Medicare Quality of Care: Oversight of Kidney Dialysis Facilities Needs
Improvement (Testimony, 06/26/2000, GAO/T-HEHS-00-136).

Pursuant to a congressional request, GAO discussed the Health Care
Financing Administration's (HCFA) processes for monitoring the quality
of dialysis facilities for end stage renal disease (ESRD) patients.

GAO noted that: (1) the oversight of dialysis facilities has several
weak links; (2) as a result, there is little assurance that facilities
are routinely complying with Medicare's quality of care standards, which
protect patients' health and safety; (3) GAO report highlights three
main areas; (4) the first is the dwindling frequency of on-site surveys;
(5) the number of facilities surveyed has been dropping each year since
1993, even though the surveys show that facilities are becoming
increasingly likely to have one or more serious deficiencies; (6) the
second problem is that HCFA's enforcement approach does not provide
strong incentives for dialysis facilities to stay in compliance with
Medicare requirements; (7) HCFA's threat to terminate a facility from
Medicare is sufficient to bring nearly all noncompliant facilities into
compliance, but many soon slip out of compliance again; (8) they face no
penalty for this behavior; (9) third, state agencies and ESRD networks
often do not share information about complaints and known
quality-of-care problems at specific facilities; and (10) as a result,
neither has a clear picture of what the other is finding and is unable
to take advantage of that information to target or otherwise modify its
own activities.

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

 REPORTNUM:  T-HEHS-00-136
     TITLE:  Medicare Quality of Care: Oversight of Kidney Dialysis
	     Facilities Needs Improvement
      DATE:  06/26/2000
   SUBJECT:  Health care facilities
	     Health care programs
	     Urologic diseases
	     Patient care services
	     Sanctions
	     Interagency relations
	     Noncompliance
	     Health surveys
	     Inspection
IDENTIFIER:  Medicare Program
	     Medicare End Stage Renal Disease Program

\******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Testimony.                                               **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************

GAO/T-HEHS-00-136

For Release on Delivery Expected at 1: 30 p. m. Monday, June 26, 2000

GAO/ T- HEHS- 00- 136

MEDICARE QUALITY OF CARE

Oversight of Kidney Dialysis Facilities Needs Improvement

Statement of William J. Scanlon, Director Health Financing and Public Health
Issues Health, Education, and Human Services Division Testimony

Before the Special Committee on Aging, United States Senate

United States General Accounting Office

GAO

Page 1 GAO/ T- HEHS- 00- 136

Mr. Chairman and Members of the Special Committee: I am pleased to be here
today to discuss what is being done to assure that the care provided to the
more than 280,000 Medicare patients being treated for End Stage Renal
Disease (ESRD), also known as kidney failure, is adequate and safe. Several
times a week, the vast majority of these patients visit a dialysis facility
for life- sustaining blood cleansing treatments. Caring for these patients
is one of Medicare's biggest costs- with spending per patient equaling 6 to
7 times the average. These patients are often elderly and afflicted with
other conditions, such as diabetes. Safe and competent treatment is
critical, because with patients this sick, there is little room for error.

Responsibility for overseeing the quality of ESRD care rests with the Health
Care Financing Administration (HCFA), the agency that administers Medicare.
HCFA's oversight takes two main forms. First, HCFA pays state agencies to
conduct unannounced inspections of dialysis facilities. These inspections,
commonly called surveys, are designed to determine whether dialysis
facilities are complying with quality- of- care standards. Second, HCFA pays
organizations called ESRD networks to conduct quality improvement activities
at the nation's 3,800 dialysis facilities and gather data on various
outcomes, such as patient mortality rates.

You asked us to evaluate how well HCFA's processes for monitoring the
quality of dialysis services are working. In response, we have completed a
report that is being released at this hearing. My statement today will
highlight some of the key points in that report.

