitals
               has not yet beenplan amendment.        and representatives
               implemented.                           of the nursing
                                                      facility industry.
                                                      The plan will provide
                                                      for a direct
                                                      pass-through of the
                                                      costs of such wage
                                                      enhancements in a
                                                      manner to ensure that
                                                      the nursing home rate
                                                      is adjusted to
                                                      reflect the full
                                                      costs of such wage
                                                      enhancement.
                                                      The supplement is
                                                      intended to address
                                                      the problem of
                               $3.68 million ($1.25   recruitment and
                               million state and      retention of
               Program began   $2.43 million federal) nonadministrative
 Maine                         was provided for a     staff. Facilities had
               July 1, 1999.   one-time nursing home  flexibility to use it
                               supplement for the     for either new
                               direct care rate.      positions or
                                                      increasing wages of
                                                      direct care staff.
                                                      State will audit
                                                      through cost reports.
                                                      Intent of the General
                                                      Assembly is that the
                                                      Governor provide in
                                                      the state budget for
                                                      FY 2002 and FY 2003
                                                      additional funds to
                                                      increase payments in
                                                      the Nursing Service
                                                      Cost Center of the
                                                      Medicaid nursing home
                                                      reimbursement. The
                                                      funds are to be used
                                                      to enable nursing
                                                      homes to address
                                                      recommendations of
                               Intention is to        the state's Task
                               provide $10 million in Force on Quality of
                                                      Care in Nursing Homes
 Maryland      Program not yet general funds for FY   in order to (1)
               implemented.    2002 and $10 million
                               in general funds for   increase hours of
                               FY 2003.               direct care to
                                                      residents; (2)
                                                      increase nursing
                                                      staff; and (3)
                                                      increase wages,
                                                      fringe benefits, and
                                                      other forms of
                                                      compensation provided
                                                      to direct care
                                                      personnel.
                                                      Expenditures by
                                                      nursing homes shall
                                                      be subject to audit
                                                      and cost settlement
                                                      by the Maryland
                                                      Department of Health
                                                      and Mental Hygiene.
                                                      The Massachusetts
                                                      Division of Medical
                                                      Assistance and the
                                                      Massachusetts
                                                      Division of Health
                                                      Care Finance and
                                                      Policy were to
                               According to the       establish criteria
                               state's fiscal year    for the disbursement
                               2001 budget,           of the funds
                               appropriated $35       appropriated and
                               million ($17.5 million report to the Senate
                               state and $17.5        and House Committees
 Massachusetts Program began   million federal) for   on Ways and Means on
               January 2000.   the exclusive purpose  the criteria to be
                               of funding increases   used by September 1,
                               in wages and related   2000. Criteria will
                               employee costs for     mandate the degree to
                               certified nurse's      which such nursing
                               aides at nursing       facilities provide
                               facilities.            enhanced wages for
                                                      certified nurse's
                                                      aides and report to
                                                      the two committees on
                                                      the wage increases
                                                      given at each
                                                      facility by January
                                                      4, 2001.
                                                      The current state FY
                                                      2000 wage
                                                      pass-through provides
                                                      a maximum increase of
                                                      an additional 75
                                                      cents per hour and
                                                      the reimbursement
                                                      limit is to be
                               In state FY 2000,      applied on a
                               approximately $33.6    per-employee basis.
                               million (approximately The provider must
                               $15.08 million state   report actual wage
                               and approximately      pass-through cost
                                                      data in the annual
               The state       $18.52 million         cost report for the
               established its federal) has been      wage pass-through
               first nursing   appropriated for a     year. In addition to
               home staff wage wage pass-through. For a copy of the
               pass-through in state FY 2001, the     facility's written
               state FY 1990   amount for the wage    policy for internal
 Michigan      with limited    pass-through is not    administration of the
               participation.  specifically           wage pass-through,
               The state's mostidentified. The FY     the provider must
               current wage    2001 appropriated      maintain, at the
               pass-through is inflationary allowance facility, information
               for state FY    may be used to cover   on individual
               2000.           any allowable variable employee wage
                               cost increases and is
                               sufficient to provide  increases and new
                               a 50-cent-per-hour     benefits costs. The
                               wage increase for      support schedule and
                               nurse's aides at all   associated payroll
                               facilities.            records must be
                                                      available for
                                                      Medicaid program
                                                      audit verification.
                                                      Failure to provide
                                                      all supporting data
                                                      for audit will result
                                                      in disallowance of
                                                      the wage pass-through
                                                      reimbursement.
                                                      For the first two
                                                      wage adjustment
                                                      bills, the
                                                      legislation left it
                                                      to the nursing
                                                      facility to decide
                                                      which employees to
