S. HRG. 106-485

HCFA REGIONAL OFFICES:INCONSISTENT, UNEVEN, UNFAIR

HEARINGBEFORE THE

SPECIAL COMMITTEE ON AGING'UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

WASHINGTON, DC

NOVEMBER 4, 1999

Serial No. 106-19Printed for the use of the Special Committee on- Agin

U.S. GOVERNMENT PRINTING OFFICE

62-902 ec WASHINGTON: 2000

For sale by the U.S. Government Printing OfficeSuperintendent of Documents, Congressional Sales Office. Washington, DC 20402

ISBN 0-16-060607-1

SPECIAL COMMITTEE ON AGING

CHARLES E. GRASSLEY, Iowa, ChairmanJAMES M. JEFFORDS, Vermont JOHN B. BREAUX, LouisianaLARRY CRAIG, Idaho HARRY REID, NevadaCONRAD BURNS, Montana HERB KOHL, WisconsinRICHARD SHELBY, Alabama RUSSELL D. FEINGOLD, WisconsinRICK SANTORUM, Pennsylvania RON WYDEN, OregonCHUCK HAGEL, Nebraska JACK REED, Rhode IslandSUSAN COLLINS, Maine RICHARD H. BRYAN, NevadaMIKE ENZI, Wyoming EVAN BAYH, IndianaTIM HUTCHINSON, Arkansas BLANCHE L. LINCOLN, ArkansasJIM BUNNING, Kentucky

THEODORE L. TorMAN, Staff DirectorMICHELLE PREJEAN, Minority Staff Director

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CONTENTS

PaOpening statement of Senator Charles E. Grassley ............................................. 1Statement of:.

Senator John Breaux .............................. 2Senator Larry E. Craig. ............................................................ 3Senator Ron Wyden .................. ......................................... 6Senator Jack Reed ............. ............................................... 7Senator Blanche Lincoln ................... ........................................ 7

Prepared statement of: .Senator Harry Reid .............. ............................................. 5Senator James Jeffords ................. .......................................... 5

PANEL I

William J. Scanlon, Director, Health Financing and Public Health Issues,U.S. General Accounting Office, Washington, DC ............................................. 8

Steve White, Raleigh, NC, on behalf of the Association of Health FacilitySurvey Agencies ........................................................... 67

.Michoel Hash, Deputv Aeiinistrator, Health Care Financing Administration,U.S. Department oHealth and Human Services, Washington, DC ............... 79

APPENDIX

Steve White's responses to Senator Craig's Questions ..................... .................... 115

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HCFA REGIONAL OFFICES: INCONSISTENT,UNEVEN, UNFAIR

THURSDAY, NOVEMBER 4, 1999

U.S. SENATE,SPECIAL COMMrrTEE ON AGING,

Washington, DC.The committee met, pursuant to notice, at 10:02 a.m., in room

SD-562, Dirksen Senate Office Building, Hon. Charles E. Grassley(chairman of the committee), presiding.

Present: Senators Grassley, Craig, Breaux, Wyden, Reed, Bryan,and Lincoln.

OPENING STATEMENT OF SENATOR CHARLES GRASSLEY,CHADRMAN

The CHAIRmAN. While we are giving our opening statements, Iwill ask the witnesses to come to the table so that even though wehave not introduced you yet, you will be there and we can savesome time for that.

I am glad to call the hearing to order. It is a pleasure to welcomemy colleagues and most importantly our witnesses, who are basicto every hearing, and those of you from the public at-large who areattending this hearing, some of whom I know are very regularattendees at our hearings.

For more than 2 years now, our committee has heard storiesfrom residents and their family members about poor treatment innursing homes. We in this committee, whether in this forum or inother forums, have worked to change the system. We have had aseries of hearings and forums to bring many of these issues to thepublic's attention. We have secured millions of additional dollarsfor the enforcement system. And in the final analysis as it dealswith nursing homes, we simply wanted to put an end to bedsores,malnutrition and dehydration.

The obvious question at this point is whether we have been suc-cessful. Can we assure the American public and particularly nurs-ing home residents and their families that there are better condi-tions? Can we ease the anxiety of those who must place their fam-ily members into nursing homes?

When it comes right down to answering that question, if we aregoing to be candid, we have to say: Not really; not yet. In a sense,think of our nursing home enforcement system as a diseased tree.The Health Care Financing Administration has cut down deadbranches, plucked off sickly leaves; the ailing tree trunk and itsdiseased roots are still intact, and anything that grows from the

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anemic base is tainted. So until we cut down the tree, we are goingto get nothing but bitter fruit.

The ailing tree trunk is the weak use of enforcement tools byHCFA. Eighteen months ago, the General Accounting Office docu-mented this problem, and the Clinton administration pledged to fixit. One specific fix was that the Federal Government should cutofffunding to States that do a bad job of inspecting their nursinghomes. Another fix was that the Federal Government should do abetter job of monitoring State inspections of nursing homes.

Who is responsible for seeing to it that the States inspect nursinghomes properly? Of course, it is the HCFA regional office adminis-trators. And over the past year, the General Accounting Office hastold us how poorly HCFA's regional offices have performed in over-sight of Medicare contractors, of Medicaid school-based programsand of Medicare+Choice programs. Now the GAO is telling us theregional office problem spills over into State agency evaluations.These evaluations are inconsistent, uneven, and unfair. They donot tell the truth about how a State survey program works or doesnot work.

Today the General Accounting Office tells us that HCFA hasnever terminated a contract with a State inspection agency andthat it has reduced the State inspection funding only once.

Part of the reason for these minimal sanctions is HCFA's lack ofan adequate way of knowing whether States are fulfilling their du-ties or not. Obviously, a punishment must fit the crime, and if theregional offices cannot evaluate the States, HCFA cannot punishthem for failures.

Today I hope we will hear how HCFA plans to address theseproblems. I hope to hear about a swift and sound plan of correction.Like many Americans, I do not understand why the greatest Na-tion on the face of the Earth cannot make sure that nursing homesare cleaned up once and for all.

Our first witness is Dr. William Scanlon, Director of the HealthFinancing and Public Health Issues area of the U.S. General Ac-counting Office. He has directed the GAO's analysis of nursinghomes at our committee's request.

Our second witness is Steve White, chief of licensure and certifi-cation in North Carolina. He represents the Association of HealthFacility Survey Agencies in his capacity as that organization's im-mediate past president.

We also welcome Mr. Michael Hash, Deputy Administrator ofHCFA, who will be our final panelist. I want to thank Mr. Hashfor being here today. Members of this committee were quite dis-turbed in March when HCFA did not attend our hearing to hearwhat citizens had to say about the inadequacies of HCFA's com-plaint investigation process. So we do appreciate your presence aspart of this panel and look forward to HCFA's participation in thecommittee's future events.

Senator Breaux.

STATEMENT OF SENATOR JOHN BREAUXSenator BREAUX. Thank you very much, Mr. Chairman.I think you have adequately described what we are attempting

to do this morning and what we want to hear from GAO and from

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our State representatives, as well as from HCFA. Having HCFA,the Government representatives, testify last is not intended toslight the Federal agency. I remember when I was in the Houseand chaired a committee back in the old days when Democratswere in charge, I used to always ask the administrative witnessesto come to the hearings and appear last so they could hear the tes-timony presented by others and have the opportunity to completelyrespond. I thought that that worked very well, and I am sure itwill this morning as well.