In summary, the oversight of dialysis facilities has several weak links. As
a result, there is little assurance that facilities are routinely complying
with Medicare's quality of care standards, which protect patients' health
and safety. Our report highlights problems in three main areas. The first is
the dwindling frequency of on- site surveys. The number of facilities
surveyed has been dropping each year since 1993, even though the surveys
show that facilities are becoming increasingly likely to have one or more
serious deficiencies. The second problem is that HCFA's enforcement approach
does not provide strong incentives for dialysis facilities to stay in
compliance with Medicare requirements. HCFA's threat to terminate a facility
from Medicare is sufficient to bring nearly all noncompliant facilities into
compliance, but many soon slip out of compliance again. At present, they
face no penalty for this behavior. Third, state agencies and ESRD networks
often do not share information about complaints and known quality- of- care
problems at specific facilities. As a result, neither Medicare Quality of
Care: Oversight of

Kidney Dialysis Facilities Needs Improvement

Medicare Quality of Care: Oversight of Kidney Dialysis Facilities Needs
Improvement

Page 2 GAO/ T- HEHS- 00- 136

has a clear picture of what the other is finding and is unable to take
advantage of that information to target or otherwise modify its own
activities. Our report recommends changes to address all three problems.
HCFA has reviewed these recommendations and agrees with them.

To stay alive, a patient with ESRD must receive either a kidney transplant
or regular kidney dialysis treatments. Such treatments use a machine to do
the kidneys' job of removing impurities from the blood. If performed
improperly, such treatments can contaminate patients' blood, causing serious
complications and even death.

Kidney dialysis is a big business. The number of Medicare patients receiving
kidney dialysis has increased more than 20 times since coverage began in
1973. To accommodate this demand, more facilities have opened. Since 1993,
for example, the number of facilities has grown an average of 6 percent per
year. Medicare's payment for a dialysis treatment is a fixed rate per
treatment that has remained essentially unchanged for more than 15 years.
For facilities that aim to maximize profits, such fixed payment rates can
create incentives for efficiencies but also can be an incentive for
underservice. Inspection surveys and other monitoring plans are needed to
help ensure that cost- cutting does not lead to substandard services.

HCFA has established a set of 11 quality- of- care standards, commonly
called “conditions of participation,” that dialysis facilities
are required to meet. The conditions of participation are designed to ensure
that facilities safely provide quality care. They cover such areas as the
physical environment of the facility, the adequacy of patient care plans to
address medical needs, and the qualifications of the staff that provide
dialysis services. Inspection surveys are designed to determine whether
facilities meet these standards. They are conducted by state agencies,
typically health departments, under contract with HCFA.

HCFA also contracts with 18 ESRD networks that work with facilities to
improve the quality of dialysis services provided to Medicare beneficiaries.
These ESRD networks collect data on key clinical indicators and provide
individual facilities with regional performance data on these indicators, so
that each facility can compare its performance with other facilities.
Because networks are staffed and governed by dialysis providers and others
with expertise in dialysis, they also provide technical support to help
facilities improve their performance on clinical indicators. The networks
also conduct quality improvement projects dealing with specific aspects of
dialysis, handle complaints regarding patient care, and assist patients in
finding dialysis providers. Background

Medicare Quality of Care: Oversight of Kidney Dialysis Facilities Needs
Improvement

Page 3 GAO/ T- HEHS- 00- 136

When a dialysis facility is certified to treat Medicare patients, nearly a
decade may elapse before it receives another HCFA- funded survey. Two
factors are at work. First, the total number of HCFA- funded surveys has
declined substantially since 1993. Second, a greater portion of these
surveys must go for inspections of new facilities. The number of new
facilities entering the program has grown each year, and each new facility
must receive a survey before it can begin participating in Medicare. As a
result of these factors, while about 1 of every 2 existing facilities
received a recertification survey in 1993, only about 1 in 10 received a
recertification survey in 1999.