                                                      give the money to.
                                                      For the latest wage
                                                      adjustment, they
                                                      passed a bill that
                                                      provides for everyone
                                                      in the nursing
                                                      facility (except the
                                                      administrator,
                                                      central office
               First wage                             employees, and anyone
               adjustment bill                        paid through a
               passed in 1998  In state FY 2001,      management fee) to
               for state FY    approximately $92.7    get an equal per-hour
               1999. There havemillion (approximately increase in wages.
 Minnesota     been two other  $45.4 million state    Each facility's per
               separate wage   and approximately      diem rate was
               adjustment bills$47.3 million federal) increased $1.00 plus
               for state FY    was appropriated for a a portion of $3.13
               2000 and state  wage adjustment.       depending on
               FY 2001.                               facilities' average
                                                      operating rate.
                                                      Facilities must file
                                                      a distribution plan
                                                      showing how they plan
                                                      to give the money to
                                                      their employees. The
                                                      plans must then be
                                                      approved by the
                                                      Minnesota Department
                                                      of Human Services
                                                      before the rate
                                                      adjustment is
                                                      implemented. The
                                                      plans are also
                                                      subject to a
                                                      look-behind audit.
                               Appropriation formally
                               approved for $22.7
                               million (approximately
                               $8.9 million state and
                                                      Proposed regulation
 Missouri      Program not yet approximately $13.8    currently drafted and
               implemented.    million federal) for
                               quality-of-care wage   receiving comments.
                               enhancement for direct
                               care staff of nursing
                               facilities.
                                                      For the state FY 2000
                                                      program, the nursing
                                                      homes could receive
                               In state FY 2000,      up to a $2.14 per
                               approximately $2.9     Medicaid day add-on
                               million (approximately to the rate for
                               $800,000 state and     direct care staff
                               approximately $2.1     wages. The nursing
                               million federal) was   facility was given
                               appropriated for a     flexibility in
                               nursing facility wage  deciding which
                                                      full-time-equivalent
               Program began   add-on for enhancing   classification would
 Montana                       the wages of direct    receive add-on (staff
               July 1, 1999.   care staff in nursing  with patient contact
                               homes. For state FY
                               2001, approximately    and food service were
                               $5.9 million           possible groups).
                               (approximately $1.6    Providers were
                               million state and $4.3 required to submit
                               million federal) was   supporting
                               appropriated for the   documentation for
                               nursing facility wage  approval that
                               add-on.                detailed how the
                                                      funds would be used
                                                      to provide for direct
                                                      care staff wage
                                                      increases.
                                                      The wage enhancement
                                                      is an adjustment to
                                                      the nursing
                                                      facility's per diem
                                                      rate equal to $3.15
                                                      per patient day. The
               First wage                             amount of the rate
               enhancement                            increase for nursing
               program was     The estimated cost for facilities was
               implemented May the state FY 2001 wage calculated assuming
               1998. The state enhancement is         that all nursing
                                                      facilities would meet
 Oklahoma      had a wage      approximately $19      the state's minimum
               enhancement in  million (approximately
               state FY 1999   $5.6 million state and staffing
               and FY 2000 and approximately $13.7    requirements.
               currently has   million federal).      Staffing ratios will
               one for state FY                       be reviewed on a
               2001.                                  monthly basis for all
                                                      nursing facilities.
                                                      Those that
                                                      demonstrate "willful"
                                                      noncompliance with
                                                      staffing ratios will
                                                      be subject to a
                                                      sizeable penalty.
                                                      Effective December 1,
                                                      1998, a 75-cents per
                                                      patient day add-on
                                                      was included in each
                                                      nursing facility's
                                                      reimbursement rate.
                                                      The add-on was
                                                      provided to assist
                                                      nursing facilities in
                                                      retaining currently
                                                      employed nurse's aide
                                                      staff. If a nursing
                                                      facility is cited
                                                      during a survey for
                                                      inadequate nurse aide
                                                      staff during the time
                                                      period in which the
                                                      75-cent add-on is
                                                      provided, it will be
                                                      required to submit
               First wage      The appropriation for  financial and
               add-on began    the state FY 2000 wage statistical
               December        add-on was             information relating
 South                         approximately $4.5     to the expenditure.
 Carolina      1, 1998. Second million (approximately If, as a result of
               wage add-on was $1.35 million state    the review, a payback
               implemented     and approximately      is warranted, it may
               October 1, 1999.$3.15 million          not exceed the total
                               federal).              amount reimbursed
                                                      through the add-on.
                                                      Effective October 1,
                                                      1999, a certified
                                                      nurse's aide vacancy
                                                      add-on was included
                                                      in each qualifying
                                                      facility's
                                                      reimbursement rate.
                                                      The add-on will be
                                                      provided in order
                                                      that nursing
                                                      facilities can
                                                      address the
                                                      industrywide nurse's