I think that as this committee has continued to supervise theMedicare program and look at Medicaid and how the money isbeing spent, it becomes clearer and clearer to me that it is goingto be really necessary to bring about wholesale and true reform ofthe Medicare program. It has just gotten so complicated, and thisis one example of why it almost becomes physically impossible tocoordinate an agency of this size and do it very well.

Medicare has 135,000 pages of regulations, about three timesmore than the Internal Revenue Code, and we all know how com-plicated that is. So what we are finding in all of these areas, Ithink, is a very large bureaucracy, which we have created, whichis attempting to do the job that Congress has said it has to do butfinding some real serious problems in being able to achieve thatgoal. And I think that what we have here is an example of tlha,and structural reform may not be what we need to do in order tomake it run more efficiently and effectively for the people whom itis designed to serve.

I look forward to the witnesses' presentations.Thank you, Mr. Chairman.The CHAIRMAN. Thank you.I will call on Senator Craig and then Senator Wyden and then

Senator Reed.

STATEMENT OF SENATOR LARRY CRAIG

Senator CRAIG. Mr. Chairman, thank you very much for holdingthis hearing this morning.

It is also fun to join with the ranking member, Senator Breaux,who is now the star of the seniors tennis circuit.

Senator BREAUX. I am just a senior.Senator CRAIG. Just a senior. Well, I think that any time anyone

gets his name in a national newspaper for some kind of athleticprowess, that is stardom.

Anyway, Mr. Chairman, I do want to thank you for holding thishearing to search out what appear to be discrepancies between theHealth Care Financing Administration's regional offices and theirapplication of those policies.

I would also like to thank each of our witnesses for taking thetime to be before this committee this morning to testify.

Like probably everyone else, I support effective efforts to overseeand improve the quality of care of our elderly and what they arereceiving through our nursing homes. However, I am a bit con-cerned about HCFA's implementation of nursing home initiatives,particularly the evaluation of State agency performance and pen-alties associated with HCFA's enforcement of survey activities.

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After speaking with several folks in my home State of Idaho inpreparation for this hearing, including the executive director of theIdaho Health Care Association which represents 78 of the 87skilled nursing facilities, I am concerned that the survey process isinconsistent and is being enforced differently amongst the variousHCFA regions and States. According to OSCAR data, Idaho, Or-egon, and Washington, all in Region 10, are consistently worse interms of survey statistics than the rest of the Nation. I must tellyou, Mr. Chairman, that I do not have a trained eye, but I visitfive, six, seven, nursing homes a year in my State concerned aboutquality of health care delivery, and I must tell you that what I see,at least from a layman's point of view, appears to be quality carebeing delivered.

The chief of the Bureau of Facility Standards in Idaho repeatedlytells me that he would be glad to hold any of our facilities in Idahoup against any facility in any other State; yet Idaho's survey num-bers would suggest that Idaho's skilled nursing facilities are amongthe worst in the Nation.

I understand that HCFA has several different types of surveysin place, including the Federal monitoring survey, the comparativesurvey, and the observational surveys. But if the central office doesnot require consistent standards of the evaluations from region toregion or State to State, I question the credibility of these efforts.

How is HCFA able to accurately assess the State agencies' per-formance without good comparative data-something as simple asthe number of hours spent on any particular survey or the ratio ofState supervisors to one Federal supervisor may differ from regionto region.

Again, I would like to thank you, Mr. Chairman, and our panelof witnesses today. I believe that consistency among the differentregions and States is critical to maintaining, or in this case to im-proving, our health care delivery system.

Thank you.[The prepared statement of Senator Craig along with prepared

statements of Senator Reid and Jeffords follows:]

PREPARED STATEMENT OF SENATOR CRAIG

I'd like to thank the Chairman for holding this hearing today on the discrepancybetween the Health Care Financing Administration's THFA's) regional offices andtheir application of HCFA's policies. I would also like to thank each of the witnessesfor taking the time to appear before the committee to testify.

Like probably everyone else here, I support effective efforts to oversee and im-prove the quality of care our elderly are receiving in the Nation's nursing homes.However, I am a bit concerned about HCFA's implementation of nursing home ini-tiatives, particularly the evaluation of state agency performance and penalties asso-ciated with HCFA's enforcement of survey activities.

After speaking with several folks in my home State of Idaho, including the execu-tive director of the Idaho Health Care Association, which represents 78 of Idaho's87 skilled nursing facilities, I am concerned that the survey process in inconsistentand is being enforced differently among the various HCFA Regions and States. Ac-cording to OSCAR data, Idaho, Oregon and Washington (all from Region 10) areconsistently worse, in terms of survey statistics, than the rest of the nation. How-ever, the Chef of the Bureau of Facility Standards in Idaho repeatedly says thathe would gladly hold any facility in Idaho up against any facility in any other state.Yet, Idaho's survey numbers would suggest that Idaho's Skilled Nursig Facilitiesare among the worst in the Nation.

I understand that HCFA has several different types of surveys in place, includingthe Federal monitoring survey, the comparative survey, and the observational sur-

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veys. But if the central office does not require consistent standards of the evalua-tions from region to region or state to state, I question the credibility of these ef-forts. How is HCFA able to accurately assess the state agency's performance withoutgood comparative data? Something as simple as the number of hours spent on anyparticular survey or the ratio of state surveyors to one federal surveyor may differfrom region to region.

Again I would lke to thank the Chairman and our panel of witnesses here today.I believe that consistency among the different regions and states is crucial to main-taining, or in this case improving, our healthcare system.

Thank you.

PREPARED STATEMENT OF SENATOR HARRY REID

Good morning Mr. Chairman, members of the Committee, and guests. I ampleased that the Committee is continuing to examine the issues surrounding thequality of care provided to nursing home residents across the countries.

As a member of this Committee, I have participated in a number of hearings thathave highlighted the poor quality of care and other problems that exist in manynursing homes. It is hard to forget the disturbing testimony we have heard fromthe families, nurses, doctors, and nursing home aides who witnessed nursing homeabuse and neglect first-hand. An important lesson we have learned from these hear-ings is that there are significant weaknesses in the Federal and State programscharged with ensuring quality of care for nursing home residents.

As part of the Administration's strategy to ensure that all nursing home residentsare treated with dignity and compassion, the Health Care Financing Administration(HCFA) has implemented a new Federal monitoring system to oversee the statemonitoring of nursing home quality of care. I am pleased that we are taking a closerlook at the impiementatiou of this particular bieuse a Stat, nsil-lance and enforcement system is crucial to ensuring the health and wel-being ofthe nursing home residents in our states.

While I am pleased that HCFA is committed to improving enforcement in stateswith weak inspection systems, I am concerned that HCFA is not ap plying its over-sight methods consistently across all of its regions. In my home State of Nevada,there is concern that our facilities are evaluated according to much stricter stand-ards than nursing homes across the country. While I cannot emphasize enough theimportance of a credible and rigorous survey process, it is also important that thesurvey process is fair and consistent across the country. I understand that the GAOreport addresses this issue, and I look forward to hearing from HCFA today to learnwhat steps it is taking to improve this situation.

