Nursing Homes: Additional Steps Needed to Strengthen Enforcement of
Federal Quality Standards (Letter Report, 03/18/1999, GAO/HEHS-99-46).

Despite reforms to ensure that nursing homes comply with federal quality
standards, one-fourth of all homes nationwide continue to be cited for
deficiencies that either caused actual harm to residents or carried the
potential for serious injury or death. Although the reforms equipped
federal and state regulators with many alternatives and tools to help
sustain compliance with Medicare and Medicaid standards, the way in
which the states and the Health Care Financing Administration (HCFA)
have applied them appears to have resulted in little headway. Repeated
noncompliance carries few consequences. HCFA's recent actions, such as
broadening the definition of a poorly performing facility, are a step in
the right direction. However, four key problems remain. First, if the
backlog of civil monetary penalties is not reduced, much of their
deterrent effect will be lost. Second, weaknesses remain in the
deterrent effect of termination, including the lack of a tie to poorly
performing facility status for reinstated homes and the limited
reasonable assurance period for monitoring terminated homes before
reinstating them. Third, the states are not required to refer for
sanction all homes with deficiencies that contribute to resident deaths.
Fourth, the changes do not address HCFA's need to improve its management
information system. HCFA's ability to improve its oversight of nursing
homes will depend heavily on whether it has the information to identify
and monitor the homes that pose the greatest risk of harm.

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

 REPORTNUM:  HEHS-99-46
     TITLE:  Nursing Homes: Additional Steps Needed to Strengthen
	     Enforcement of Federal Quality Standards
      DATE:  03/18/1999
   SUBJECT:  Nursing homes
	     Patient care services
	     Noncompliance
	     Fines (penalties)
	     Sanctions
	     Safety standards
	     Long-term care
	     Elder care
	     Elderly persons
	     Administrative law
IDENTIFIER:  Medicare Program
	     Medicaid Program
	     HCFA Online Survey, Certification, and Reporting System
	     California
	     Texas
	     Michigan
	     Pennsylvania

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GAO/HEHS-99-46

United States General Accounting Office

GAO Report to Congressional Requesters

March 1999 NURSING HOMES Additional Steps Needed to Strengthen Enforcement
of Federal Quality Standards

GAO/ HEHS- 99- 46

GAO United States General Accounting Office

Washington, D. C. 20548 Health, Education, and Human Services Division

B- 278679 March 18, 1999 The Honorable Charles E. Grassley Chairman The
Honorable John B. Breaux Ranking Minority Member Special Committee on Aging
United States Senate

The Honorable John D. Dingell Ranking Minority Member Committee on Commerce
House of Representatives

The Honorable Pete Stark Ranking Minority Member Subcommittee on Health
Committee on Ways and Means House of Representatives

The Honorable Ron Wyden United States Senate

The Honorable Nick Smith House of Representatives

The 1.6 million elderly living in nursing homes are among the sickest and
most vulnerable populations in the nation. The federal government, together
with states, plays a key role in ensuring that nursing home residents
receive adequate quality of care. In addition to paying a projected $39
billion for nursing home care in 1999, the federal government sets standards
that homes must meet to participate in the Medicare and Medicaid programs
and has authority to impose sanctions 1 if homes do not meet these
standards. In recent years, the Congress has authorized additional
sanctions, such as fines, to help ensure that homes maintain compliance with
the standards. Since these new sanctions have taken effect, however,
concerns about the quality of care some homes provide have persisted. For
example, we previously reported on

1 The term used in the law and regulations to describe a nursing home
penalty for noncompliance is “remedy.” Throughout this report,
we use a more common term, “sanction,” to refer to such
penalties. Sanctions include actions such as fines, denial of payment for
new admissions, and termination from the Medicare and Medicaid programs.

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weaknesses in federal oversight of nursing home care in California and on
inspection and enforcement weaknesses nationwide. 2

This report responds to your request for information on the enforcement of
federal nursing home standards. As agreed with your offices, it (1) provides
national data on the existence of serious deficiencies in nursing home
compliance with Medicare and Medicaid standards and (2) discusses the use of
sanction authority for homes that failed to maintain compliance with the
standards. Concurrent with our last report, the Health Care Financing
Administration (HCFA) 3 announced several initiatives to correct problems it
had found with its enforcement process. As part of our work for this report,
and as agreed with your offices, we also evaluated the extent to which these
actions would address any problems we identified.

Our information about the extent of serious deficiencies in compliance with
standards came mainly from analyzing HCFA's nationwide database of periodic
inspections (called surveys) of nursing homes. Our information about the use
of sanctions came mainly from work conducted at 4 of HCFA's 10 regional
offices and in four states that collectively account for about 23 percent of
the nation's nursing homes. 4 Within these four states, we selected 74 homes
for detailed analysis, choosing homes that had been referred to HCFA- often
several times- for enforcement action. We were looking primarily to see how
sanctions were working when homes had serious or sustained compliance
problems. Because the sample was chosen deliberately from among the worst
homes, it is not representative of all homes, either in these states or
nationwide. We conducted our work between December 1997 and March 1999 in
accordance with generally accepted government auditing standards. Appendix I
contains a more detailed explanation of our scope and methodology.

Results in Brief Overall, our work showed that while HCFA has taken steps to
improve oversight of nursing home care, it has not yet realized a main goal
of its

enforcement process- to help ensure that homes maintain compliance with
federal health care standards.

2 California Nursing Homes: Care Problems Persist Despite Federal and State
Oversight (GAO/ HEHS- 98- 202, July 1998). 3 HCFA administers Medicare and,
in conjunction with the states, Medicaid. 4 The HCFA regions were III, V,
VI, and IX; the states were Pennsylvania, Michigan, Texas, and California,
respectively.

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Surveys conducted in the nation's 17,000- plus nursing homes in recent years
showed that each year, more than one- fourth of the homes had deficiencies
that caused actual harm to residents or placed them at risk of death or
serious injury. The most frequent violations causing actual harm included
inadequate prevention of pressure sores, failure to prevent accidents, and
failure to assess residents' needs and provide appropriate care. Although
most homes were found to have corrected the identified deficiencies,
subsequent surveys showed that problems often returned. About 40 percent of
the homes that had such problems in their first survey during the period we
examined (July 1995 to October 1998) had them again in their last survey
during the period.

Sanctions initiated by HCFA against noncompliant nursing homes were never
implemented in a majority of cases and generally did not ensure that the
homes maintained compliance with standards. Our review of HCFA's survey data
combined with our analysis of 74 homes that had a history of problems showed
a common pattern: HCFA would give notice to impose a sanction, the home
would correct its deficiencies, HCFA would rescind the sanction, and a
subsequent survey would find that problems had returned. The threat of
sanctions appeared to have little effect on deterring homes from falling out
of compliance again because homes could continue to avoid the sanctions'
effect as long as they kept correcting their deficiencies. HCFA has some
tools to address this cycle of repeated noncompliance but has not used them
effectively. Fines, or civil monetary penalties, are potentially a strong
deterrent because they can be applied even if a home comes back into
compliance. However, the usefulness of civil monetary penalties is being
hampered by a backlog of administrative appeals coupled with a legal
provision that prohibits collection of the penalty until the appeal is
resolved. In effect, the sanction is often delayed for several years. We
also found problems with several aspects of HCFA's policies for ensuring
that sufficient attention is placed on homes that have serious deficiencies
or a history of recurring noncompliance as well as with policies for
reinstating homes that have been terminated from the Medicare and Medicaid
programs.

HCFA's recent actions to improve nursing home oversight are aimed mainly at
resolving problems pointed out in earlier studies, such as staggering the
survey schedule and prosecution of egregious violations, but have not
resolved additional problems that we have identified. Issues that remain to
be addressed include strengthening the use of civil monetary penalties,
improving the referral process for sanctions, and increasing the deterrent
effect of terminating homes from the Medicare and Medicaid programs. A

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final area that will affect HCFA's ability to resolve its recognized
oversight problems is the state of its management information system. The
system in place is ineffective at providing comprehensive information needed
to identify homes with recurring problems, homes owned by chains, and
deficiencies identified as a result of complaint investigations rather than
standard surveys.