                                                      aide staffing
                                                      turnover problem that
                                                      was enhanced by a
                                                      change in the minimum
                                                      staffing
                                                      requirements.
                                                      There is no specified
                                                      portion of the funds
                                                      that are to be used
                                                      for nursing homes
                                                      versus hospice room
                                                      and board. The funds
                                                      provide additional
                                                      funds for direct care
                                                      staff of nursing
                                                      homes--registered
                                                      nurses, licensed
                                                      vocational nurses,
                                                      and certified nurse's
                                                      aides. Participation
                               The Texas Enhanced     in the program
                               Direct Care Staff Rate requires the facility
                               program provided $41   to maintain certain
                               million ($15.8 million direct care staffing
                               in general revenue     levels. All
                               funds and $25.2        contracted facilities
                               million in federal     will provide the
                               funds) during state FY Texas Department of
                                                      Human Services an
 Texas         Program began   2000 for reimbursement Annual Staffing and
               May 1, 2000.    increases for nursing
                               homes and hospice room Compensation Report
                               and board (in nursing  reflecting the
                               homes) and is          activities of the
                               providing $40.9        facility while
                               million ($15.8 million delivering contracted
                               state and $25.1        services over the
                               million federal)       rate year. This
                               during state FY 2001.  report will be used
                                                      as the basis for
                                                      determining
                                                      compliance with the
                                                      staffing requirements
                                                      and recoupment
                                                      amounts. Also, the
                                                      Department requires a
                                                      6-month staffing
                                                      report that will be
                                                      used as the basis for
                                                      determining
                                                      compliance with the
                                                      staffing requirements
                                                      and recoupment
                                                      amounts.
                                                      Hourly wages for
                                                      nurse's aides were
                                                      monitored to ensure
               State had                              funding was directed
               previously      For the 1998 program,  to the wage problem.
               implemented a   the state implemented  In addition, the
               pass-through    a wage pass-through,   nursing facility
               program in 1990 which added $3.06 per  Medicaid payment rate
               and 1992 for    day for nurse's        has a "nursing
 Utah          nursing         aides--approximately   component" that is
               facilities. The $3.5 million           "provider specific."
               most recent     (approximately         Payments are based on
               nursing facility$945,000 state and     nursing costs
               pass-through    $2.56 million federal) reported for the
               program began   was appropriated for   prior year.
                               the wage pass-through. Therefore, if nursing
               July 1, 1998.                          expenditures are
                                                      reduced, future
                                                      payment rates reflect
                                                      that decrease.
                                                      The supplement is to
                                                      be calculated as the
                                                      prorated share of the
                                                      net revenues based on
                                                      the ratio of its
                                                      nursing wages,
                                                      salaries, and fringe
                                                      benefits to the total
                                                      of all nursing wages,
                                                      salaries, and fringe
                                                      benefits paid by
                                                      Vermont nursing homes
                                                      participating in the
                                                      Medicaid program as
                                                      reported on their
                                                      1997 Medicaid cost
                               $4 million ($1.52      reports. The
               Program began   million state and      supplement is then
 Vermont                       $2.48 million federal) added to the
               July 1, 1999.   was appropriated for   facility's total per
                               the wage pass-through. diem rate. Within 60
                                                      days after the end of
                                                      each state fiscal
                                                      year during which
                                                      wage supplement
                                                      payments are made,
                                                      each facility is to
                                                      file on forms
                                                      prescribed by the
                                                      Vermont Division of
                                                      Rate Setting a report
                                                      of the wages,
                                                      salaries, fringe
                                                      benefits, and bonuses
                                                      paid to employees
                                                      during the state
                                                      fiscal year.
                                                      The nursing home wage
                                                      supplement was to
                                                      compensate nursing
                                                      facilities for
                                                      increased costs of
                               $21.7 million          certified nurse's
                               (approximately $10.5   aides and other
               Program began   million state and      increases in direct
 Virginia                      approximately $11.2    care costs. The
               July 1, 1999    million federal) was   nursing homes are to
                               appropriated for the   report what was
                               wage supplement.       actually spent, and
                                                      if the facility did
                                                      not spend the money
                                                      for the wage
                                                      supplement, then it
                                                      must be returned to
                                                      the state.
                               The statewide amount
                               of the nursing home    A nursing home wage
                               wage pass-through is   pass-through is
                               not to exceed $8.3     provided to
                               million (approximately facilities to
                               $3.42 million state    increase wages and
 Wisconsin     Program began   and $4.88 million      fringe benefits, or
               October 1, 1999.federal) in state FY   to increase staff
                               1999-2000 and $11.1    hours equal to 5% of
                               million (approximately the total amount of
                               $4.53 million state    wages reported in a
                               and $6.57 million      facility's 1998 cost
                               federal) in state FY   report.
                               2000-2001.