As the largest single payer of nursing home care, the Federal Government ischarged with ensuring that our oldest, most vulnerable population receives quaJitycare, and that our standards are strictly enforced. If we turn a blind eye to the sen-ous lack of enforcement of nursing home standards in this country, we are no betterthan the facilities that condone negligent and abusive practices in their nursinghomes. I hope that today's hearing will help HCFA to id~entify, some of the troublespots in this part of the nursing home initiative so it may continue its efforts toensure that nursing homes meet quality standard.

PREPARED STATEMENT OF SENATOR JEFFORDS

I applaud the Chair for convening today's hearing on another part of the storyimportant to our national effort to deliver quality nursing home care to frail anddisabled adults. The Chair's strong leadership has been critical in provi the con-sistent, even, and fair examination of what needs improving to actualize the prom-ises of the 1987 Federal Nursing Home Reform Act, commonly known as OBRA '87.

The Chair is not alone in his concern for quality nursing home care delivered byan effective regulatory system. In a recent survey conducted by Vermont's Depart-ment of Aging and Disabilities, 60 percent of Vermonters have concerns that a nurs-ing home stay is in their future. Like all Vermonters, I want and need the Stateand Federal Goverments to maximize the health, safety, welfare, and rights protec-tions called for in State and Federal standards.

Today, we learned from the General Accounting Office, the Health Care FinancingAdministration (HCFA), and the Association of State Licensing and Survey Agenciesthat much needs to be done. HCFA's current data and oversight systems do notallow the Agency a reasonable ability either to monitor or to evaluate the actionsof their own regional offices or of their contracted State agencies which conductthousands of inspections. While the real-life outcome of such lapses in Government

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oversight may be buried in jargon like the 'FOSS" survey, the Federal Government'sresponsibility is to keep promises of quality health care which were made to the vet-erans of World War H and their children.

I take very seriously the responsibilities of Government to protect our citizens liv-ing in the Nation's 17,000 nursing homes. It is vitally important that Governmentbe able to detect and remedy poor long-term care services with highly qualified,trained State and Federal inspectors carrying out tested national protocols.

I call upon all the witnesses at today's hearing and upon the advocates and pro-viders who serve nursing home residents to work constructively to gather and evalu-ate all the data necessary to evaluate the quality of nursing home care. And it isequally important that advocates, providers, and governmental agencies work hard-er to assure that the care and services provided in all long-term care facilities honorour families, friends, and communities. We and they desire nothing less.

The CHAIRMAN. Thank you. I think you also ought to be ap-plauded for visiting as many nursing homes as you do as well.

Senator Wyden.

STATEMENT OF SENATOR RON WYDENSenator WYDEN. Thank you, Mr. Chairman.I too appreciate your holding this hearing. Back when I was di-

rector of the Gray Panthers at home in Oregon, I was the publicmember on the Board of Nursing Home Examiners, and we had alot of these problems then. It is very clear, as the GAO reports tous today, that the problems are getting worse.

Nursing home surveys are now a crazy quilt of inconsistent prac-tices with respect to the number of surveyors involved and the timethat is spent on these surveys. To me, the message the GAO hasfurnished the committee today is that there are no practical toolsfor measuring the quality of nursing home care in this country.That is what we have got to address, and one area that I am par-ticularly interested in examining, Mr. Chairman-and I am verypleased that you and Senator Breaux deal with all of these matterson a bipartisan basis-is trying to put in place a system that al-lows us to devote a special focus on those facilities that are causingthe bulk of the problems.

It is very clear-and this is frankly true in any field, whether itis law or accounting or the U.S. Congress or any other institution-that you have a fraction of the people in the institutions that youhave to devote special attention to. I would hope that we could lookat creating what amounts to a watch list for facilities that, on anongoing basis, are showing that they are not complying with thequality standards that we need. If you have a watch list so thatyou can focus on the 5 percent or whatever the number is and en-sure that they get the rigorous kind of treatment that is necessaryto monitor for quality care, it seems to me you send a message allthrough the field that you are going to do what is necessary to pro-mote good quality, and at the same time, you are not going to sayto the majority of facilities-and Senator Craig is absolutely right,there are a lot of facilities that give good care; we see them in theWest-we ought to create a system that allows us to put the focusof our resources in terms of monitoring and enforcement on thosefacilities that are clearly not performing in terms of quality. I hopethat in the days ahead, we can talk in this committee about theidea of creating a watch list so that on an ongoing basis, those fa-cilities that are not performing get special scrutiny, and there is an

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effort to make sure that they are in compliance, and also use theprivilege to offer care with reimbursement from the Government.

So I look forward to working with the committee and to hearingfrom our witnesses.

The CHAIRMAN. Thank you, Senator Wyden.Senator Reed.

STATEMENT OF SENATOR JACK REED

Senator REED. Thank you, Mr. Chairman, and I thank you verymuch for holding this hearing. I think it is very important to tryto assess the relationship between the HCFA central office and theregional offices.

I have heard many of the same complaints that my colleagueshave heard about the unfair application of standards, the vari-ations between States and regions, the fact that within the indus-try, there are certain standards applied in one place that are ap-plied differently in other places. We all believe in standards andthe need for them, but we equally believe that these standardsshould be as uniform as possible, as fair as possible, and as effec-tive and efficient as possible.

I believe that this hearing and the gentlemen who are here withus today can help us better understand what is going on and betterensure that we nave uniform a-d effective standards for the nurs-ing home industry.

I thank you, Mr. Chairman.The CHAIRMAN. Thank you, Senator Reed.Now, Senator Lincoln.

STATEMENT OF SENATOR BLANCHE L. LINCOLN

Senator LINcoLN. Thank you, Mr. Chairman, and as always, weappreciate your leadership and Senator Breaux' leadership on thisissue.

We would like to welcome you gentlemen to our committee. I be-lieve that today, we are building on several other hearings thatthis committee has held to assess the ability of HCFA to monitorand improve the quality of care in nursing homes as part of theNursing Home Initiative.

I am very interested in hearing from our witnesses about howHCFA's central office coordinates with its regional offices in over-seeing State surveys and applying penalties to States that do notcomply with Federal regulations.

I do not think that the purpose of this hearing is to point fingersor to criticize; rather, I think my colleagues and I hope to identifythe barriers within HCFA that prevent coordination and oversightat the regional and State levels, hopefully, encouraging the righthand to speak to the left hand and know what each other aredoing.

We also need to know what obstacles State survey agencies facein order to conduct surveillance and enforcement activities. Theonly way we can help in solving those problems is to understandwhat it is that you are faced with.

The ultimate goal of all of our efforts is to ensure that our sen-iors are safe and well-cared for in our skilled nursing facilities. AsChairman Grassley said in a previous hearing on nursing home

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oversight, over 90 percent of all nursing homes are doing a fine job.It is that 5 to 9 percent of the bad apples that we really want toweed out, and I think that is what this hearing is about.

In closing, this is not just a HCFA problem. It is not just a Statesurvey agency problem. I think we all must work together to im-prove the present oversight system. And based on today's testimonyand questions, I think we can all make recommendations for im-provement and work together to find those solutions. Our seniorscertainly deserve nothing less in this country.

Thank you, Mr. Chairman, for your leadership. We appreciate itand look forward to the testimony.