We are making several specific recommendations to the Administrator of HCFA
to strengthen HCFA's enforcement process and thereby increase the protection
provided to nursing home residents. In a written response to our draft
report, HCFA generally concurred with our recommendations and cited other
efforts, planned and under way, to help ensure nursing home residents
receive quality care.

Background Nursing homes play an essential role in our health care system.
They care for persons who are temporarily or permanently unable to care for

themselves but who do not require the level of care provided in an acute
care hospital. Titles XVIII and XIX of the Social Security Act establish
minimum standards that all nursing homes must meet to participate in the
Medicare and Medicaid programs. 5

Oversight Is a Shared Federal and State Responsibility

The states and the federal government share responsibility for oversight of
the quality of care in the nation's 17,000 nursing homes. Oversight includes
routine and follow- up surveys to assess compliance with standards and
enforcement activities to ensure that identified deficiencies are corrected
and remain corrected. At the direction of the Congress, HCFA sets standards
for nursing homes' participation in Medicare and Medicaid. HCFA also
contracts with state agencies to check compliance with these standards
through surveys at least every 15 months. States also enforce their own
licensing requirements in all state- licensed nursing homes, including those
with Medicare certification, and check for compliance with these licensure
requirements during standard surveys. States also conduct surveys in
response to complaints.

Enforcement of Medicare and Medicaid standards is likewise a shared
responsibility. HCFA is responsible for enforcing standards in homes with
Medicare certification- about 86 percent of all homes. 6 When homes are
found to have deficiencies at the most severe level, or when homes fail to

5 56 Fed. Reg. 48827. 6 This percentage includes homes that have both
Medicare and Medicaid certification.

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correct deficiencies in a timely manner, HCFA policies call for states to
refer these cases to HCFA, together with any recommendations for sanctions.
HCFA normally accepts these recommendations but can modify them. States are
responsible for enforcing standards in homes with only Medicaid
certification- about 14 percent of all homes.

1987 Law Shifted Focus of Regulatory Standards and Added Sanctions

As part of the Omnibus Budget Reconciliation Act of 1987 (OBRA 87), the
Congress changed the focus of standards that homes needed to meet to
participate in Medicare and Medicaid. Prior to OBRA 87, the Medicare and
Medicaid participation standards focused on a home's capability to provide
care, not on the quality of care actually provided. Largely in response to a
1986 Institute of Medicine study, 7 which recommended more resident-
oriented nursing home standards, OBRA 87 refocused standards on the actual
delivery of care and the results of that care. For example, the focus of the
standards moved to such matters as a home's performance in providing
appropriate care for incontinence or for preventing pressure sores, and the
performance would be evaluated by reviewing medical records and examining
residents.

To ensure that facilities would achieve and maintain compliance with the new
standards, OBRA 87 also greatly expanded the range of enforcement sanctions.
Studies of nursing home regulation had shown that many homes tended to cycle
in and out of compliance with standards that were important to protecting
residents' health and safety, thereby placing nursing home residents in
jeopardy. For example, in 1987 we reported that more than one- third of
nursing homes reviewed failed to consistently meet one or more of the
standards that were most likely to adversely affect residents' well- being.
8 These facilities were nevertheless able to remain in Medicare and Medicaid
without incurring any penalties if the deficiencies were corrected in a
timely manner. As such, there was no effective federal penalty to deter
noncompliance. At that time, the only sanctions available were termination
from the program or, under certain circumstances, denial of payments for new
Medicare or Medicaid residents. OBRA 87 added several new alternatives, such
as civil monetary penalties, and expanded the deficiencies that could result
in denial of payments. (See table 1.)

7 Improving the Quality of Care in Nursing Homes, Institute of Medicine
(Washington, D. C., 1986). The purpose of the study was to recommend changes
in regulatory policies and procedures to ensure nursing home residents
receive satisfactory care.

8 Medicare and Medicaid: Stronger Enforcement of Nursing Home Requirements
Needed (GAO/ HRD- 87- 113, July 22, 1987).

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Table 1: Sanctions Available to Enforce Compliance With Medicare and
Medicaid Program Standards

Sanction Description In place

before OBRA 87

Added or expanded under OBRA 87

Civil monetary penalties Penalties ranging from $50 to $10,000

per day can be assessed. X Temporary management The nursing home accepts a
substitute

manager appointed by the state with the authority to hire, terminate, and
reassign staff; obligate funds; and alter facility procedures as
appropriate.

X Denial of payments Medicare and/ or Medicaid payments

can be denied for all covered residents or for newly admitted residents.

X X Directed in- service training

The nursing home is required to provide training to staff on a specific
issue identified as a problem in the survey.

X Directed plan of correction The facility would be required to take

action within specified time frames according to a plan of correction
developed by HCFA, the state, or the temporary manager.

X State monitoring An on- site state monitor can be placed

in the nursing home to help ensure that the home achieves and maintains
compliance.

X Termination The provider is no longer eligible to

receive Medicare and Medicaid payments for beneficiaries residing in the
facility.

X

Particularly with regard to civil monetary penalties, the Congress intended
that these sanctions create a strong incentive to maintain compliance with
federal standards by penalizing homes for their deficiencies. To this end,
the associated House Budget Committee Report stated

the Committee amendment would expressly allow a State to impose civil money
penalties for each day in which a facility was found out of compliance with
one or more of the requirements of participation, even if the facility
subsequently corrected its deficiencies and brought itself into full
compliance. This, in the Committee's view, is essential to creating a
financial incentive for facilities to maintain compliance with the
requirements for participation (emphasis added). 9

The Department of Health and Human Services (HHS) issued regulations
implementing OBRA 87 in two stages. Regulations implementing standards

9 H. R. 391, 100th Cong., p. 473. The Committee's provision establishing
civil monetary penalties was adopted in conference.

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were effective by October 1990, but enforcement regulations covering
sanctions did not become effective until July 1995. According to a HCFA
official, publication of enforcement regulations was delayed because of the
controversial nature of the regulation and the workload associated with
responding to the large volume of comments received in the rulemaking
process.

Sanctions Are Matched to Severity of Deficiencies

OBRA 87 gave the HHS Secretary authority to specify criteria as to when and
how each sanction should be applied. In developing the regulations
implementing these sanctions, HCFA proceeded on the assumption that, while
all standards must be met and enforced, failure to meet a standard takes on
greater or lesser significance depending on the circumstances and the actual
or potential effect on residents. Thus, the regulations established an
approach for determining the relative seriousness of each instance of
noncompliance with standards.

For each deficiency identified in the survey process, the approach places
the deficiency in one of 12 categories, labeled “A” through
“L” depending on the extent of patient harm (severity) and the
number of patients adversely affected (scope). The most dangerous category
(L) is for a widespread deficiency that causes actual or potential for death
or serious injury to residents; the least dangerous category (A) is for an
isolated deficiency that poses no actual harm and has potential only for
minimum harm. Homes with deficiencies that do not exceed the C level are
considered in “substantial compliance,” and as such, providing
an acceptable level of care. 10 The effect of HCFA's categorizing is that
for a home to be out of compliance, it must have one or more deficiencies
that subject a resident to at least the potential for more than minimal
harm. Identifying the scope and severity of a deficiency also provides the
basis for three groups of enforcement sanctions, which may be required or
optional. (See table 2.)

10 We use the term “compliance” throughout the remainder of the
report to mean homes that meet HCFA's definition of “substantial
compliance” with the standards.