Additional Information on Federal Oversight Activities

Because HCFA does not expect to implement a centralized database on
comparative surveys until 2001, we manually compiled a summary of the 157
comparative surveys conducted between October 1998 and May 2000 by obtaining
copies of the state and corresponding federal survey from each regional
office. Table 16 presents the results of our analysis.

ï¿½ Compared with the results of state surveys, 70 percent of federal
comparative surveys found more serious care problems. On average, state
surveyors identified 3 deficiencies per home, while federal surveyors found
almost 10.

ï¿½ Significant differences emerged among the 10 regions responsible for
conducting comparative surveys. In August 1999, HCFA instructed regions to
start their federal comparative surveys within 14 to 28 days after the
state's survey was completed. Our analysis found that HCFA's New York and
Philadelphia regions both had an average 39-day time period between the
conclusion of the state survey and the beginning of the federal comparative
survey. In contrast, the average interval for the Denver region was 23 days.
Our analysis also found that of the 10 regions, only Chicago cited fewer
deficiencies, on average, than state surveyors. Similarly, Boston was the
only region to cite deficiencies at a lower scope and severity level than
state surveyors.

                                 Number of
                     Number of
                     surveys     surveys
                     where scope where scope Average
             Number  and                     number  Average       Average
                     severity of and         of
 HCFA region of      state       severity of         number of     number of
                                                     state         federal
             surveys deficiency  federal     days    deficiencies  deficiencies
                     was higher  deficiency  between
                     than that   was higher  surveys
                     of federal  than that
                     deficiency  of state
                                 deficiency
 Boston      13      4           3           28.6    3.7           5.6
 New York    7       0           6           38.9    4.1           12.0
 Philadelphia16      2           11          39.1    2.8           6.3
 Atlanta     28      5           19          28.6    3.7           8.1
 Chicago     22      4           13          33.1    2.9           2.1
 Dallas      23      0           23          25.1    2.0           14.5
 Kansas City 13      1           9           32.8    3.2           14.2
 Denver      16      1           11          22.6    2.3           11.7
 San
 Francisco   10      0           10          24.5    7.3           23.6
 Seattle     9       4           5           27.2    5.8           9.3
 Total       157     21          110         29.6    3.4           9.9

Beginning October 2000, HCFA plans to track the states' compliance with an
initial set of seven state performance standards. Based largely on standards
established for the SAQIP program, the seven standards are scheduled to
replace states' self-evaluation of compliance. HCFA is in the process of
developing protocols to ensure that the regions consistently enforce the
seven standards. Table 17 summarizes the standards, indicates whether the
state or HCFA was previously responsible for assessing compliance, and lists
the data HCFA expects the regions to use in evaluating performance.