While the number of surveys is going down, the proportion of surveys that
find major problems is increasing. In 1993, 6 percent of facilities surveyed
were cited for not meeting a condition of participation; that figure rose to
15 percent in 1999. A condition- of- participation deficiency means that the
problems found are serious enough that, unless corrected, the facility's
participation in Medicare will be terminated by HCFA. Because so few
facilities actually receive a recertification survey in a given year and
surveys are not performed on a random basis, it is not clear whether this
increased percentage is indicative of all facilities. Nevertheless, it is
cause for concern.

The most common types of deficiencies included lack of adequate operational
rules and patient care policies to safeguard the health and safety of
patients, the failure to meet standards governing the reuse of dialyzers and
supplies, and lack of adequate patient care plans. Deficiencies such as
these can be life- threatening. For example, improper procedures for reusing
dialyzers can expose dialysis patients to microbial contamination and
dangerous levels of the germicide used to clean the dialyzers.

HCFA has recognized that the infrequency of on- site inspections may be
compromising patient care, and it has requested a nearly threefold increase
in the funding for dialysis facility surveys- from $2.2 million in fiscal
year 2000 to $6.3 million in 2001. Such an increase, according to HCFA, will
ensure that ESRD facilities are surveyed at least every 3 years. However,
the extent to which any increased on- site survey efforts will be effective
in improving quality also depends on how well HCFA systems (1) get
facilities to correct deficiencies and maintain compliance with standards,
and (2) make use of available information to target its on- site survey
resources. As I will discuss, both these areas need improvement. Most
Facilities Go

Years Between Surveys for Compliance With HCFA Standards

Medicare Quality of Care: Oversight of Kidney Dialysis Facilities Needs
Improvement

Page 4 GAO/ T- HEHS- 00- 136

HCFA relies on termination from Medicare- or, in reality, the threat of
termination- as its only tool for bringing deficient facilities into
compliance with standards. HCFA officials view this threat as an effective
method for achieving compliance. Before a facility can be terminated, it has
an opportunity, essentially a grace period, to correct its deficiencies or
develop acceptable plans of correction. Of the 481 facilities confronted
with at least one condition- of- participation deficiency since 1993, only
three have been terminated for not correcting it. 1

We found that the problem was not getting facilities to comply, but assuring
that they stay compliant. If a facility slips out of compliance again, it
can avoid a penalty by once again coming into compliance during the next
grace period. Because of the infrequency of recertification surveys, it is
difficult to determine how quickly and how often facilities fall out of
compliance. It also means that a facility that becomes deficient again could
remain so for a very long time. Analysis of HCFA's survey database suggests
that facilities do tend to have repeat deficiencies. Of those facilities
with four or more surveys, 38 percent that had deficiencies on their most
recent survey were also deficient in at least one of the same areas on their
prior survey. More than half of them had two or more repeat deficiencies.
For example, a Texas facility cycled in and out of compliance over a 9- year
period while developing numerous plans of correction. On many occasions the
deficiencies were so severe they put the health and safety of the facility's
227 patients in immediate jeopardy. In 1999, the deficiencies included not
providing care necessary to address patients' medical needs, not complying
with physician orders, and not following up on adverse incidents. It took
more than 4 months and two revisits from the state before the facility came
back into compliance. However, when the state conducted another survey 4
months later, the facility was again out of compliance. At the time of our
review, state agency officials were exploring enforcement options under
state licensing authority.

In the past, this Committee has examined a similar problem- nursing homes
that cycled in and out of compliance with quality standards. The Congress
has allowed HCFA a broad range of penalties to help encourage nursing homes
to maintain compliance with standards. For example, for nursing homes HCFA
has authority to levy monetary penalties and stop Medicare payments to
deficient nursing homes, but neither of these

1 An additional facility voluntarily withdrew from Medicare because of the
threat of termination. Enforcement Process

Gives Facilities Little Incentive to Sustain Compliance

Medicare Quality of Care: Oversight of Kidney Dialysis Facilities Needs
Improvement

Page 5 GAO/ T- HEHS- 00- 136

options can be applied to dialysis facilities. Effective options for dealing
with chronically deficient dialysis facilities do not exist.