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Table 2: HCFA's Scope and Severity Grid for Medicare and Medicaid Compliance
Deficiencies Scope Sanction a Severity category Isolated Pattern Widespread
Required Optional

Actual or potential for death/ serious injury b J K L Group 3 Group 1 or 2

Other actual harm G H I Group 2 Group 1 c Potential for more than minimal
harm D E F Group 1 for categories D

and E; group 2 for category F

Group 2 for categories D and E; group 1 for category F

Potential for minimal harm (substantial compliance) A B C None None

a Group 1 sanctions are directed plan of correction, directed in- service
training, and/ or state monitoring. Group 2 sanctions are denial of payment
for new admissions or all individuals and/ or civil monetary penalties of
$50 to $3,000 per day of noncompliance. Group 3 sanctions are temporary
management, termination, and/ or civil monetary penalties of $3,050 to
$10,000 per day of noncompliance.

b This category is referred to in regulations as “immediate
jeopardy.” c Sanctions for category I also include option for
temporary management.

Homes in substantial compliance are not subject to sanctions. For
noncompliant homes referred to HCFA for sanction, the severity of the
sanction that must or can be imposed generally increases with the severity
of the deficiency. For each category in the scope and severity grid, a
sanction from a particular group must be imposed and sanctions from certain
other groups can be added. 11 For example, a home with one or more
deficiencies rated J or higher must receive a sanction from group 3, and
HCFA has the option of levying additional sanctions from groups 1 or 2. HCFA
regulations provide that the choice of sanctions is to take into account not
only the severity and scope of the deficiency but also a consideration of
prior performance, desired corrective and long- term compliance, and the
number and severity of all the homes' deficiencies together.

Under their shared responsibility for Medicare- certified nursing homes,
state agencies identify and categorize deficiencies and make referrals with
proposed sanctions to HCFA. HCFA is responsible for imposing sanctions and
collecting monetary penalties.

11 Two conditions override the penalties in the scope and severity grid. If
a home does not correct all its deficiencies within 3 months of the survey,
a denial of payment for new admissions must be imposed. If a home fails to
achieve compliance status within 6 months of the survey, it must be
terminated from Medicare and Medicaid.

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States May Grant Noncompliant Homes a Grace Period

Under HCFA's policies, most homes are given a grace period, usually 30 to 60
days, to correct deficiencies identified in the standard or complaint
surveys. States do not refer these homes to HCFA for sanction unless they
fail to correct their deficiencies within the grace period. Exceptions are
provided for homes with deficiencies rated J, K, or L and for homes that
meet HCFA's definition of a “poorly performing facility”- a
special category of homes with repeat severe deficiencies. HCFA policies
call for states to refer these homes immediately for sanction.

HCFA also requires a notice period before the sanction takes effect. When a
HCFA regional office receives a referral from a state, it reviews the case
and the state's recommendation, decides whether to impose a sanction, and
notifies the home if a sanction is to be imposed. Under HCFA regulations,
homes have 15 to 20 days to come into compliance, and if a home does so by
the deadline, the sanction does not take effect. There are two major
exceptions. One is a civil monetary penalty, which can be assessed
retroactively even if a home corrects the problem. The other is when a
nursing home is found to have a deficiency rated J, K, or L. In this
circumstance, HCFA may put a sanction into effect after a 2- day notice
period.

Many Nursing Homes Had Deficiencies That Harmed Residents

National data on nursing home surveys for July 1995 to October 1998 showed
that the proportion of homes with the most severe deficiencies remained at
uncomfortably high levels throughout this period. The total number of homes
not in compliance, even for the most serious deficiency categories, remained
relatively steady. Furthermore, about 40 percent of the homes found to have
serious deficiencies in a survey early in the period were found to have
deficiencies of equal or greater severity in a subsequent survey late in the
period. 12

One- Fourth of All Homes Had Deficiencies in the Highest Severity Categories

Compliance with nursing home standards of care continued to be a problem
during the entire 3- year period we examined. Comparing the number of cited
deficiencies per noncompliant nursing home during this period showed little
overall change from the first, or base, survey (3.79) to

12 HCFA categorizes surveys and takes enforcement action based on the
deficiency's scope and severity ranking. We used this approach for comparing
survey results from different periods.

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the most recent survey (3.74). 13 In the earlier set of surveys, 28 percent
of homes had at least one deficiency in the two highest severity categories
(actual or potential for death or serious injury and other actual harm); in
the most recent set of surveys, the figure was 27 percent (see table 3).

Table 3: Base Period and Ending Period Survey Deficiencies Base survey a
Most recent survey b

HCFA severity category Number of homes Percent Number of

homes Percent

Actual or potential death/ serious injury 125 1 192 1

Other actual harm 4,690 27 4,521 26 Potential for more than minimal harm
6,527 38 7,535 43

No deficiencies or in substantial compliance (deficiencies with potential
for minimal harm) 5,902 34 5,435 31

Total 17,244 100 17,683 100 c

a First survey conducted between July 1, 1995, and December 31, 1996. b Most
recent survey conducted between January 1, 1997, and October 22, 1998. c
Does not add to 100 due to rounding.

In the two highest severity categories, common deficiencies included
inadequate attention to prevent pressure sores, failure to provide
supervision or assistance devices to prevent accidents, and failure to
assess residents' needs or provide necessary care. Table 4 shows the most
frequently cited violations in these severity groups for surveys conducted
in the most recent survey period.

13 We identified the most recent survey conducted between January 1, 1997,
and October 22, 1998, and compared the results to the first survey conducted
between July 1, 1995, and December 31, 1996. Interim surveys may have
occurred but were excluded from this analysis. Data from prior periods are
not comparable because severity classifications were not required for
surveys conducted prior to July 1, 1995.

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Table 4: Most Frequently Cited Deficiencies That Caused Actual Harm, January
1997 to October 1998 Number of homes cited a Deficiency category Health
effect of deficiency

2,809 Inadequate attention to prevent pressure sores- the erosion of skin
and underlying tissue that result from pressure, friction, or lack of blood
supply

Without proper care, complications of pressure sores can occur and include
pain, infection, increased debilitation, and skin loss with extensive
destruction or damage to muscle and bone. The severity can range from skin
redness to large wounds that can expose skin tissue and bone.

1,857 Failure to provide supervision or assistance devices to prevent
accidents Without appropriate supervision and accident prevention devices,
such

as alarm devices or external hip protectors, accidental injury may be more
likely to occur, especially for bed- bound residents, who are at the highest
risk for falls because they may try to get out of bed on their own and fall,
which often results in serious injury, such as hip fracture.

2,158 Failure to provide comprehensive assessment of resident needs; poor
development of care plans; failure to provide necessary care to attain the
highest level of well- being b

The quality of care that residents receive is largely dependent on
assessment of their needs and developing and following the plan of care
developed to meet these needs. For example, resident assessments should
identify individual needs, such as urinary or bowel continence, and these
needs should be matched with a plan, such as “the resident will be
assisted to the bathroom every 3 hours.” At regular intervals, the
health care team is supposed to develop objectives for the highest level of
functioning and well- being a resident may be expected to attain, such as
“the resident will remain continent at all times.”

1,171 Failure to maintain acceptable nutritional status Residents who
receive insufficient nutrition to maintain body weight may

be more susceptible to increased rates of infection, skin breakdown,
cognitive impairment, and premature mortality.

555 Failure to provide appropriate treatment for incontinent resident If
left unattended, incontinence can lead to serious physical

complications including infection, skin breakdown, and sepsis, as well as
emotional damage to resident dignity.

510 Failure to maintain or enhance resident's dignity HCFA regulations
protect and promote the right of each resident to a

dignified existence. Accordingly, HCFA policies stipulate that nursing homes
must assist residents to be well- groomed, promote resident independence,
respect resident privacy, and focus on residents as individuals. Such
uncaring acts as physically exposing a resident to visitors and other
residents or verbally abusing a resident are violations of a resident's
dignity.

421 Improper use of physical restraints Physical restraints, such as cotton
vests that can be tied to a chair to prevent the resident from slipping, are
devices to restrict freedom of movement and are used to protect residents
from injury. Restraint devices cannot be easily removed by residents and
improper use can cause decreased muscle tone, increase likelihood of falls
or other accidents, incontinence, pressure ulcers, depression, confusion,
and mental deterioration.

