oversight

Nursing Homes: Additional Steps Needed to Strengthen Enforcement of Federal Quality Standards

Published by the Government Accountability Office on 1999-03-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 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
      United States
GAO   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 sanctions1 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.


                   Overall, our work showed that while HCFA has taken steps to improve
Results in Brief   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.


                        Nursing homes play an essential role in our health care system. They care
Background              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   The states and the federal government share responsibility for oversight of
Federal and State       the quality of care in the nation’s 17,000 nursing homes. Oversight includes
Responsibility          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   As part of the Omnibus Budget Reconciliation Act of 1987 (OBRA 87), the
Regulatory Standards and    Congress changed the focus of standards that homes needed to meet to
Added Sanctions             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                                                                       In place        Added or
and Medicaid Program Standards                                                                         before          expanded
                                   Sanction          Description                                       OBRA 87         under OBRA 87
                                   Civil monetary Penalties ranging from $50 to $10,000                                X
                                   penalties      per day can be assessed.
                                   Temporary         The nursing home accepts a substitute                             X
                                   management        manager appointed by the state with
                                                     the authority to hire, terminate, and
                                                     reassign staff; obligate funds; and alter
                                                     facility procedures as appropriate.
                                   Denial of         Medicare and/or Medicaid payments                 X               X
                                   payments          can be denied for all covered residents
                                                     or for newly admitted residents.
                                   Directed          The nursing home is required to provide                           X
                                   in-service        training to staff on a specific issue
                                   training          identified as a problem in the survey.
                                   Directed plan     The facility would be required to take                            X
                                   of correction     action within specified time frames
                                                     according to a plan of correction
                                                     developed by HCFA, the state, or the
                                                     temporary manager.
                                   State             An on-site state monitor can be placed                            X
                                   monitoring        in the nursing home to help ensure that
                                                     the home achieves and maintains
                                                     compliance.
                                   Termination       The provider is no longer eligible to             X
                                                     receive Medicare and Medicaid
                                                     payments for beneficiaries residing in
                                                     the facility.

                                   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   OBRA 87 gave the HHS Secretary authority to specify criteria as to when and
Severity of Deficiencies   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                                                         Sanctiona
Severity category            Isolated         Pattern             Widespread          Required                       Optional
Actual or potential for      J                K                   L                   Group 3                        Group 1 or 2
death/serious injuryb
Other actual harm            G                H                   I                   Group 2                        Group 1c
Potential for more than      D                E                   F                   Group 1 for categories D Group 2 for categories D
minimal harm                                                                          and E; group 2 for       and E; group 1 for
                                                                                      category F               category F
Potential for minimal harm   A                B                   C                   None                           None
(substantial compliance)
                                         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          Under HCFA’s policies, most homes are given a grace period, usually 30 to
Noncompliant Homes a      60 days, to correct deficiencies identified in the standard or complaint
Grace Period              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.


                          National data on nursing home surveys for July 1995 to October 1998
Many Nursing Homes        showed that the proportion of homes with the most severe deficiencies
Had Deficiencies That     remained at uncomfortably high levels throughout this period. The total
Harmed Residents          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   Compliance with nursing home standards of care continued to be a
Had Deficiencies in the   problem during the entire 3-year period we examined. Comparing the
Highest Severity          number of cited deficiencies per noncompliant nursing home during this
                          period showed little overall change from the first, or base, survey (3.79) to
Categories