                 New state
 State           performance         Source of new
 performance     standard            performance    Data source
 area                                standarda
                 (effective October
                 1, 2000)

 Conduct of the  Surveys are
                 planned, scheduled,
                                     SAQIP (State)  OSCAR
 survey          and conducted in a
                 timely manner.
 Deficiency      Survey findings are                State survey statement
 documentation   supportable.        SAQIP (State)  of deficiencies
                 Certifications of
                 homes' compliance
                 with federal
 Consistency in  standards are fully
 survey          documented and      SAQIP (State)  Federal Monitoring
 performance     consistent with                    Surveys
                 applicable law,
                 regulations, and
                 general
                 instructions.
                 When certifying
                 noncompliance,
                 adverse action
 Enforcement     procedures set                     Long-Term Care
 actions         forth in            SAQIP (State)  Enforcement Tracking
                 regulations and                    System
                 general
                 instructions are to
                 be adhered to.
                 All program                        State Survey Agency
 Federal         expenditures and                   Budget/Expenditure
 expenditure     charges to be       SAQIP (HCFA)   Report and Nursing Home
 monitoring      substantiated to                   Initiative Expenditure
                 HHS Secretary.                     Report
                 Conducting and
                 reporting of
                 complaint
 Complaints      investigations is
 investigation   timely and accurate SAQIP (State)  OSCAR
                 and complies with
                 general
                 instructions for
                 complaint handling.

 OSCAR data      Accurate and timely
 entry           data entry into     SAQIP (HCFA)   OSCAR
                 OSCAR.

aThe current SAQIP Nursing Home Performance Standards for State Agencies are
divided into two sets of performance standards--one for states and one for
HCFA regional offices. The states are responsible for self-assessing their
ability to meet the seven state standards and reporting those results to
their regional offices. The regional offices have an additional four
performance standards they are responsible for ensuring their state survey
agencies meet. The "source of new standard" column indicates whether it is a
state or HCFA SAQIP standard.

Between April and June 2000, HCFA conducted full federal surveys at the 16
nursing homes suspected of bribing the state survey agency director.44 This
number is significant because most states have only two full federal surveys
each year. Figure 1 demonstrates that compared with the most recent state
survey, federal surveyors found significantly more quality-of-care problems
at these homes.

Nursing Homes in Oklahoma

Comments From the Health Care Financing Administration

Comments From California's Department of Health Services

Comments From Michigan's Department of Consumer and Industry Services

Comments From Missouri's Department of Social Services

Comments From Washington's Department of Social and Health Services

GAO Contact and Staff Acknowledgments

Walter Ochinko, (202) 512-7157

This report was prepared by Connie Peebles Barrow, Jack Brennan, Leslie V.
Gordon, Bob Lappi, Peter Oswald, Sangeetha Raghunathan, Janet Rosenblad,
Peter Schmidt, Don Walthall, and Opal Winebrenner under the direction of
Walter Ochinko.

Related GAO Products

Nursing Home Care: Enhanced HCFA Oversight of State Programs Would Better
Ensure Quality (GAO/HEHS-00-6, Nov. 4, 1999).

Nursing Homes: HCFA Should Strengthen Its Oversight of State Agencies to
Better Ensure Quality Care (GAO/T-HEHS-00-27, Nov. 4, 1999).

Nursing Home Oversight: Industry Examples Do Not Demonstrate That Regulatory
Actions Were Unreasonable (GAO/HEHS-99-154R, Aug. 13, 1999).

Nursing Homes: HCFA Initiatives to Improve Care Are Under Way but Will
Require Continued Commitment (GAO/T-HEHS-99-155, June 30, 1999).

Nursing Homes: Proposal to Enhance Oversight of Poorly Performing Homes Has
Merit (GAO/HEHS-99-157, June 30, 1999).

Nursing Homes: Complaint Investigation Processes in Maryland
(GAO/T-HEHS-99-146, June 15, 1999).

Nursing Homes: Complaint Investigation Processes Often Inadequate to Protect
Residents (GAO/HEHS-99-80, Mar. 22, 1999).

Nursing Homes: Stronger Complaint and Enforcement Practices Needed to Better
Ensure Adequate Care (GAO/T-HEHS-99-89, Mar. 22, 1999).

Nursing Homes: Additional Steps Needed to Strengthen Enforcement of Federal
Quality Standards (GAO/HEHS-99-46, Mar. 18, 1999).