385 Failure to provide proper treatment and services for residents with
limited range of motion, such as wheelchair- or bed- bound residents

Lack of physical exercise can lead to a loss of function or range of motion
in the fingers, wrists, elbows, shoulders, hips, knees, and ankles. A
decline in a resident's physical range of motion can result in arm and leg
contractures and further pain, debilitation, and immobility.

(Table notes on next page)

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a The total number of homes cited exceeds the total number of homes in the
two severity categories because some homes were cited for more than one
deficiency. b We combined these three deficiencies because of their close
link. Resident assessments provide the information necessary to set
treatment objectives and care plans to achieve the highest level of
functioning and well- being a resident may be expected to attain.

Forty Percent of Homes With Severe Deficiencies Were Repeat Violators

Although most noncompliant homes eventually returned to compliance, many did
not maintain this status. Among those homes cited for deficiencies at the
two highest levels of severity during the base survey, about 40 percent were
cited for deficiencies at the same or higher level of severity during the
most recent survey. In other words, during the 3- year period, 4 of 10 homes
that were found by the base survey to have caused actual or potential death
or serious injury or other actual harm to residents had deficiencies
(possibly different deficiencies) that were just as severe- or worse- in the
most recent inspection. Although we focused our analysis on deficiencies in
the most severe categories, we noted that among those homes with
deficiencies considered to hold potential for more than minimal harm in the
first survey, about 77 percent were cited for deficiencies (again, possibly
different ones) at the same or higher level of severity during the most
recent survey.

Sanctions Do Not Ensure Nursing Homes Maintain Compliance

To determine the role sanctions play in bringing about a greater degree of
compliance, we focused on a sample of 74 homes that had been referred for
sanctions. 14 The case histories of these homes showed that sanctions helped
bring the homes back into temporary compliance but provided little incentive
to keep them from slipping back out of compliance. While several aspects of
the sanction program, such as civil monetary penalties, have potential to
provide the necessary incentive to better ensure continued compliance,
certain HCFA policies or practices limited their effectiveness with these
homes.

Most Sanctions Achieved Temporary Corrective Action

The 74 homes we reviewed had been referred by the states to HCFA for
possible sanctions a total of 241 times- on average, about 3 times each. All
74 homes also had at least one deficiency that caused actual harm to
residents or placed residents at risk of serious injury or death. Some
referrals were accompanied by a recommendation for one sanction, while
others were accompanied by recommendations for two or more. The most

14 Based on HCFA regional data, we estimate that in a single year, 1997,
about 12 percent of noncompliant homes in the four states we visited were
referred to HCFA for possible sanction.

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common sanction initiated by HCFA was denial of payments for new admissions-
176 times. HCFA also initiated 115 civil monetary penalties and 44
terminations.

Many homes corrected their deficiencies after being notified that a sanction
would be imposed. In these cases, HCFA rescinded the sanction. (See table
5.) For example, denial of payment never took effect in 97 of the 176
instances in which HCFA gave notice that a sanction would be imposed.
Recision usually occurred because the facility corrected the deficiency
before the effective date of the sanction. 15

Table 5: Disposition of Referrals for the 74 Homes Reviewed

Sanction HCFA notices to impose sanction Sanctions that

never took effect

Denial of payment for new admissions 176 97 Civil monetary penalties 115 78
Termination 44 31

The ability of sanctions to help bring about corrective action is reflected
in the fact that, at the time of our study, only 7 of the homes in our
sample that were sanctioned with termination remained terminated from the
Medicare and Medicaid programs. However, sanctions- or the penalties they
carry- only temporarily induced homes into taking action to correct
identified deficiencies, as many were again out of compliance by the time
the next survey or follow- up inspection was conducted. Of the 74 homes we
reviewed, 69 were again referred for sanctions after being found out of
compliance once more- some went through this process as many as six or seven
times. Table 6 shows some of the cases in our sample where homes had been
cited for serious deficiencies, referred to HCFA for sanctions, and
subsequently cited for serious deficiencies again.

15 Although civil monetary penalties show a similar pattern of having far
fewer fines take effect than were imposed by HCFA, the relatively small
number of penalties that have taken effect is a reflection of the large
number of fines under appeal. As appeals are settled, a higher number of the
115 fines imposed may take effect.

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Table 6: Examples of Nursing Homes With Patterns of Repeat Deficiencies and
Repeat Referrals for Sanctions

State in which nursing home is located Summary of deficiency history

Michigan Twice in 1995, and again in 1996 and 1997, the state cited one home
for causing actual harm to residents. Deficiencies included failure to
prevent the development of pressure sores in several residents and failure
to prevent accidents, which resulted in a broken arm for one resident and a
broken leg for another.

Texas State surveyors cited one nursing home for placing residents in
immediate jeopardy and actual harm twice in 1995- including failure to
prevent choking hazards, provide proper incontinent care, and prevent or
heal pressure sores. On the next round of surveys, beginning in January
1997, surveyors again found quality of care deficiencies that caused harm to
residents, including failure to provide adequate nutrition.

Pennsylvania In 1995, 1996, and 1997, the state cited one nursing home for
causing harm to residents. Problems included resident abuse and failure to
provide services to several residents in accordance with a plan of care
resulting in excessive weight loss.

This yo- yo pattern of compliance and noncompliance could be found even
among homes that were terminated from Medicare, Medicaid, or both.
Termination is usually thought of as the most severe sanction and is
generally done only as a last resort. 16 Once a home is terminated, however,
it can generally apply for reinstatement if it corrects its deficiencies.
For three of the six reinstated homes in our group, the pattern of
noncompliance returned. For example, a Texas nursing home was terminated
from Medicare for a string of violations that included widespread
deficiencies at the severity level of actual harm to residents. About 6
months after the home was terminated, it was readmitted under the same
ownership. Within 5 months, state surveyors identified a series of
deficiencies involving harm to residents, including failure to prevent
avoidable pressure sores or ensure that residents received adequate
nutrition.

Other sanctions authorized by OBRA 87- increased state monitoring,
appointment of a temporary manager to oversee the home while it corrects its
deficiencies, and state- directed plans of correction (see table 1)- have so
far been applied infrequently. All three are receiving limited use, state
officials said, because of various cost and administrative concerns. For
example, officials in three of the four states said they lacked a pool of
qualified administrators to act as temporary managers. Michigan

16 When a home is terminated, it loses any income from Medicare and Medicaid
payments, which for many homes represents a substantial part of operating
revenues. Residents who receive support from Medicare or Medicaid must be
moved to other facilities.

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was an exception to this pattern. In the first quarter of 1998, Michigan
entered into a contract with the Michigan Public Health Institute to provide
oversight of facilities with significant compliance problems. Oversight
activities focus on directed plans of correction and state monitoring.

Manner in Which Sanctions Are Implemented Hampers Their Effectiveness

Sanctions have been unable to ensure continued compliance because several
procedures for implementing sanctions can minimize their effectiveness or
invalidate them altogether. Civil monetary penalties, a sanction with strong
potential deterrent effect, were hampered by a growing backlog of appeals.
Imposing sanctions without a grace period was seldom used because of
restrictive HCFA guidance. And termination, the ultimate sanction because it
removes homes from the program, had little effect because many homes were
able to reenter the program with little consequence for their past actions
and were given a clean slate for the future.

Appeals Backlogs Hamper Deterrent Effect of Civil Monetary Penalties

Civil monetary penalties have an advantage in encouraging homes to remain in
compliance- they can be applied retroactively to the date of initial
noncompliance. In other words, they cannot be avoided simply by taking
corrective action, and the longer the deficiency remains, the larger the
penalty can be. HCFA initially planned to make wide use of the new sanctions
when they were put in place but has since modified its policy by reserving
civil monetary penalties for more serious deficiencies (G or higher in the
scope and severity grid).