                          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 surveya                 Most recent surveyb
                                                                        Number of                        Number of
                                  HCFA severity category                  homes            Percent         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              100c
                                  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 citeda     Deficiency category                     Health effect of deficiency
2,809           Inadequate attention to prevent pressure         Without proper care, complications of pressure sores can occur and
                sores—the erosion of skin and underlying         include pain, infection, increased debilitation, and skin loss with
                tissue that result from pressure, friction, or   extensive destruction or damage to muscle and bone. The severity can
                lack of blood supply                             range from skin redness to large wounds that can expose skin tissue
                                                                 and bone.
1,857           Failure to provide supervision or                Without appropriate supervision and accident prevention devices, such
                assistance devices to prevent accidents          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                 The quality of care that residents receive is largely dependent on
                assessment of resident needs; poor               assessment of their needs and developing and following the plan of care
                development of care plans; failure to            developed to meet these needs. For example, resident assessments
                provide necessary care to attain the             should identify individual needs, such as urinary or bowel continence,
                highest level of well-beingb                     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       Residents who receive insufficient nutrition to maintain body weight may
                status                                           be more susceptible to increased rates of infection, skin breakdown,
                                                                 cognitive impairment, and premature mortality.
555             Failure to provide appropriate treatment for If left unattended, incontinence can lead to serious physical
                incontinent resident                         complications including infection, skin breakdown, and sepsis, as well
                                                             as emotional damage to resident dignity.
510             Failure to maintain or enhance resident’s        HCFA regulations protect and promote the right of each resident to a
                dignity                                          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          Lack of physical exercise can lead to a loss of function or range of
                services for residents with limited range of     motion in the fingers, wrists, elbows, shoulders, hips, knees, and ankles.
                motion, such as wheelchair- or bed-bound         A decline in a resident’s physical range of motion can result in arm and
                residents                                        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     Although most noncompliant homes eventually returned to compliance,
With Severe Deficiencies   many did not maintain this status. Among those homes cited for
Were Repeat Violators      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.


                           To determine the role sanctions play in bringing about a greater degree of
Sanctions Do Not           compliance, we focused on a sample of 74 homes that had been referred
Ensure Nursing             for sanctions.14 The case histories of these homes showed that sanctions
Homes Maintain             helped bring the homes back into temporary compliance but provided
                           little incentive to keep them from slipping back out of compliance. While
Compliance                 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    The 74 homes we reviewed had been referred by the states to HCFA for
Temporary Corrective       possible sanctions a total of 241 times—on average, about 3 times each. All
Action                     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                                                                             HCFA notices to           Sanctions that
                                        Sanction                                                  impose sanction         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   State in which
and Repeat Referrals for Sanctions     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   Sanctions have been unable to ensure continued compliance because
Are Implemented Hampers     several procedures for implementing sanctions can minimize their
Their Effectiveness         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     Civil monetary penalties have an advantage in encouraging homes to
Deterrent Effect of Civil   remain in compliance—they can be applied retroactively to the date of
Monetary Penalties          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   Under HCFA policy, HCFA can apply sanctions on an immediate basis (that
to Impose Immediate Sanctions   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   State in which
Referred to HCFA for Immediate        nursing home is
Sanction                              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         Another group of homes that can largely avoid the threat of immediate
Homes Receive a Clean Slate,          sanction even though they exhibited a pattern of recurring and serious
but Some Continue Old                 noncompliance are those that have been terminated from Medicare and
Behaviors                             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.


                           Recent actions taken or proposed by HCFA to improve nursing home
Despite Recent HCFA        oversight can help make sanctions more of a deterrent against continued
Proposals to Make          noncompliance, but on their own they are not enough to fully address the
Sanctions More             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
Effective, Additional      the Congress summarizing a 2-year study of nursing home regulation.20
Steps Are Needed           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     In July 1998, HHS announced several actions that HCFA would take to
Problem Areas Unresolved   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          Sanction-related problems
Initiatives                          identified                       Recent HCFA initiatives      GAO observations
                                     Civil monetary penalties are     HHS’ budget request for      The likelihood of obtaining
                                     hampered by a backlog of         fiscal year 2000 includes    additional funds is uncertain
                                     appeals                          additional funding to reduce
                                                                      the appeals backlog
                                     Policies do not require states   None                         Instances in which death
                                     to refer all cases where                                      resulted may not be
                                     deficiencies have resulted in                                 referred to HCFA
                                     a resident death to HCFA for
                                     sanction
                                     Procedures for readmitting       None                         Expanded definition of
                                     terminated homes limit the                                    “poorly performing facility”
                                     usefulness of terminating                                     does not include homes
                                     homes from the program                                        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               HCFA’s initiatives to focus more oversight on homes with serious and
Systems Have Limited                 repeat noncompliance are likely to encounter obstacles due to three
Ability to Support Key               weaknesses in HCFA management information: the inability to centrally
                                     track enforcement actions, the lack of needed data on the results of
HCFA Initiatives                     complaint investigations, and the inability to identify nursing homes under
                                     common ownership.