California Nursing Homes: Federal and State Oversight Inadequate to Protect
Residents in Homes With Serious Care Violations (GAO/T-HEHS-98-219, July 28,
1998).

California Nursing Homes: Care Problems Persist Despite Federal and State
Oversight (GAO/HEHS-98-202, July 27, 1998).

(201018)

Table 1: Scope and Severity of Deficiencies 9

Table 2: Predictable Surveys for Nursing Homes in Six States 15

Table 3: Examples of Planned State Funding Increases to Hire
Additional Surveyors and Enhance Oversight of Nursing
Homes 16

Table 4: Homes With Actual Harm and Immediate Jeopardy
Deficiencies Before and After Implementation of the
Quality Initiatives 18

Table 5: State Investigative Time Frames for Complaints Prior
to the Initiatives and Extent to Which States Meet the
10-Day Requirement for Actual Harm 22

Table 6: Federal Medicare and Medicaid Funding for State Survey
and Certification Activities 26

Table 7: Summary of Information Provided by Nine States on Their
Fiscal Year 1999 Nursing Home Initiatives Allocation 28

Table 8: Comparison of Pending Appeals and Increased Staffing
at the Departmental Appeals Board 33

Table 9: Comparison of Per-Instance and Per-Day Fines for Fiscal
Year 2000, as of August 8, 2000 34

Table 10: HCFA Analysis of OSCAR Data and Comparative Surveys
Could Have Raised Questions About the Performance of Oklahoma's State Survey
Agency 40

Table 11: HCFA Analysis of Available Data Could Have Raised
Questions About the Performance of Missouri's State Survey Agency 41

Table 12: Results of Federal Surveys of 16 Nursing Homes in
Oklahoma 43

Table 13: Implementation Chronology for Key Nursing Home
Initiatives 48

Table 14: Percentage of Homes at Each Deficiency Level Before
and After the Nursing Home Initiatives, by State 51

Table 15: States With Programs to Address Nursing Home
Staff Shortages 53

Table 16: GAO Analysis of the Results of Federal Comparative
Surveys Conducted Between October 1998 and May 2000 60

Table 17: New State Performance Standards, Relationship to SAQIP,
and Federal Evaluation Data Sources 61

Figure 1: Comparison of State and Federal Quality-of-Care Deficiencies for
16 Nursing Homes in Oklahoma 62
  

1. See related GAO products listed at the end of this report.

2. State surveyors are typically assigned to local district offices
(sometimes referred to as regional offices) that are responsible for
conducting nursing home surveys and complaint investigations. In Missouri,
separate state offices are responsible for overseeing hospital-based and all
other nursing homes. We focused our work on the Missouri office that
oversees the approximately 85 percent of all nursing homes that are not
hospital-based.

3. Included in this percentage are homes certified for both Medicaid and
Medicare.

4. If a state has a unique enforcement sanction, it may obtain HCFA approval
to use it in lieu of a federal remedy. The state must satisfy HCFA that its
sanction is as effective as a federal remedy in deterring noncompliance and
correcting deficiencies. In addition, state sanctions must meet several
general requirements, including timing and notice requirements in federal
regulations and, according to HCFA, consistency with statutory intent.

5. The Omnibus Budget Reconciliation Act of 1987 requires HCFA to conduct
comparative surveys within 2 months of states' surveys. In August 1999, HCFA
urged its regional offices to commence comparative surveys within 14 to 28
days after a state's survey.

6. California Nursing Homes: Care Problems Persist Despite Federal and State
Oversight (GAO/HEHS-98-202, July 27, 1998).

7. Quality indicators were the result of a HCFA-funded project at the
University of Wisconsin. The developers based their work on nursing home
resident assessment information known as the minimum data set--data that all
homes are required to report to HCFA. See Center for Health Systems Research
and Analysis, Facility Guide for the Nursing Home Quality Indicators
(University of Wisconsin-Madison: Sept. 1999).

8. Prior to the introduction of quality indicators, selection of the sample
was less systematic, relying on a listing of residents and their conditions
maintained at the nursing home and on observation of residents made during a
walk-through of the facility.

9. States still have the opportunity to meet the 10-percent requirement by
performing more than 10 percent of surveys off-hours during the remainder of
the fiscal year.