As we have stated in our reports to you on nursing homes, monetary penalties
in particular create a strong incentive for nursing homes to remain free of
severe or repeated deficiencies. Today's report on ESRD suggests that the
Congress may wish to consider granting HCFA the same sanctioning authority
to dialysis facilities as it has for nursing homes.

HCFA does already have authority to impose monetary penalties for facilities
failing to maintain compliance with requirements in one aspect of quality of
care, but the agency has decided not to use this authority. Specifically,
HCFA can assess financial penalties on facilities that do not properly
reprocess and reuse dialyzers, the filters that clean a patient's blood.
Reprocessing dialyzers incorrectly can lead to such problems as exposing a
patient's blood to dangerous levels of the germicide used to clean the
dialyzers. The Congress authorized HCFA to impose penalties on such
facilities even if they subsequently corrected their deficient procedures,
which may provide a stronger incentive than the threat of termination to
remain compliant with the quality requirements.

So far, HCFA has not exercised this authority. HCFA officials believe doing
so would be difficult, because the agency could only recoup payments for
specific services affected by the lack of compliance. However, many of the
important reuse standards relate to processes and procedures that affect
almost all patients in a facility. Our state- level reviews showed instances
in which surveyors were able to identify specific days on which facilities
were out of compliance with requirements that affected all patients in a
facility. Application of the sanction appears feasible in these instances.
As a result, our report recommends that HCFA develop procedures to make use
of this authority.

Ideally, the facilities that are most likely to be deficient will be
targeted for more frequent inspections. We looked at what is done to
identify the dialysis facilities most in need of oversight. HCFA is taking
some steps to use outcome measures to identify facilities to survey. While
this approach has merit, it also has limitations that remain to be
addressed. We do see immediate opportunities for HCFA to facilitate the
sharing of information between state regulators who conduct the inspections
and ESRD networks that gather information for individual facilities to
better target surveys. Sharing information on complaints and known quality-
of- care problems could help target inspections where they are needed most.
Efforts and

Opportunities to Improve On- Site Inspections

Medicare Quality of Care: Oversight of Kidney Dialysis Facilities Needs
Improvement

Page 6 GAO/ T- HEHS- 00- 136

The approach HCFA is developing to assist in targeting surveys involves the
use of certain patient outcome measures reported to ESRD networks, Medicare
claims processing contractors, and the Centers for Disease Control and
Prevention. In May 2000, as part of a pilot project, HCFA created profiles
of these measures for facilities in seven states. The profiles were based on
information HCFA obtained from dialysis facilities on such indicators as the
degree to which dialysis treatments remove impurities from the blood and the
degree to which patients' anemia is controlled.

Because the facility profile project is in the process of being tested, we
did not comprehensively evaluate it. However, a major concern is whether the
outcome indicators being used are a strong predictor of noncompliance with
Medicare standards. In the states we visited, we found cases in which
facilities had above- average scores on these indicators but were found to
have serious deficiencies during surveys or complaint investigations. These
deficiencies included such things as lack of knowledge of basic medical and
dialysis practices like anemia management, infection control, and water
purity. Accordingly, we recommended that HCFA complete an evaluation of the
pilot project results before it encourages states to use outcome data as a
key factor in selecting facilities for on- site inspections.

More immediately, sharing ESRD networks information on complaints and known
quality- of- care problems at specific facilities with state agencies could
strengthen the oversight process. HCFA has not consistently encouraged this
coordination, and in some cases, through conflicting policy interpretations,
has actually impeded it.