The CHAIRMAN. And I thank so many of my colleagues for turn-ing out for this hearing, and not just for this hearing, but most ofthe time, we have very good attendance, and as Chairman, I reallyappreciate that, but more importantly, I think it shows the concernof Members of the Senate about the conditions in nursing homesand our desire to do something about it.

I have already introduced the witnesses, so we will start with Dr.Scanlon, then Mr. White, and then Administrator Hash, please.STATEMENT OF WILLIAM J. SCANLON, DIRECTOR, HEALTH FI-

NANCING AND PUBLIC HEALTH ISSUES, U.S. GENERAL AC-COUNTING OFFICE, WASHINGTON, DCMr. SCANLON. Thank you very much, Mr. Chairman and Mem-

bers of the Committee. I am very happy to be here today to discussHCFA's regional offices and their ability to oversee the State agen-cies that the Federal Government contracts with to ensure thatnursing homes comply with Federal quality standards.

Today we are releasing a report that we prepared at your requestthat evaluates HCFA's programs for the oversight of these agen-cies.

The hearings that this committee has had, as you indicated, Mr.Chairman, over the past 24 months have highlighted both the dis-turbingly frequent instances of unacceptably poor care that manynursing home residents receive, as well as weaknesses in the Fed-eral and State programs to detect, correct, and prevent such care.

This attention has helped to generate a renewed commitment byHCFA, including a broad range of about 30 initiatives that it hasundertaken, as well as actions by many States to improve theirprograms to ensure that nursing homes meet quality standards.

This summer, we testified that the initial implementation ofsome of HCFA's initiatives has been uneven across the country,and successful implementation will require continued commitmenton the part of the Congress, HCFA and the States.

In the report being released today, we found that HCFA's mecha-nisms for assessing State agency survey performance are limited intheir scope and effectiveness are and not being applied consistentlyacross each of HCFA's 10 regional offices. As a result, HCFA doesnot have sufficient and consistent data to evaluate State agenciesor to measure the success of its other initiatives to assure nursinghome quality.

Presently, there is a wide range in the frequency with whichStates identify serious deficiencies in nursing home care, as Sen-ator Craig has indicated. HCFA cannot be certain, however, wheth-

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er States with lower rates of deficiencies have better-quality homesor are just failing to identify deficiencies that harm nursing homeresidents.

In our view, this uncertainty results in part because HCFAmakes negligible use of independent inspections, known as com-parative surveys, that could provide information on whether Statesappropriately cite deficiencies. HCFA only conducted between oneand three comparative surveys per State over the last year. Never-theless, more than two-thirds of these surveys found deficienciesthat were more serious than those found by the State surveyorsthat typically had been in the home one or 2 months earlier.

Rather than making extensive use of comparative surveys, HCFAinstead conducts 90 percent of its surveys as observational surveysin which regional office surveyors accompany and observe Statesurveyors as they conduct all or a portion of a nursing home sur-vey. Observational surveys may help HCFA- identify State agencytraining needs, but several problems inhibit their ability to providea clear and accurate picture of State survey performance. Perhapsmost importantly, HCFA's presence during the survey may makeState surveyors more attentive to their tasks than they would beif they were not being observed. It is a well-established fact thatindividuals are very likely to improve their performance or behav-ior when they are aware they are being sttudied.

To assure that State agencies are fulfilling other aspects of theirquality assurance activities, HCFA relies on State-operated qualityimprovement programs, largely based on self-reported performancemeasures. As an oversight program, its effectiveness is limited be-cause HCFA does not validate the information included in theState self-assessments. As a result, HCFA has no assurances thatStates identify or correct all serious problems. For example, in ourprior work, we found that some States were not promptly reviewingcomplaints filed against nursing homes, but had not identified thisproblem to HOFA as required by the quality improvement program.

These limitations of HCFA's oversight mechanisms are com-pounded by inconsistencies in how the mechanisms are applied bythe 10 regional offices. For example, the regions vary in how theyselect which nursing home surveys to review and the sample ofresidents in those reviews. Regions also commit differing amountsof time to observational surveys, ranging on average from 27 to 71hours per survey, raising questions about whether the level of ef-fort in some regions is sufficient. Our testimony this summer alsohighlighted that regions varied widely in how they monitored Stateimplementation of HCFA's nursing home initiatives.

You asked us, Mr. Chairman, to examine whether or not HCFA'sorganizational structure may play a role in this inconsistencyacross regions, and your staff has prepared a chart of HCFA's orga-nizational structure, on my left. I would note that HCFA relies onits 122 surveyors in the 10 regional offices to carry out the over-sight responsibilities that I have been discussing. While HCFA'sCenter for Medicaid and State Operations is the central office divi-sion responsible for developing guidance to the regions and theStates, the regional office staff is responsible for nursing homeoversight, and they are not directly accountable to the Center.Rather, they report to a regional administrator who, through the

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four consortia of regions, reports directly to the HCFA Adminis-trator.

Setting appropriate priorities, providing guidance on policies, andassuring effective implementation involves extensive coordinationand cooperation between the Center and the regions. Such an ar-rangement can work, but it relies on there being excellent coordina-tion and cooperation between the Center and each region as wellas a commonality of purpose. When disagreements arise that can-not be settled informally, they can only be resolved at the level ofthe HCFA Administrator.

Apart from the issues related to whether HCFA identifies inad-equate State agency performance is the question of what HCFA cando to correct poor performance. HCFA currently does not have anadequate array of effective remedies or sanctions to ensure correc-tion. Generally, HCFA provides training to surveyors or surveyteams, or requires that States submit a plan of correction. If theseremedies fail, HCFA has two sanctions available-reducing aState's survey and certification funding, or terminating its surveycontract. Because of the extreme nature of both, it would be rareto invoke either. Indeed, HCFA has only reduced State funding onone occasion and has never terminated a State contract. Further-more, HCFA's current oversight structure does not effectively pro-vide the evidence on State performance that the agency would needto justify applying such sanctions.

Let me conclude by noting that in our view, assuring that theState survey agencies are fulfilling their responsibilities is essen-tial if the efforts that this Committee has triggered to eliminate thetoo frequent instances of poor nursing home care are to succeed.Measuring State agency performance is a key first step in knowingwhere to concentrate assistance and influence to improve perform-ance. Significantly increasing the use of comparative surveys wouldhelp to provide the information needed to direct such efforts.

Consistency among the regions in the oversight of State agenciesis important in order to further facilitate the targeting of efforts toimprove performance. Consistency among the regions is also essen-tial, as we discussed in June, for the implementation of the fullarray of initiatives that HCFA has undertaken. The promise ofthose initiatives will not be realized if they are not fully deployedin all States.

Finally, while recognizing the difficulty of the task, we would en-courage HCFA to continue to work to develop additional remediesor sanctions for State agencies whose performance is not adequateto protect their residents from poor nursing home care.

Mr. Chairman, this concludes my statement. I would be happyto answer any questions that you or members of the Committeemay have.