10. In May 2000, Tennessee modified this law to permit homes to be surveyed
at a maximum interval of 15 months.

11. We excluded Alaska, Delaware, the District of Columbia, Hawaii, Idaho,
Mississippi, Montana, Nevada, New Hampshire, New Mexico, North Dakota, Rhode
Island, and Wyoming from this analysis because fewer than 100 homes were
surveyed and even a small increase or decrease in the number of homes with
serious deficiencies in such states produces a relatively large percentage
point change.

12. See Appropriateness of Minimum Nurse Staffing Ratios in Nursing Homes
(Baltimore, Md.: HCFA, Summer 2000), Vols. I-III.

13. A 1996 Institute of Medicine study documented similar reasons for
turnover and retention problems among nurse's aides: Institute of Medicine,
Nursing Staff in Hospitals and Nursing Homes: Is It Adequate? (Washington,
D.C.: National Academy Press, 1996).

14. Wage pass-throughs provide a specific amount or percentage increase in
reimbursement, earmarked typically for direct care staff's--such as nurses
and nurse's aides--salaries and/or benefits. States that have enacted wage
pass-throughs include Arkansas, California, Connecticut, Florida, Kansas,
Maine, Michigan, Minnesota, Montana, Oklahoma, South Carolina, Texas, Utah,
Vermont, Virginia, and Wisconsin. Four other states--Louisiana, Maryland,
Massachusetts, and Missouri--recently passed legislation and have not yet
implemented their wage pass-through programs.

15. Nursing Homes: Complaint Investigation Processes Often Inadequate to
Protect Residents (GAO/HEHS-99-80, Mar. 22, 1999).

16. Nursing Homes: Stronger Complaint and Enforcement Practices Needed to
Better Ensure Adequate Care (GAO/T-HEHS-99-89, Mar. 22, 1999).

17. Because of the requirement for annual surveys and other priorities, HCFA
recognized that not all states would be able to meet the 10-day standard
and, in October 1999, issued guidance including techniques to help states
identify complaints having a higher level of actual harm.

18. HCFA determined that additional state resources would be consumed by
initiatives that required states to better target and monitor poorly
performing homes and to investigate any complaint alleging actual harm
within 10 days of complaint receipt. HCFA also anticipated that the use of
quality indicators would increase surveyor preparation time prior to
visiting a nursing home and that this could lead to a net increase in total
survey time.

19. Appropriated funds are neither automatically nor immediately available
for use. First, the funds must be apportioned by the Office of Management
and Budget to HHS and allotted (a delegation of authority to incur
obligations) by HHS to HCFA. HCFA then determines, on the basis of state
workload and expenditure data, what amount should be allocated to each state
and advises its regional offices of these suggested amounts. In fiscal year
1999, regional offices could reallocate among the states up to 15 percent of
the suggested amounts. The regional office then notifies states of award
determinations and the ability to incur obligations for these amounts.

20. This requirement applies to nursing home initiatives funding for fiscal
years 1999 and 2000.

21. According to HCFA officials, nursing home initiatives funds appropriated
in fiscal year 1999 may only be used for this purpose. These officials
advised us that after HCFA makes the funds available to the states, the
states must expend or obligate the funds during the same federal fiscal
year. They explained that HCFA may reallocate funds not spent by one state
during a particular fiscal year to a state that expended more than it was
initially provided for that fiscal year.

22. One possible explanation of these discrepancies is the fact that HCFA
did not require states to specifically account for nursing home initiatives
expenditures until December 1999.

23. Thirty states provide gubernatorial budget authority to spend
unanticipated federal funds without approval of the legislature.

24. OSCAR does not contain complete or reliable data on enforcement actions.
As a result, each region maintained its own enforcement action data, which
varied in sophistication from comprehensive computer databases to illegible
hand-kept logs with inconsistent formats.

25. Previously, states referred for sanction any homes with deficiencies at
the immediate jeopardy level (J-L) without granting a grace period. However,
because of the very serious nature of immediate jeopardy deficiencies, the
state, nursing home, and regional office often work in concert to resolve
the situation as soon as possible. States are now required to deny a grace
period to homes that are assessed one or more deficiencies at the actual
harm level or above (G-L in HCFA's scope and severity grid) in each of two
successive surveys within a survey cycle. A survey cycle is two successive
standard surveys and any intervening survey, such as a complaint
investigation.