However, the use of civil monetary penalties for even this narrow range of
deficiencies has resulted in a growing backlog of appeals. Nursing homes can
appeal civil monetary penalties before HHS' Departmental Appeals Board.
Appealed penalties are not collected until the case is closed, usually
through the ruling of an administrative law judge or a negotiated settlement
between HCFA and the nursing home. Nationwide, a lack of hearing examiners
has created a backlog of about 620 cases awaiting decision as of August
1998, with some cases dating back to 1996. By February 1999, the backlog had
grown to over 700 cases and is predicted to grow further. HHS budget
documents estimated that each year at least twice as many appeals would be
received as would be settled. This backlog creates a bottleneck for timely
collections. For example, HCFA accounting records showed, as of September
1998, only 37 of the 115 monetary penalties imposed on the 74 homes we
reviewed had been

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collected. Unless penalties are actually collected they have minimal
deterrent effect.

Large backlogs undermine the effectiveness of civil monetary penalties in
two ways. First, they increase the pressure on HCFA to resolve the appeal by
negotiating settlements- a strategy that helps somewhat in controlling the
growth of the backlog but can also lower the size of the fine, potentially
reducing the effect of the penalty. 17 Second, even if the appeal goes to a
hearing and a penalty is upheld, considerable time may have elapsed without
the home having to pay. As a result, it is not surprising that some nursing
home owners routinely appeal imposed penalties. For example, regional
enforcement logs showed one large Texas nursing home chain appealed 62 of
the 76 civil monetary penalties imposed on its nursing homes (including
chain- owned homes that were not in our sample) between July 1995 and April
1998. These 62 penalties totaled $4.1 million.

Some Procedures Limit Ability to Impose Immediate Sanctions Under HCFA
policy, HCFA can apply sanctions on an immediate basis (that

is, without a grace period to correct deficiencies) to homes designated as
poor performers and to homes that place residents in immediate jeopardy
(actual death or serious injury or potential for such an outcome). Doing so
can help encourage sustained compliance because eliminating the grace period
means that homes are more likely to be affected by penalties.

However, HCFA's guidance for when to apply poor performer and immediate
jeopardy designations has allowed severe and repeat violators to avoid
immediate sanctions. Until September 1998, HCFA's definition of a poorly
performing home was so narrow that it excluded many nursing homes that had
repeated deficiencies causing actual harm to residents. In our earlier
report on California nursing homes, we found that 73 percent of homes cited
repeatedly for harming residents did not meet HCFA's definition of a poorly
performing facility. In the other states we visited, we also found instances
of severe and repeated deficiencies that were not designated as poor
performers and thus avoided immediate sanctions.

HCFA has since revised its definition to broaden the circumstances under
which a nursing home could be designated as a poorly performing facility.
The new definition includes homes with any deficiencies rated H or higher in
the scope and severity grid on its current survey and in its previous

17 It was beyond the scope of our work to review negotiated settlements or
adjudicated appeals in detail. However, because regulations provide for an
automatic reduction of 35 percent in the penalty amount if a home waives its
appeal rights, a home would have a financial incentive to appeal only if it
expected to realize a greater reduction or other advantage, such as a
lengthy delay.

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standard survey or any intervening survey (including complaint
investigations). HCFA said it would expand the definition in 1999 to include
deficiencies rated G.

The revision, however, narrowed the definition in certain other respects,
such as shortening the period during which deficiencies could be considered
from the previous two surveys to the most recent one. The revised definition
also excluded F- rated deficiencies (widespread potential for more than
minimal harm) from consideration of poorly performing facility status.
Because the changes are so recent, it is too early to tell what their effect
will be on the number of homes designated as poor performers.

A second area- which HCFA has not addressed- involves referral of homes
cited for deficiencies that contributed to the death of a resident. We found
several examples where state surveyors cited the deficiency during a
complaint investigation that took place some time after the incident and
found that the deficient practice contributing to the death had ceased at
the time of the investigation. Under HCFA policy, such deficiencies
corrected at the time of the investigation are considered “past
noncompliance” and are to be cited as isolated actual harm, level G in
HCFA's scope and severity grid. HCFA does not require homes with level- G
deficiencies to be referred for sanctions. As a result, homes cited for
deficiencies so severe that they contributed to resident deaths may not be
referred to HCFA for sanctions at all. By allowing these homes to escape
immediate sanction, much of the ability to deter future noncompliance is
lost. Table 7 shows examples of homes that were not referred for immediate
sanction.

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Table 7: Examples of Deficiencies Contributing to Resident Deaths Not
Referred to HCFA for Immediate Sanction

State in which nursing home is located Summary of deficiency

Michigan The home failed to follow its written policies and procedures
designed to protect residents. As a result, the home failed to prevent a
confused resident from leaving unaccompanied and was unaware that the
resident was absent for several days. During this period, the resident was
stabbed to death. Facility staff noted that the resident's bed was empty
during a midnight bed check, but no one verified the patient's whereabouts.
Three days later, the resident's family returned from a holiday weekend and
learned about the homicide from the police. The family notified the nursing
home, which had not reported the missing resident to the police or the state
survey agency.

Michigan The home failed to follow a plan of care and physician's orders to
monitor every 30 minutes a confused resident restrained in bed. As a result,
the resident climbed out of bed, became entangled in the restraint, and died
of asphyxia due to chest compression. The resident was found suspended from
the vest restraint intended to keep her from leaving the bed.

California The home failed to protect a resident from abuse by another
resident. The assaulted resident suffered a head injury and later died. The
home compounded the situation by not promptly notifying the resident's
attending physician of his deteriorating condition and by failing to notify
the state agency of the death as required by law.

After Readmission, Terminated Homes Receive a Clean Slate, but Some Continue
Old Behaviors

Another group of homes that can largely avoid the threat of immediate
sanction even though they exhibited a pattern of recurring and serious
noncompliance are those that have been terminated from Medicare and
subsequently readmitted. After a terminated home has been readmitted in
Medicare, HCFA policy prevents state agencies from considering the home's
prior record in determining if the home should be designated as a poorly
performing facility, effectively giving the home a “clean
slate.” This policy produces the disturbing outcome that termination
could actually be advantageous to a home with a poor history of compliance
because this history would no longer be considered in making enforcement
decisions after it was readmitted to Medicare. Given the continuing spotty
performance we found among those homes in our sample that had been
terminated and subsequently reinstated, this policy merits reexamination.

Two other aspects of HCFA's use of termination also limit its effectiveness.
First, HCFA typically paid terminated homes in our sample for 30 days after
termination regardless of whether transfers of patients were under way. 18

18 Medicaid regulations expressly condition this payment on reasonable
efforts being made to transfer patients during this 30- day period.
Continued Medicare funding during this period is discretionary with HCFA.

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This policy in effect gives terminated homes 30 extra days of payment while
they seek reinstatement. Second, HCFA generally used a short
“reasonable assurance period” 19 to determine if homes seeking
reinstatement to Medicare had corrected their problems and were otherwise
complying with the standards. While HCFA can make this period last up to 180
days, the homes we examined were given reasonable assurance periods of 15 to
60 days- a shorter period that provides less assurance that homes can
sustain long- term compliance.

Despite Recent HCFA Proposals to Make Sanctions More Effective, Additional
Steps Are Needed

Recent actions taken or proposed by HCFA to improve nursing home oversight
can help make sanctions more of a deterrent against continued noncompliance,
but on their own they are not enough to fully address the problems we
identified. HCFA began a series of actions in response to our earlier report
on California nursing homes and its own July 1998 report to the Congress
summarizing a 2- year study of nursing home regulation. 20 These actions
address a number of problems we identified in our earlier report but do not
resolve all of them or additional problems we have identified through our
ongoing work. Further, weaknesses in HCFA's management information systems
will continue to limit HCFA's ability to implement its initiatives and
further strengthen its enforcement processes.