The CHAnMN. Thank you very much.[The prepared statement of Mr. Scanlon follows:]

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United States General Accounting Office

TestimonyBefore the Special Committee on Aging, U.S. Senate

For Release on DeliveryExpected at 10:00 am.Thursday, November 4, 1999 NURSING HOMES

HCFA ShouldStrengthen Its Oversightof State Agencies toBetter Ensure QualityCareStatement of Wiaiam j. hcanion, DirectorHealth FInancing and Pubhc Health IssuesHealth, Education, and Human Services Division

£ GAOA .111t * b lob *P wGAO/r-HEIIHS-OO27

GAO

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,Nlr. Chairman and Members of the Committee:

We appreciate the opportunity to participate in the Committee's hearing focusing onHCFA's regional offices and their ability to oversee state agencies they contract with toensure that nursing homes comply with federal quality standards. Today, I will discussour study of HCFA's implementation of two of its nursing home initiatives: onerequiring enhanced federal review of state agencies' survey process. and the otheraddressing remedies and sanctions to be applied when inadequate state performance isidentified.

The 1.6 million elderly and disabled residents of the nation's more than 17,000 nursinghomes are among the sickest and most vulnerable populations in the nation, often needingextensive assistance with basic activities of daily living such as dressing, grooming,feeding, and using the bathroom. In 1999, these nursing homes are expected to receivenearly $39 billion in federal payments from the Medicare and Medicaid programs. Tohelp ensure that they provide proper care to their residents, state agencies, under contractwith the federal government, perform detailed inspections at each of the homes. Thepurpose of these state agency surveys is to ensure that nursing homes comply with federalquality standards and that inadequate resident care is identified and conrected. HCFA, inturn, is statutorily required to make sure that each state agency has an effective surveyprocess in place.

The series of hearings this Committee has held over the past 15 months has highlightedboth the disturbingly high frequency of unacceptably poor care that many nursing homeresidents receive as well as weaknesses in federal and state programs charged withensuring quality care. This has helped to generate a renewed commitment by HCFA andmany states to improve their programs to ensure that nursing homes meet qualitystandards, including a broad range of about 30 initiatives that HCFA has undertaken tostrengthen federal standards, oversight, and enforcement for nursing homes. In reportsissued at the Committee's request since July 1998, we have documented the severity ofcare problems nationwide and inadequacies in the survey and enforcement process thattoo often leave these problems unidentified or uncorrected, and have maderecommendations to strengthen HCFA's oversight of nursing homes.' This summer, wetestified that the initial implementation of some of HCFA's initiatives has been unevenamong the states and will require continued commitment by the Congress, HCFA, andthe states.2

The focus of today's hearing is HCFA regional offices' oversight of state agencies thatperform the surveys of nursing homes, addressing issues fundamental to ensuring thathomes meet federal care standards protecting residents and that the states adhere to thenew, stronger federal policies resulting from HCFA's nursing home initiatives. The

IA list of related GAO products is at the end of this statement.

2Nursine Homes: HCFA Initiatives to Improve Care Are Under Way but Will Require

Continued Commitment (GAO/T-HEHS-99-155, June 30, 1999).

GAOrr-HEHS4XO-27

13

information we are presenting here discusses HCFA's progress in implementing two

important initiatives to improve its state oversight. In a report we are releasing today. we

provide more detailed information.3

In brief. we found that HCFA's mechanisms for assessing state agency survey

performance are limited in their scope and effectiveness and are not being applied

consistently across each of HCFA's 10 regional offices. As a result. HCFA does not

have sufficient, consistent, and reliable data to evaluate state agencies or to measure the

success of its other nursing home initiatives. Given the wide range in the frequencies

with which states identify serious deficiencies, HCFA cannot be certain whether states

with lower rates of deficiencies have better quality homes or are failing to identify

deficiencies that harm nursing home residents.

This uncertainty results, in part, because HCFA makes negligible use of independent

inspections. known as comparative surveys, that could surface information about whether

states appropriately cite deficiencies. Generally, only one to two comparative surveys per

state were conducted in the more than 17,000 nursing homes over the last year.

Nevertheless, two-thirds of these surveys found deficiencies that were more serious than

those found by state surveyors during their reviews conducted typically I or 2 months

earlier. About 90 percent of the inspections HCFA conducts nationwide are, instead,

observational surveys. These surveys, in which HCFA surveyors accompany state surveyteams, are useful in helping HCFA to provide training to state surveyors, but are limited

as a method for evaluating state agencies' performance. HCFA's presence during these

surveys is likely to make state surveyors more attentive to their survey tasks than they

would be if they were not being observed-the Hawthorne effect. Beyond these surveys,

HCFA also relies on a quality improvement program that is qIrg- y hb on sasses' self-reported performance measures, which do not accurately or completely reflect problemsin the state's performance.

These limitations in HCFA's oversight methods are compounded by inconsistencies in

how the methods are applied by its regions. For example, the regions vary in how they

select nursing home surveys to review and how they choose samples of residents to

review. Regions also commit differing amounts of time to conduct observational

surveys, ranging on average from 27 to 71 hours, which raises questions about whether

the level of effort some regions dedicate to observational surveys is sufficient to

thoroughly review state surveyors' performance.

Furthermore, for state agencies whose performance has been found inadequate, HCFA

has not developed a sufficient array of alternatives to encourage agencies to correct

serious deficiencies in their processes. Our report includes several recommendations to

assist the HCFA Administrator in improving the rigor, consistency, and effectiveness of

HCFA's programs to oversee state agencies responsible for certifying that nursing homes

meet federal standards for participation in Medicare and Medicaid.

3See Nursing Home Care: Enhanced HCFA Oversisht of State Programs Would Better

Ensure Quality (GAO/HEHS4-0-6, Nov. 4, 1999).

GAOtr-HEHS40-272

14

BACKGROUND

On the basis of statutory requirements, HCFA defines standards that nursing homes mustmeet to participate in the Medicare and Medicaid programs and contracts with states tocertify that homes meet these standards through annual inspections and other types ofreviews. including complaint investigations. The annual inspection, which must beconducted no less than every 15 months at each home, entails a team of state surveyorsspending several days on-site conducting a broad review to determine whether care andservices meet the assessed needs of residents. HCFA has established specific protocolsfor state surveyors to use in conducting these comprehensive reviews.

HCFA is statutorily required to establish an oversight program for evaluating theadequacy and effectiveness of each state's nursing home survey process, relying on its122 surveyors in 10 regional offices to carry out these oversight responsibilities. WhileHCFA's Center for Medicaid and State Operations is the central HCFA divisionresponsible for developing guidance to states embodying national polices related tonursing home oversight and enforcement, the regional officials who oversee the statesurvey agencies are not formally subordinated to this Center. Rather, they report to aRegional Administrator. The 10 regions are further organized into 4 regional consortia,and both the regional consortia heads and the Director of the Center for Medicaid andState Operations report directly to HCFA's Administrator.4 In addition to developingoverall policy guidance, the Center's staff carry out their day-to-day role of coordinatingregional office oversight of the states through numerous less formal interactions withregional officials, including meetings and conference calls between managers and stafffrom the Center and the regions. If a disagreement between the Center and a regionaloffice cannot be informally settled at a lower level, it can only be resolved at the level ofthe HCFA Administrator.