26. Nursing Homes: HCFA Initiatives to Improve Care Are Under Way but Will
Require Continued Commitment (GAO/T-HEHS-99-155, June 30, 1999), p. 12.

27. The Departmental Appeals Board provides the administrative law judge
review and the final administrative appellate level review for nursing home
appeals of any federal enforcement sanction. The HHS Office of General
Counsel includes the regional office attorneys who represent HHS and HCFA in
such appeals.

28. In commenting on our draft report, California officials indicated that
an additional effect of appeals is that HHS' attorneys are requiring state
surveyor and consultant staff to provide testimony to support HCFA's action.
The state said that preparation time and hearings can last 8 to 10 days and
that during this time the involved surveyors are not available to accomplish
survey and certification work.

29. For example, HCFA's San Francisco regional office suggested that it was
appropriate to use per-instance fines for isolated instances of
noncompliance at a nursing home with a generally good compliance record.

30. A HCFA official noted that although states had the authority to use the
per-instance fine in May 1999, they may have been reluctant to do so before
the issuance of HCFA's implementing guidance in March 2000.

31. In contrast to the per-instance maximum of $10,000 per survey, the
per-day monetary fine has a $10,000 per-day limit, which accrues until the
home achieves substantial compliance. HCFA regulations preclude use of a
per-instance and a per-day monetary fine on the same survey.

32. Before readmitting a terminated facility to Medicare, HCFA requires
nursing homes to address the situation that led to termination and provide
reasonable assurance that it will not recur. To give this assurance, a home
is required to have two surveys not more than 180 days apart, each of which
shows the problem to be corrected. The reasonable assurance period is the
time between these two surveys.

33. Initially, California targeted 34 facilities--2 for each of the state's
17 district offices. Two additional homes were added to the list to replace
homes that left the focused enforcement program.

34. Effective October 1998, the number of comparative surveys was increased
to about 10 percent of the approximately 900 federal surveys conducted
annually--either one, two, or three per state, depending on the number of
nursing homes. Though the majority of federal surveys continued to be
observational, HCFA issued new protocols to ensure they were conducted more
consistently and set up a centralized tracking system to analyze the
results.

35. HCFA relies on 129 federal surveyors in 10 regional offices to carry out
its responsibility for evaluating the adequacy and effectiveness of each
state's nursing home survey process.

36. Board members include representatives from HCFA's Center for Medicaid
and State Operations, Center for Beneficiary Services, Center for Health
Plans and Providers, Office of Financial Management, Office of Clinical
Standards and Quality, and two HCFA regional administrators. The HCFA
Administrator and Deputy Administrator are ex officio members, and the
Offices of General Counsel and Legislation have permanent, nonvoting
members.

37. In each regional office, the associate regional administrator
responsible for nursing homes reports to a regional administrator. The
Philadelphia Regional Office Administrator will not evaluate an associate
administrator's performance but will provide feedback to the appropriate
regional administrator.

38. The other lead areas are state survey performance, cross-regional
surveys, quality, federal monitoring surveys, certification of new
providers, surveyor staffing, and non-long-term-care surveys.

39. States are represented by the Association of Health Facility Survey
Agencies.

40. California Nursing Homes: Care Problems Persist Despite Federal and
State Oversight (GAO/HEHS-98-202, July 27, 1998) and Nursing Home Care:
Enhanced HCFA Oversight of State Programs Would Better Ensure Quality
(GAO/HEHS-00-6, Nov. 4, 1999).

41. Comparative surveys are generally conducted within 2 months of the
state's survey to ensure that conditions in the home are similar for both
the federal and state survey team. Four of these 16 federal surveys would
qualify as comparatives because 2 months or less had elapsed since the most
recent state survey. As with typical comparative surveys, the federal
surveyors conducted a complete review of the care provided by each nursing
home.

42. GAO/HEHS-00-6, Nov. 4, 1999, pg. 28.

43. North Carolina Division of Facility Services, Comparing State Efforts to
Address the Recruitment and Retention of Nurse Aide and Other
Paraprofessional Aide Workers (Sept. 1999).

44. Four of these 16 federal surveys would qualify as comparatives because 2
months or less had elapsed since the most recent state survey.
*** End of document. ***