HCFA Initiatives Leave Problem Areas Unresolved

In July 1998, HHS announced several actions that HCFA would take to toughen
enforcement of nursing home regulations, particularly focusing on homes with
serious and repeat deficiencies. The actions include plans to expand the
definition of “poorly performing facility” to include more homes
with repeat deficiencies that harmed residents. HCFA also directed that the
results of an intervening survey, such as complaint investigations, be
considered in determining whether a home should be designated as
“poorly performing.” The actions also called for increased
survey frequency for homes with the most chronic compliance problems and
focusing enforcement efforts on nursing homes in chains that have a record
of noncompliance with federal rules. With regard to the problems we have
identified in this report, however, HCFA's actions leave several issues
unresolved. HCFA may be able to resolve one of the issues (the

19 Before readmitting a terminated facility to Medicare, HCFA requires that
a nursing home remove the reason for termination and give reasonable
assurance that it will not recur. To give this assurance, HCFA requires that
a terminated home have two surveys not more than 180 days apart, each of
which shows the problem to be corrected. The reasonable assurance period is
the length of time between these surveys.

20 HCFA, Report to Congress: Study of Private Accreditation (Deeming) of
Nursing Homes, Regulatory Incentives and Non- Regulatory Initiatives, and
Effectiveness of the Survey and Certification System (July 1998).

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backlog of civil monetary appeals) if HHS' budget request for additional
staff positions is adopted. However, there are no actions under way with
regard to two other issues- referring homes for sanction in all cases where
deficiencies contributed to the death of a resident and better using the
deterrent effect of termination from the Medicare and Medicaid programs (see
table 8).

Table 8: Sanction- Related Problems That Remain and Recent HCFA Initiatives

Sanction- related problems identified Recent HCFA initiatives GAO
observations

Civil monetary penalties are hampered by a backlog of appeals

HHS' budget request for fiscal year 2000 includes additional funding to
reduce the appeals backlog

The likelihood of obtaining additional funds is uncertain

Policies do not require states to refer all cases where deficiencies have
resulted in a resident death to HCFA for sanction

None Instances in which death resulted may not be referred to HCFA

Procedures for readmitting terminated homes limit the usefulness of
terminating homes from the program

None Expanded definition of “poorly performing facility” does
not include homes that were terminated for poor performance and subsequently
reinstated; other problems identified with these procedures still remain

HCFA initiatives also include a proposal to allow civil monetary penalties
to be assessed on instances of noncompliance as an alternative to the number
of days out of compliance. Since the proposed regulation had not been issued
at the time we completed our review, we were not able to evaluate the
extent, if any, that it could have on increasing use of civil monetary
penalties.

Management Information Systems Have Limited Ability to Support Key HCFA
Initiatives

HCFA's initiatives to focus more oversight on homes with serious and repeat
noncompliance are likely to encounter obstacles due to three weaknesses in
HCFA management information: the inability to centrally track enforcement
actions, the lack of needed data on the results of complaint investigations,
and the inability to identify nursing homes under common ownership.

HCFA Unable to Track Enforcement Actions

HCFA lacks a system that integrates federal and state enforcement
information to help ensure that homes receive appropriate regulatory

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attention. Such a system would track key information about steps taken by
HCFA offices and the states, such as verification that deficiencies were
corrected or sanctions imposed. Although HCFA's Online Survey,
Certification, and Reporting (OSCAR) system was developed for this purpose,
we learned that the system's information was incomplete and inaccurate
because states and HCFA have not consistently entered data into OSCAR. We
found that the HCFA regions and states that we visited maintain and use
their own systems, not OSCAR, to monitor enforcement actions. At the time of
our initial inquiry, HCFA's regional systems ranged from manual paper- based
systems to complex computerized programs, and none of the four states'
tracking systems was compatible with OSCAR or the regional systems.

This lack of management information makes it difficult for HCFA's central
office to coordinate and oversee the actions of its 10 regional offices,
which are responsible for working with the states to administer the
enforcement system. For example, officials in HCFA's central office were not
aware that regions were frequently late in imposing the sanction of denial
of payment for new admissions on nursing homes out of compliance for 3
months- a sanction mandated under HCFA regulation. The four HCFA regional
offices we visited often missed the time frame and sometimes did not impose
the sanction at all. Of the 241 enforcement actions we reviewed, 85 involved
situations where payment for new admissions was not stopped, even though
homes had been out of compliance for more than 3 months. In 61 of the 85
cases, the regional office imposed denial of payment an average of 24 days
after the deadline. In the remaining 24 cases, the region never denied
payments at all, despite these homes being out of compliance for an average
of 156 days. When we discussed this problem with responsible HCFA
headquarters staff, they were unaware of the extent of this problem. If
HCFA's central office lacks adequate management information on the
activities of its regional offices, it will be unable to monitor whether
they are properly carrying out HCFA's initiatives.

Data on Complaint Investigation Results Inadequate

A second area in which HCFA lacks adequate information is the results of
complaint surveys. HCFA does not require states to cite violations of
federal standards if the deficiencies were found during complaint surveys or
to ensure that if such deficiencies are cited, they are reported to HCFA.
One of the four states we reviewed based its decisions to refer homes to
HCFA for sanctions solely on the results of the surveys. 21 California did
not report

21 HCFA officials told us that New York and Louisiana also do not report
results of complaint investigations to HCFA.

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the results of complaint investigations to HCFA; instead it chose to deal
with the homes under the state's licensing authority. These practices leave
HCFA without full information about nursing homes' compliance status with
Medicare and Medicaid standards. In September 1998, HCFA modified its
guidance to states to stipulate that any federal deficiencies cited during
complaint investigations must be used in determining if a nursing home is a
“poorly performing facility.”

The situation in California exemplifies how this lack of information limited
HCFA's ability to get a full picture of a home's compliance with Medicare
and Medicaid standards. California surveyors usually do not cite federal
deficiencies when they find violations in complaint investigations. 22 As a
result, California does not recommend, and HCFA has no basis to impose,
federal sanctions on deficient nursing homes resulting from complaint
investigations.

In many instances, substantiated complaint investigations disclosed severe
deficiencies that were not part of the record referred to HCFA. For example,
one home had 61 complaints between September 1995 and July 1998. State
investigators substantiated violations in 30 of these complaints, some of
which resulted in actual harm and placed residents in immediate danger, such
as abuse of a resident by a staff member and failure to prevent or treat
pressure sores. The state agency levied fines totaling $80,000 under its
licensing authority but did not cite any federal deficiencies although many
of its findings clearly violated Medicare and Medicaid standards. The home's
surveys did not document major problems. As a result, HCFA remained unaware
of this home's compliance problems.

HCFA Unable to Identify Homes Under Common Ownership

The third weakness with HCFA's management information is the lack of data
about homes with common ownership that are having severe compliance
problems. Chain- owned nursing homes, a significant and growing segment of
the nursing home industry, often cross state and regional boundaries.
Effective oversight requires an information system that will be able to
identify which chains have experienced severe compliance problems. However,
HCFA tracks enforcement actions by individual facility provider number only.
Consequently, regulators considering enforcement actions against a chain
provider in one part of the state or country cannot easily determine the
extent to which the problems they have identified are reflective of a
broader pattern within the chain.

22 California surveyors cite deficiencies and impose fines under state
licensing requirements. In June 1998, California changed its procedures to
cite federal deficiencies for substantiated complaints.

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To illustrate the impact of this lack of ownership information, we
identified a chain provider and linked the records on the provider by three
available sources: HCFA, states, and fiscal intermediaries. 23 The linking
showed that the chain provider had a disproportionate number of enforcement
actions relative to other homes in the same states. In Texas, the provider
owned about 11 percent of the nursing homes but accounted for over 18
percent of the state's enforcement actions, including 25 percent of the
state's immediate jeopardy cases and 25 percent of the poorly performing
facilities. In Michigan, where the chain owned eight facilities, six of the
eight had a total of 27 separate enforcement actions. Despite multiple
enforcement actions against these homes, Michigan and HCFA regional
officials were unaware that the Michigan homes had a common owner or of the
problem history of the owner's facilities in Texas. In discussing this
finding with HCFA officials, they noted that this example clearly
demonstrated the need for information on common ownership. The inability to
identify and track homes by chain could pose an immediate limitation on
HCFA's recent initiative to direct more enforcement efforts toward nursing
home chains. To be successful in this initiative, HCFA needs to ensure that
it can identify and track homes with common ownership.