The Omnibus Budget Reconciliation Act of 1987 requires HCFA's surveyors to conductfederal monitoring surveys in at least 5 percent of the nursing homes in each state eachyear within 2 months of the state's completion of its survey. HCFA uses a mix of twotypes of on-site reviews to fulfill this 5-percent mandate: (I) comparative surveys, inwhich a team of federal surveyors conducts a complete, independent survey of a nursinghome after the state has finished its survey and compares the state's survey results withits own, and (2) observational surveys, in which federal surveyors accompany andobserve the state surveyors as they perform a variety of survey tasks, give state surveyorsverbal feedback, and later provide a written rating of the state surveyors' performance tostate managers. HCFA introduced revisions in its federal monitoring program in October1998 that require a minimum of I to 3 comparative surveys in each state each year andthat also developed a standard set of procedures all regions are expected to follow in

'The regional consortia play an important role in administering HCFA policies in otherHCFA functions, such as oversight of the Peer Review Organization program andMedicare+Choice plans. In these areas, most functions have been consolidated into oneof the two or three regional offices in the consortium. However, each of the 10 regionaloffices carries out the full range of functions relating to oversight of state agencies'implementation of HCFA's guidance relating to nursing homes.

3 GAOfr-HEHS4X-O27

15

conducting an observational survey. In addition to the comparative and observationalsurveys, HCFA has other sources of information available for evaluating state agencyperformance, including a quality improvement program that requires state agencies toestablish performance measures and develop action plans addressing deficiencies in thestate's survey process.

If HCFA determines that a state agency's survey performance is inadequate, it canimpose appropriate remedies or sanctions against the state agency. Among severalremedies and sanctions HCFA can use currently are requiring the state to submit a writtenplan of correction explaining how it plans to eliminate the identified deficiencies.reducing federal funds for state survey and certification activities, and ultimately.terminating HCFA's contract with the state.

To assess HCFA's oversight activities, we obtained data about federal monitoringsurveys and other oversight efforts from HCFA and each of its 10 regions, interviewedofficials at HCFA headquarters and 3 of its regions, and met with state surveyors fromfour states (Florida, Missouri, Tennessee, and Washington).

HCFA MAKES NEGLIGIBLE USE OF COMPARATIVE SURVEYS TO ASSESSSTATE AGENCIES' PERFORMANCE

An effective HCFA program for assessing state agencies' performance in certifying thatnursing homes meet federal standards for quality care is especially important givenconcerns that some state agencies miss serious care problems. Our work in Californiafound that surveyors missed some problems that affect the health and safety of residents.In addition. HCFA data show significant variations in the extent to which Csate surv.eyrnsidentify serious deficiencies. For example, state survey agencies in Washington, Idaho,North Dakota, and Kansas identified serious deficiencies resulting in harm to residents inmore than half their surveys-more than 4 times the rate of serious deficiencies found bysurvey agencies in Maine, Colorado, Tennessee, and Oklahoma. With such a range,HCFA needs to know to what extent such data accurately portray the quality of careprovided or the adequacy of state performance in the survey process.

However, HCFA makes negligible use of comparative surveys-independent re-surveysof homes-which are its most effective technique for determining whether state surveyorsmiss deficiencies. HCFA requires that only I or 2 of these surveys be completed eachyear in most of the states. Yet, more than two-thirds of the 64 comparative surveysHCFA conducted between October 1998 and August 1999 identified more seriousdeficiencies than the state identified.

For example, in one of its comparative surveys, surveyors from HCFA's Kansas Cityregion found 24 deficiencies in a Missouri nursing home that state surveyors did notidentify during their survey conducted about 6 weeks earlier. One of these deficienciesidentified six residents whose nutritional status was not being adequately assessed by thenursing home, resulting in significant weight loss in several cases. One resident lost 19percent of his weight between June and October 1998. His weight at the time of HCFA's

GAOTr-HEHS4I0-27

.16

survey was 93 pounds. which HCFA indicated was significantly below the resident'sminimally acceptable body weight of 108 pounds. Fewer than 4 months after hisadmission to the nursing home. this resident also had developed two moderately severepressure sores, which the home was inappropriately treating with a cream themanufacturer stated was not intended to heal pressure sores but rather to prevent irritationto the skin. According to HCFA surveyors, these deficiencies affecting multiple residentsshould have been evident at the time of the state's survey, but the state surveyors did notcite them.

Because of the time that typically elapses between a state's survey and HCFA'scomparative survey, HCFA often cannot be certain whether HCFA-identified deficienciesare the result of poor state agency performance, such as state surveyors' failure toidentify deficiencies, or to changed conditions in the nursing home following the statesurvey. Typically, these surveys occur I month after the state completes its survey butsometimes occur as much as 2 months later. In August 1999. HCFA instructed itsregions to start comparative surveys within 2 to 4 weeks.after the state's survey, but eventhis delay could result in problems comparing results. State and federal surveyors told usthat comparative surveys are more effective and reliable in assessing state performance ifthey start immediately after the state has completed its survey, even as soon as the dayafter the state's exit from the home.

Rather than making more extensive use of comparative surveys, HCFA instead conducts90 percent of its surveys as "observational" surveys, in which its regional surveyorsaccompany and observe state surveyors as they conduct all or a portion of their survey.These observational surveys may help HCFA to identify state agency training needs, butseveral problems inhibit their ability to give a clear and accurate picture of a state'ssurvey capability. Perhaps most importantly, HCFA's presence may make statesurveyors more attentive to their survey tasks than they would be if they were not beingobserved. This is an example of the Hawthorse effect, in which individuals tend toimprove their performance when they are aware they are being studied. As a result,observational surveys do not necessarily provide a valid assessment of typical statesurveyor performance.

Another HCFA oversight mechanism, which predates HCFA's recent nursing homeinitiatives, also has significant shortcomings. Under the State Agency QualityImprovement Program, each state does a yearly self-assessment and informs HCFA as towhether it is in compliance with seven survey requirements, such as investigatingcomplaints effectively. As an oversight program, its effectiveness is limited becauseHCFA does not validate the information included in the states' self-assessment as wasrequired under this program's predecessor, and thus has no assurance that the statessurface all serious problems or that they correct all the problems they have identified.For instance, in our prior work we found that some states were not promptly reviewingcomplaints filed against nursing homes, yet they had not identified this problem to HCFAas pan of their quality improvement program.5 In addition, HCFA has no policyregarding consequences for states that do not provide accurate information through this

5GAO/HEHS-99-80, Mar. 22,1999.

5 GAOfr.HEHS40 27

17

program. Furthermore. although the program also addresses some state agencyperformance standards that must be reviewed by HCFA's staff. these standards do notinclude some important aspects of a state agency's performance, such as determiningwhether the timing of a state agency's surveys can be predicted by the nursing homes.

HCFA REGIONS ARE INCONSISTENT IN HOW THEY CONDUCT OVERSIGHTACTIVITIES

In addition to these weaknesses in its oversight mechanisms. HCFA regions are uneven inthe way they implement them. resulting in limited assurance that states are being heldequally accountable to federal standards, including the recent initiatives. AlthoughHCFA established the current federal monitoring surveys to develop a uniform nationalapproach for regions to follow, the regions use different methods for selecting surveys toreview and for conducting reviews. Examples follow:

* Some regions comply with HCFA guidance on comparative surveys by selectinghomes with no established pattern of deficiencies, while other regions focus on homesthat the state has already identified as having serious deficiencies. By doing thelatter, HCFA is unlikely to identify situations in which state surveyors underreportserious deficiencies. Furthermore, HCFA's broad guidance for selectingobservational surveys does not ensure that its reviews assess as many state surveyorsas possible to maximize the training effect.