By sharing information and knowledge, ESRD networks and state agencies can
create a more complete picture of ESRD facilities. The networks and agencies
have different information about facilities. ESRD networks have information
on the clinical aspects of the care in facilities and also may be more aware
of recent staffing and management changes, patient complaints, and the
results of quality improvement initiatives. In contrast, state survey
agencies may have more detailed information about facilities' systems, such
as those for infection control and reprocessing dialyzers.

HCFA's current policy allows networks to share facility- specific
information with state survey agencies to aid in the certification process.
However, HCFA regional offices that oversee network and survey agency
activities have not applied this policy consistently. As a result, the level
of coordination and information sharing varies dramatically across regions,
and in most cases little has taken place. Most HCFA regional offices
restrict networks from sharing facility- specific information and support

Medicare Quality of Care: Oversight of Kidney Dialysis Facilities Needs
Improvement

Page 7 GAO/ T- HEHS- 00- 136

ESRD networks when they deny requests by state survey agencies for such
information, saying that federal confidentiality restrictions prohibit this
sort of exchange. In contrast, with the knowledge of its HCFA regional
office, the ESRD network in Texas began providing facility- specific
information to the Texas Department of Health after the state passed a
licensure law for dialysis facilities in 1996. More recently, early this
year, some HCFA regional offices have begun efforts to facilitate the
communication and exchange of information, including facility- specific
performance information, between ESRD networks and state agencies. Because
we see increased communication as a way to help identify which facilities
are most likely to need attention, we recommended that HCFA encourage better
and more consistent cooperation and information sharing between ESRD
networks and state survey agencies.

In commenting on our report, HCFA officials agreed with our recommendations
and indicated that steps were being taken to implement them. For example,
HCFA stated that they would develop the necessary regulations and procedures
to implement sanctions for facilities that do not meet quality standards for
dialyzer re- use. HCFA also stated that steps were under way to clearly
delineate responsibilities of state survey agencies and ESRD networks that
would encourage cooperative information sharing to help identify poor-
performing facilities.

This concludes my statement. I will be happy to answer any questions you may
have.

For future contacts regarding this testimony, please contact Janet Heinrich
at (202) 512- 7119 or Frank Pasquier at (206) 287- 4861. Individuals who
made key contributions to this testimony included Margaret Buddeke, Timothy
Bushfield, Stanley Stenersen, and Mark Ulanowicz. GAO Contacts and

Acknowledgment

Page 8 GAO/ T- HEHS- 00- 136

Medicare Quality of Care: Oversight of Kidney Dialysis Facilities Needs
Improvement( GAO/ HEHS- 00- 114, June 23, 2000). Nursing Homes: Additional
Steps Needed to Strengthen Enforcement of Quality Standards( GAO/ HEHS- 99-
46, Mar. 18, 1999). Nursing Homes: Stronger Complaint and Enforcement
Practices Needed to Better Ensure Adequate Care( GAO/ T- HEHS- 99- 89).
Medicare Dialysis Patients: Widely Varying Lab Test Rates Suggest Need for
Greater HCFA Scrutiny( GAO/ HEHS- 97- 202, Sept. 26, 1997). Medicare: Data
Limitations Impede Measuring Quality of Care in Medicare ESRD Program( GAO/
HEHS- 97- 137R, July 11, 1997). Medicare: Enrollment Growth and Payment
Practices for Kidney Dialysis Services( GA0/ HEHS- 96- 33, Nov. 22, 1995).

(201070) Related GAO Products

Orders by Internet For information on how to access GAO reports on the
Internet, send an e- mail message with “info” in the body to:

Info@ www. gao. gov or visit GAO's World Wide Web home page at: http:// www.
gao. gov

Contact one: Web site: http:// www. gao. gov/ fraudnet/ fraudnet. htm E-
mail: fraudnet@ gao. gov 1- 800- 424- 5454 (automated answering system)
Ordering Information

To Report Fraud, Waste, and Abuse in Federal Programs
*** End of document. ***