Conclusions Despite reforms to ensure that nursing homes maintain compliance
with federal quality standards, one- fourth of all homes nationwide continue
to

be cited for deficiencies that either caused actual harm to residents or
carried the potential for death or serious injury. This pattern has not
changed since the July 1995 reforms were implemented. Although the reforms
equipped federal and state regulators with many alternatives and tools to
help promote sustained compliance with Medicare and Medicaid standards, the
way in which states and HCFA have applied them appears to have resulted in
little headway against the pattern of serious and repeated noncompliance.
Such performance may do little to dispel concerns over the health and safety
of frail and dependent nursing home residents.

The enforcement system we observed still sends signals to noncompliant
nursing homes that a pattern of repeated noncompliance carries few
consequences. HCFA's recent actions, such as broadening the definition of a
“poorly performing facility,” are a step in the right direction.
However, four key problems we identified remain in need of attention. First,
if the backlog of civil monetary penalties is not reduced, much of the
deterrent effect of this sanction will continue to be lost. Second,
weaknesses remain in the deterrent effect of termination, including the lack
of a tie to “poorly

23 Fiscal intermediaries are contractors who process Medicare claims for
HCFA.

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performing facility” status for reinstated homes and the limited
“reasonable assurance period” for monitoring terminated homes
before reinstating them. Third, under HCFA guidance, states are not required
to refer for sanction all homes with deficiencies that contribute to
resident deaths. And finally, the changes do not address the need for HCFA
to improve its management information system. HCFA's ability to improve its
oversight of nursing homes will depend heavily on whether it has the
information to identify and monitor those homes that pose the greatest risk
of harm.

Recommendations to the Administrator of HCFA

To strengthen its ability to ensure that nursing homes maintain compliance
with Medicare and Medicaid quality- of- care standards, we recommend that
the Administrator of HCFA take the following actions:

? Improve the effectiveness of civil monetary penalties. The Administrator
should continue to take those steps necessary to shorten the delay in
adjudicating appeals, including monitoring progress made in reducing the
backlog of appeals. ? Strengthen the use and effect of termination. The
Administrator should

(1) continue Medicare and Medicaid payments beyond the termination date only
if the home and state Medicaid agency are making reasonable efforts to
transfer residents to other homes or alternate modes of care, (2) ensure
that reasonable assurance periods associated with reinstating terminated
homes are of sufficient duration to effectively demonstrate that the reason
for termination has been resolved and will not recur, and (3) revise
existing policies so that the pre- termination history of a home is
considered in taking a subsequent enforcement action. ? Improve the referral
process. The Administrator should revise HCFA

guidance so that states refer homes to HCFA for possible sanction (such as
civil monetary penalties) if they have been cited for a deficiency that
contributed to a resident's death. ? Develop better management information
systems. The Administrator

should enhance OSCAR or develop some other information system that can be
used both by the states and by HCFA to integrate the results of complaint
investigations, track the status and history of deficiencies, and monitor
enforcement actions.

Agency Comments and Our Response

We obtained comments on our draft report from HCFA and the four states that
we visited. HCFA, California, Michigan, and Pennsylvania commented in
writing (see app. II through app. V); Texas provided oral comments. In

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general, HCFA and the states concurred with our findings and recommendations
and cited steps being taken to strengthen enforcement of Medicare and
Medicaid requirements. They also suggested technical changes, which we
included in the report where appropriate.

HCFA commented that our findings underscore the need for the agency's recent
initiatives and will help sharpen the focus on areas that still need to be
addressed. In its response (see app. II), HCFA generally agreed with our
four recommendations and cited specific steps that it was planning to
address them. HCFA concurred with our recommendation to shorten the delay in
adjudicating appeals but also noted that it does not oversee the
department's appeals board. HCFA pointed out that the President's fiscal
year 2000 budget includes funds to double the number of administrative law
judges that hear appeals for the board. We recognize that HCFA does not have
administrative oversight of appeals board activities, but it does have the
key role in monitoring and evaluating the effectiveness of civil monetary
penalties as a sanction. Our recommendation was made with this latter role
in mind.

Regarding our recommendation for a better management information system,
HCFA stated that a major system redesign is being undertaken. HCFA stated
that the redesign was a long- term project but that it had plans for interim
steps to make the existing system more useful to both state and HCFA
offices. Also, concerning our recommendation to improve its referral
process, HCFA indicated that it would reiterate to the states the need to
use civil monetary penalties in serious cases of past noncompliance.

HCFA also concurred with two specific steps that we recommended to
strengthen termination as a sanction but did not concur with the third-
using a longer reasonable assurance period before reinstating the home. HCFA
pointed out that a long reasonable assurance period would not be appropriate
if the home were terminated because it ran out of time correcting a minor
deficiency that was corrected shortly after termination. This recommendation
was based on evidence that a short reasonable assurance period appears to be
given without attention to a home's past performance. For example, four of
the six reinstated homes in our sample were given reasonable assurance
periods of 30 days or less. Most had repeated and serious deficiencies-
those causing actual harm to patients. Our earlier work in California also
showed that reinstated homes were often cited soon after reinstatement with
new deficiencies that harmed residents. The intent of this recommendation is
to help accomplish the stated purpose of the reasonable assurance provision-
that there be some

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assurance that the cause for termination has been removed and will not
recur. In response to HCFA's comment, we revised the recommendation to
clarify this intent.

While in agreement with our recommendations, California's comments
recommended additional steps, such as enhanced funding to the states, that
would help strengthen nursing home oversight (see app. III).

Michigan's comments largely focused on the implementation of initiatives
taken in 1998 to correct problems that we discuss in the report. Michigan
particularly highlighted its resident protection initiative, designed to
monitor facility corrective action and performance both before and after the
state determines the facility has achieved substantial compliance. It
emphasizes such sanctions as directed plans of correction and state
monitoring-– steps the homes must pay for themselves. We were aware of
this initiative, which had become operational shortly before our visit in
June 1998, and have revised the report where appropriate to reflect this
initiative. However, data on its effectiveness in creating incentives for
homes to maintain compliance with the standards were not available at the
time we conducted our work. The results of future surveys will be needed to
assess the initiative's success.

We also provided a copy of the report for review by the American Health Care
Association (AHCA) and the American Association of Homes and Services for
the Aging (AAHSA). AHCA officials expressed agreement with the report's
recommendations. They did express concern, however, about our sample size
and methodology for selecting homes for detailed review. In selecting 74
homes that states had referred to HCFA for enforcement action, we focused on
homes with serious and often repeat deficiencies. Our rationale in selecting
these homes was if we found that such homes had been effectively dealt with,
there might be some assurance that the system was at least addressing the
worst problems. However, we did not find that the enforcement process was
working as effectively as it should, even for these homes. Both AHCA and
AAHSA also pointed out that deficiencies cited as actual harm (level G) on
HCFA's scope and severity grid may represent broad variation in seriousness
and, by definition, refer to isolated situations that affect one or a very
limited number of residents, with some citations appearing to be less
serious than others. We acknowledge that there may be variation in the
seriousness of actual harm violations but also found in the course of our
work that a G- level citation most often involved serious resident care
issues and at times did affect more than one resident.

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Copies of this report are also being sent to the Administrator of HCFA and
other interested parties. If you or your staff have any questions about this
report, please contact me or Kathryn Allen, Associate Director, at (202)
512- 7114. This report was prepared by Margaret Buddeke, Peter Schmidt,
Terry Saiki, Stan Stenersen, and Evan Stoll under the direction of Frank
Pasquier.