* In conducting comparative surveys, the regions vary in how they select residentsamples, with some regions selecting a sample that includes some overlap with thestate's sample and other regions making no attempt to do so.

* The regions also, on average, spend very different amounts of time to conduct anobservational survey. While the average time spent on these surveys is 52 hours, theregions range from an average of 27 hours to 71 hours to conduct these surveys, thusraising questions about the level of effort some regions devote to gauging stateperformance. Table I provides additional detail on the variation in regional resourcesavailable and in the time spent to complete observational surveys.

6GAOa-HEHSX0-276

18

Table 1: Variation in Resources Available and in Time to Comolete ObservationalSurveys

Region Ratio of state to Ratio of observational Average no. of ourn perfederal surveyor surveys required in observational survey

1999 to federal (OCL 1998- July 1999)______________ _ __________surveyors

Boston 4 to I 5 to 27New York 33 to I 7to 1 31Philadelphia 16to I 6to 1 49Atlanta 33 to 1 7 to I 61Chicago 31 lto I to 71Dallas 60to I * lo 1 38Kansas City 30 tO I 6 to I 51Denver Ito 1 4 to 59San Francisco 27 to 1 8to I 54Seattle 16 to I 3to I 52Nationwide 28 to I 7 to I 32

In addition. HCFA regional officials make different use of the State Agency QualityImprovement Program for overseeing state agency performance. Some regionssupplement information provided by the states through the quality improvement programby extensively analyzing available survey performance data, while other regions do notbelieve there is a need to use these supplemental data to assess state survey performance.For example, HCFA's Atlanta region recently started a program to conduct in-depthanalyses of each state agency in its region using available survey data. Through theseanalyses, the region determined that the annual state surveys of nursing homes in four ofits eight states are highly predictable, contrary to HCFA policy. It also found that in fourof the six states where it has completed reviews, more than half of the time statesurveyors did not conduct revisits of nursing homes, to determine whether identifieddeficiencies had been corrected, within the 55 days recommended by HCFA.

In testimony before your Committee this summer, we also noted that the HCFA regionsdo not consistently monitor state implementation of new, stronger policies resulting fromHCFA's nursing home initiatives. When we asked the regional offices how they weremonitoring states' implementation of these initiatives, their responses ranged from nomonitoring of most of the implemented initiatives to requiring states to submit specialmonthly reports on how they were implementing several of the initiatives. These unevenmonitoring practices, combined with the limitations we found in HCFA's moreformalized monitoring approaches, result in HCFA not being sufficiently informed aboutwhat the states are doing to implement these initiatives.

HCFA'S OPTIONS FOR ADDRESSING POORLY PERFORMING STATEAGENCIES ARE INADEQUATE

Even if HCFA identifies inadequate state agency performance, it currently does not havean adequate array of effective remedies or sanctions to ensure corrections. Mostcommonly, HCFA provides training to surveyors or survey teams. HCFA may also

GAOrr-HEHs-00-277

19

require the state to submit a plan of correction. provide technical assistance, and assumeresponsibility for developing the state's survey schedule. If these remedies fail. HCFAhas two sanctions available that it may then apply--reducing a state's survey andcertification funding or terminating its survey contract. Because of the extreme nature ofthese sanctions. HCFA has only once reduced state funding and has never terminated astate's contract.

To support reducing the state's survey and certification funding, HCFA requires evidenceshowing a pattern of inadequate state performance, which its current oversight structuredoes not effectively provide. In essence, HCFA must show that a state agencydemonstrates a pattern of failing to identify serious deficiencies. However, becauseHCFA conducts so few comparative surveys, and observational surveys are not intendedto identify all missed deficiencies, it is not currently possible for HCFA to establish that astate consistently fails to identify serious deficiencies.

As part of its nursing home initiatives, HCFA established a task force in late 1998 toexpand and clarify the definition of inadequate state survey performance and to suggestadditional remedies and sanctions for state agencies that perform poorly. The task forcehas preliminarily proposed two additional sanctions for HCFA's use: (I) placing a stateagency on notice that it is not in compliance with its Medicaid plan regarding nursinghome survey performance and (2) requiring HCFA officials to meet with the governorand other high-level state officials. Although HCFA refers to these two proposed actionsas sanctions, they are not as severe as what are normally thought of as sanctions and maynot be forceful enough to compel a state to improve its performance. Regarding placingthe state agency on notice, we were told that it means that HCFA expects its regions to..,.coh,,..rainve!y tavi y eths a.gencies to urg crnmni.nr. with the --uifn-nts in

their state Medicaid plans. Furthermore, although the proposed sanction requiring HCFAofficials to meet with the governor or other state officials can raise problems to a higherlevel in state government and possibly secure greater state support to improveperformance, it is not clear what effect this sanction would have in compelling a stateagency to improve its performance. HCFA intends to have these two new sanctions inplace by the end of 1999. HCFA also plans to issue additional state survey agencyperformance standards and measures, and indicated that over the next 18 months, it willdetermine whether the expanded remedies and sanctions have been effective inimproving state agency performance. At that time, HCFA will determine whetheradditional remedies or sanctions should be developed.

HCFA SHOULD STRENGTHEN ITS OVERSIGHT OF STATE PROGRAMS

HCFA has taken many positive steps-including 30 wide-ranging initiatives--thatdemonstrate its commitment to improving the quality of care that nursing home residentsreceive. These steps include a major effort to enhance its oversight of state agencies, butthe limited scope and rigor of its various state performance monitoring mechanisms, andtheir uneven application across the regions, do not give HCFA a systematic, consistentmeans of assessing state survey performance. Specifically, the negligible use ofcomparative surveys, combined with delays in starting them, does not provide HCFAwith sufficient evidence to determine whether states are appropriately assessing nursing

a GAOIr-HEHS--27

20

homes' compliance with federal standards. Furthermore, inconsistencies among theregional offices in their oversight of state agency performance hamper HCFA's ability toensure that all state agencies are being held equally accountable for their performance.Even though HCFA is strengthening its oversight mechanisms to be able to establish apattern of unacceptable state survey performance, it has not developed effectivealternatives for ensuring that states meet federal standards.

Our report issued today contains several specific recommendations to HCFA tostrengthen its oversight of state survey agencies' activities. These recommendations areintended to help HCFA ensure that states meet federal standards for certifying thatnursing homes provide adequate care and consistently implement the more stringentstandards required by HCFA's recent initiatives. Our recommendations include that theHCFA Administrator

* Improve the scope and rigor of HCFA's oversight process by increasing the use ofcomparative surveys and ensuring that they are initiated more promptly after states'surveys.

* Improve the consistency of HCFA oversight across regional offices bystandardizing procedures for selecting and conducting federal monitoring surveys.

* Further explore the feasibility ofappropriate alternative remedies or sanctionsfor those states that prove unable or unwilling to meet HCFA's performancestandards.

In reviewing a draft of our report, HCFA reaffirmed that enhanced oversight of stateprograms is critical to improving the quality of care in nursing homes and generallyagreed with our recommendations. Although HCFA indicated that it needs to furtherevaluate the appropriate course of action, it is clear that HCFA's continued efforts andinitiatives, in concert with the Committee's ongoing oversight, have the potential to makea decided difference in the quality of care for the nation's nursing home residents.