HCFA Unable to Track                 HCFA lacks a system that integrates federal and state enforcement
Enforcement Actions                  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       A second area in which HCFA lacks adequate information is the results of
Investigation Results   complaint surveys. HCFA does not require states to cite violations of federal
Inadequate              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   The third weakness with HCFA’s management information is the lack of
Homes Under Common        data about homes with common ownership that are having severe
Ownership                 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.


              Despite reforms to ensure that nursing homes maintain compliance with
Conclusions   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.


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


                           We obtained comments on our draft report from HCFA and the four states
Agency Comments            that we visited. HCFA, California, Michigan, and Pennsylvania commented
and Our Response           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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B-278679




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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B-278679




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




Page 27         GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Contents



Letter                                                                                                  1


Appendix I                                                                                             30
Scope and
Methodology
Appendix II                                                                                            33
Comments From the
Health Care Financing
Administration
Appendix III                                                                                           43
Comments From
California’s
Department of Health
Services
Appendix IV                                                                                            46
Comments From
Michigan’s Bureau of
Health Systems
Appendix V                                                                                             53
Comments From
Pennsylvania’s
Department of Health
Tables                  Table 1: Sanctions Available to Enforce Compliance With                         6
                          Medicare and Medicaid Program Standards
                        Table 2: HCFA’s Scope and Severity Grid for Medicare and                        8
                          Medicaid Compliance Deficiencies
                        Table 3: Base Period and Ending Period Survey Deficiencies                     10
                        Table 4: Most Frequently Cited Deficiencies That Caused Actual                 11
                          Harm, January 1997 to October 1998




                        Page 28        GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Contents




Table 5: Disposition of Referrals for the 74 Homes Reviewed                     13
Table 6: Examples of Nursing Homes With Patterns of Repeat                      14
  Deficiencies and Repeat Referrals for Sanctions
Table 7: Examples of Deficiencies Contributing to Resident                      18
  Deaths Not Referred to HCFA for Immediate Sanction
Table 8: Sanction-Related Problems That Remain and Recent                       20
  HCFA Initiatives
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


Page 29         GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
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.




             Page 30         GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
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.



Page 31          GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
                                     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                                                                     Number of        Number of
                                                                                               nursing            HCFA
                                                    Regional office                             homes       enforcement
                                     HCFA region    location           State visited          reviewed           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.




                                     Page 32          GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix II

Comments From the Health Care Financing
Administration




              Page 33   GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix II
Comments From the Health Care Financing
Administration




Page 34           GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix II
Comments From the Health Care Financing
Administration




Page 35           GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix II
Comments From the Health Care Financing
Administration




Page 36           GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix II
Comments From the Health Care Financing
Administration




Page 37           GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix II
Comments From the Health Care Financing
Administration




Page 38           GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix II
Comments From the Health Care Financing
Administration




Page 39           GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix II
Comments From the Health Care Financing
Administration




Page 40           GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix II
Comments From the Health Care Financing
Administration




Page 41           GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix II
Comments From the Health Care Financing
Administration




Page 42           GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix III

Comments From California’s Department of
Health Services




               Page 43   GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix III
Comments From California’s Department of
Health Services




Page 44           GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix III
Comments From California’s Department of
Health Services




Page 45           GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix IV

Comments From Michigan’s Bureau of
Health Systems




              Page 46   GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix IV
Comments From Michigan’s Bureau of
Health Systems




Page 47          GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix IV
Comments From Michigan’s Bureau of
Health Systems




Page 48          GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix IV
Comments From Michigan’s Bureau of
Health Systems




Page 49          GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix IV
Comments From Michigan’s Bureau of
Health Systems




Page 50          GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix IV
Comments From Michigan’s Bureau of
Health Systems




Page 51          GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix IV
Comments From Michigan’s Bureau of
Health Systems




Page 52          GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
Appendix V

Comments From Pennsylvania’s Department
of Health




             Page 53   GAO/HEHS-99-46 Enforcing Federal Quality Standards in Nursing Homes
           Appendix V
           Comments From Pennsylvania’s Department
           of Health




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