William J. Scanlon Director, Health Financing and

Public Health Issues

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Contents Letter 1 Appendix I Scope and Methodology

30 Appendix II Comments From the Health Care Financing Administration

33 Appendix III Comments From California's Department of Health Services

43 Appendix IV Comments From Michigan's Bureau of Health Systems

46 Appendix V Comments From Pennsylvania's Department of Health

53 Tables Table 1: Sanctions Available to Enforce Compliance With

Medicare and Medicaid Program Standards 6

Table 2: HCFA's Scope and Severity Grid for Medicare and Medicaid Compliance
Deficiencies

8 Table 3: Base Period and Ending Period Survey Deficiencies 10 Table 4:
Most Frequently Cited Deficiencies That Caused Actual

Harm, January 1997 to October 1998 11

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Contents

Table 5: Disposition of Referrals for the 74 Homes Reviewed 13 Table 6:
Examples of Nursing Homes With Patterns of Repeat

Deficiencies and Repeat Referrals for Sanctions 14

Table 7: Examples of Deficiencies Contributing to Resident Deaths Not
Referred to HCFA for Immediate Sanction

18 Table 8: Sanction- Related Problems That Remain and Recent

HCFA Initiatives 20

Table I. 1: Summary of Nursing Home Selection for GAO Review 32

Abbreviations

AAHSA American Association of Homes and Services for the Aging AHCA American
Health Care Association HCFA Health Care Financing Administration HHS
Department of Health and Human Services OBRA Omnibus Budget Reconciliation
Act OSCAR Online Survey, Certification, and Reporting

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Appendix I Scope and Methodology

To determine the extent to which nursing homes maintain compliance with
federal standards, we analyzed HCFA's nationwide database of nursing home
inspections- the Online Survey, Certification, and Reporting (OSCAR) system.
This data system records the results of states' recertification surveys in
standard format. The format changed to recognize the deficiency scope and
severity classifications made effective by the July 1995 final enforcement
regulations. As a result, analysis of the scope and severity of nursing home
deficiencies is inherently limited to periods after July 1995. Accordingly,
the period of our analysis included surveys done from July 1995 through
October 1998. We restricted our analysis to the 187 nursing home
requirements for participation in Medicare and Medicaid categorized as
related to patient care. Therefore, our analysis did not include data on
compliance with safety code standards, such as fire protection and physical
plant requirements.

In addition to using these data to analyze the extent to which homes comply
with the standards, we used the data to determine the most frequently
occurring deficiencies and their relative severity. In order to compare
nursing homes' performance in achieving and maintaining compliance over
time, we used OSCAR data to identify the earliest recertification survey
performed after the regulations became effective compared to the homes' most
current surveys. To do this, we used data from a facility's first survey
during the period July 1, 1995, to December 31, 1996, which became part of
the “base” period. Data from the latest survey since January 1,
1997, became part of the “current” period. For some nursing
homes, there was an intervening survey, but we did not use data from these
surveys.

Although we did not thoroughly assess the reliability of the OSCAR database,
for purposes of analyzing findings of nursing home recertification surveys,
HCFA officials as well as private researchers who work with the database
generally recognize the data as reliable. Even though the data are
considered reliable for recertification deficiencies reported by the states,
the extent to which they provide a consistent measure of the quality of care
across states is unknown. Nevertheless, OSCAR data contain omissions that
likely understate the extent of deficiencies found during other surveys by
state inspectors. For example, in California, serious violations found
during complaint investigations conducted by state inspectors were not
routinely shown in OSCAR and appear to be understated in national data as
well.

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Appendix I Scope and Methodology

To determine the extent to which the new sanctions contribute to nursing
homes' sustained compliance, we were unable to use OSCAR to perform a
similar nationwide analysis. We found that OSCAR does not contain complete
or reliable data on enforcement actions, such as the extent to which
sanctions are imposed, and no other system exists that provides such
nationwide data. For this reason, we relied on enforcement monitoring
databases from the four HCFA regional offices we visited.

Thus, to obtain information about the effectiveness of sanctions in
deterring future noncompliance, we had to gather available data on
enforcement actions from states and HCFA's regional offices. In general, we
used a two- step process. First, we looked at the extent to which states
were referring cases of noncompliance to HCFA for enforcement sanctions.
Second, we reviewed a sample of cases where states had recommended to HCFA
that sanctions be imposed. We selected 4 of HCFA's 10 regional offices-
Philadelphia (region III), Chicago (region V), Dallas (region VI), and San
Francisco (region IX)- for further review. We selected these four regions
because they are geographically dispersed and contain about 55 percent of
the nation's nursing homes. Within each region, we selected one state-
Pennsylvania, Michigan, Texas, and California, respectively- in which to
gather additional information on specific providers and chains. We selected
these four states because they had substantial numbers of nursing homes that
accounted for about 23 percent of the nation's nursing homes.

At the states, we reviewed procedures for referring cases to HCFA; discussed
these procedures with each state's ombudsman; and where appropriate,
reviewed selected case files to obtain a better understanding of procedures
in place. At each of the four HCFA regional offices, we used HCFA regional
enforcement records to identify nursing homes that had scope and severity
designations of G or higher for which the state survey agencies had
forwarded to HCFA survey files with recommendations for sanctions. From
these records, we selected a sample of enforcement cases to review. The
sample was not designed to be representative of the universe of enforcement
actions. Rather, it was designed to give us a sufficient number of cases
where different types of sanctions, including termination, were possible. We
then reviewed these case files with an eye toward determining the
implemented sanction's strength or weakness as a deterrent to future
noncompliance. Accordingly, we focused the sample on nursing homes,
including known chain providers that had multiple referrals by state
agencies to HCFA for enforcement or had been terminated.

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Appendix I Scope and Methodology

In all, we selected 74 separate nursing home providers. These providers
accounted for 241 enforcement actions between July 1995 and October 1998
(see table I. 1). These enforcement actions consisted of both
recertification surveys and other abbreviated surveys (follow- up or
complaint) where the state had referred cases to the HCFA regional office
for sanctions.

Table I. 1: Summary of Nursing Home Selection for GAO Review

HCFA region Regional office location State visited

Number of nursing

homes reviewed

Number of HCFA enforcement

actions

III Philadelphia Pennsylvania 17 44 V Chicago Michigan 18 81 VI Dallas Texas
27 96 IX San Francisco California 12 20

To determine the extent to which HHS' actions were sufficient to ensure
sanctions were applied in a timely and effective manner, we reviewed the
actions announced by HCFA from July through November 1998 that concerned
enforcement of nursing home standards. As such, proposed changes to the
nursing home survey and certification process were outside the scope of our
review. We also reviewed the extent to which adequate management information
systems existed to support and oversee HCFA's revised initiatives to
strengthen its enforcement process. This included an examination of record
formats in OSCAR, HCFA's regional office tracking system, and state nursing
home compliance systems.

We also reviewed HCFA regulations, policies, and guidance; interviewed
officials in HCFA's headquarters and regional offices; and interviewed state
survey agency officials. We also interviewed representatives from industry
groups and advocacy groups and academic researchers. Our Office of the
General Counsel, in consultation with HCFA attorneys, provided legal
guidance on our interpretation of relevant OBRA 87 provisions.

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Appendix II Comments From the Health Care Financing Administration

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Appendix II Comments From the Health Care Financing Administration

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Appendix II Comments From the Health Care Financing Administration

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Appendix II Comments From the Health Care Financing Administration

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Appendix II Comments From the Health Care Financing Administration

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Appendix II Comments From the Health Care Financing Administration

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Appendix II Comments From the Health Care Financing Administration

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Appendix II Comments From the Health Care Financing Administration

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Appendix II Comments From the Health Care Financing Administration

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Appendix II Comments From the Health Care Financing Administration

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Appendix III Comments From California's Department of Health Services

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Appendix III Comments From California's Department of Health Services

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Appendix III Comments From California's Department of Health Services

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Appendix IV Comments From Michigan's Bureau of Health Systems

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Appendix IV Comments From Michigan's Bureau of Health Systems

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Appendix IV Comments From Michigan's Bureau of Health Systems

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Appendix IV Comments From Michigan's Bureau of Health Systems

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Appendix IV Comments From Michigan's Bureau of Health Systems

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Appendix IV Comments From Michigan's Bureau of Health Systems

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Appendix IV Comments From Michigan's Bureau of Health Systems

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Appendix V Comments From Pennsylvania's Department of Health

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Appendix V Comments From Pennsylvania's Department of Health

(108342) GAO/ HEHS- 99- 46 Enforcing Federal Quality Standards in Nursing
Homes Page 54

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