Mr. Chairman, this concludes my statement. I will be happy to answer any questions thatyou or other Members of the Committee may have.

GAO CONTACT AND ACKNOWLEDGMENTS

For further contacts regarding this testimony, please call William J. Scanlon or KathrynG. Allen at (202) 512-7114. Individuals making key contributions to this testimonyincluded John Dicken, Jack Brennan, and Mary Ann Curran.

GAOrr-HEHS-40279

21

RELATED GAO PRODUCTS

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

Nursing Homes: HCFA Initiatives to Improve Care Are Under Way but Will ReguireContinued Commitment (GAOiT-HEHS-99-155, June 30, 1999).

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

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

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

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

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

2005

GAOfr-HEHS-OO2710

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United StatesGi ^(i) General Accounting offiee~~~~~~~~~Washington, D.C. 20548

Health, Education, andHuman Services Division

B-281759

November 4, 1999

The Honorable Charles E. GrassleyChairmanThe Honorable John B. BreauxRanking Minority MemberSpecial Committee on AgingUnited States Senate

The federal government and the states are jointly responsible for ensuringthat the nation's more than 17,000 nursing homes provide adequate care totheir highly vulnerable 1.6 million elderly and disabled residents. TheHealth Care Financing Administration (HcPA), within the Department ofHealth and Human Services, is responsible for ensuring that each stateestablishes and maintains a survey capability that effectively identifies andresolves problems in nursing homes that receive Medicare or Medicaidpayments. Under contract with HcFA, state agencies conduct surveys atnursing homes to ensure that the homes provide quality care to residents.On the basis of their surveys, these agencies certify to the federalgovernment that each home is in compliance with federal nursing homestandards, which enables the home to receive federal payments. Federalpayments to these nursing homes under the Medicare and Medicaidprograms are expected to total $39 billion in 1999.

In previous reports to you, we found that residents received anunacceptably poor quality of care in some nursing homes and that thefederal and state programs designed to identify and correct theseproblems had significant weaknesses. For example, we reported that

. nearly a third of the 1,370 homes in California had been cited for careviolations classified as serious under federal or state deficiencycategories;'

* one-fourth of the nation's nursing homes had serious deficiencies thatcaused actual harm to residents or that placed them at risk of death orsenous injury and that 40 percent of these homes had repeated seriousdeficiencies;

2

serious complaints alleglng that nursing home residents are being harmedcan remain uninvestigated for weeks or months, prolonging situations in

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GAOMESE0Oa Fedes NoS lane- OvWSMPweil

24

3171

which residents may be subject to abuse, neglect resulting in serous careproblems like malnutrition and dehydration, preventable accidents, andmedication errors3 andwhen serious deficiencies are identified, federal and state enforcementpolicies have not been effective in ensuring that the deficiencies arecorrected and remain corrected'

In response to these problems and our recommendations, HCFA hasdeveloped about 30 initiatives to strengthen federal standards, oversight,and enforcement for nursing homes.' One of these initiatives is to enhancefederal oversight of the state survey agencies to help ensure that the statesare adequately protecting the health and safety of nursing home residentsWhen it is determined that a state agency is rot adequately performing Itssurvey responsibilities, HCFA has indicated It would develop appropriatesanctions to penalize the state agency, including terminating its contract.HCr&'S initiatives are fundamental to its ability to hold states accountablefor reliably and consistently performing their contractual responsibilitiesfor certifying that nursing homes meet Medicare and Medicaid standardsand provide quality care for nursing home residents.

Because an effective oversight program is critical to HcFA's ability to gaugethe states success in implementing HCFA's many initiatives, you asked usto evaluate HCFA'S oversight programs of state agencies nuring homesurvey process. Specifically, we assessed (1) the effectiveness of HCFA'Sapproaches to assessing state agency performance, (2) the extent to whichHcFA's regional offices vary in their application of these approaches, and(3) the corrective actions available to HCFA when it identifies poor stateagency performance. To do this work, we contacted HCFA's 10 regionaloffices to obtain data about each region's oversight programs from 1996 tothe present, interviewed officials at HCFA's headquarters in Baltimore aswen as federal surveyors and their managers in HCFA's regional offices;interviewed HCFA officials from the Atlanta, Kansas City, and Seattleregions and met with state surveyors and their managers in four statesfrom these three regions-Flonida, Missouri, Tennessee, and Washington;and reviewed data provided by HCPA and its regional offices regarding thenumber and types of oversight reviews conducted during the past 3 years.We conducted our work between March and September 1999 Inaccordance with generally accepted government auditing standards.

TGUVHEM49.46 M.. is 1_.

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Ghe 5 - F .d B-FqP 2

25

B5281755

Results in Brief Since last year, HCFA has undertaken a series of initiatives intended toaddress quality problems facing the nation's nursing home residents,including redesigning its program for overseeing state agencies that surveynursing homes to ensure quality care. The objective of HCFA'5 oversightprogram is to evaluate the adequacy of each state agency's performance inensuring quality care in nursing homes, but the mechanisms it has createdto do so are limited in their scope and effectiveness. In addition, HCFA'soversight mechanisms are not applied consistently across each of its 10regional offices. As a result, HCFA does not have sufficient, consistent, andreliable data to evaluate the effectiveness of state agency performance orthe success of its recent initiatives to improve nursing home care. Giventhe wide range in the frequencies with which states identify seriousdeficiencies, HcFA cannot be certain whether some states are falling toidentify serious deficiencies that harm nursing home residents.Furthermore, HcFA does not have an adequate array of effective sanctionsto encourage a state agency to correct serious or widespread problemswith its survey process.

HCFA's primary mechanism to monitor state survey performance stemsfrom its statutory requirement to survey annually at least 5 percent of thenation's 17,000 nursing homes that states have certified as eligible forMedicare or Medicaid funds.' But HCFA's approach to these federalmonitoring surveys does not produce sufficient information to assess theadequacy of state agency performance. To fulfill its 5 percent monitoringmandate, HcOA makes negligible use of its most effective technique-anindependent survey done by -crA surveyors following completion of astate's survey-for assessing state agencies' abilities to identify seriousdeficiencies in nursing homes. For the vast majority of states, HCFArequires only one or two of these comparative surveys per state, per year.Yet, in the 64 comparative surveys conducted from October 1998 toAugust 1999, HCFA found deficiencies that were more serious than thosethe state found in about two-thirds of the surveys, which suggest thatsome state surveyors miss some serious deficiencies But because ofelapsed time between the federal and state surveys, HcrA cannot tenwheheir ihe differences between is survey resuits and those of ihe stateare attributable to poor state performance, such as underreporting by statesurveyors, or to conditions in the nursing home that changed since thestate survey. Rather than making extensive use of comparative surveys,HCFA focuses 90 percent of its own survey efforts on observational

*hOi. T-9 h BdgdRe-sdimiAof 198 sef__ to the - HCFAut ,,s a .% - ,HCF'. brd e-m fct-dli.Sot X . s e- .ttoing hkhsn of e. t d o he. . his aw teHA.a.des6 t -htt4 u.oeies - i - s .dto Fod.9 Oodtt . pd 5Su-wy.

PC5G 5OO Fedoosi No.w1- row tFee a

26

B458175

surveys," in which it relies on its regional surveyors to observe statesurveyors as they conduct at least a portion of their surveys While thisapproach is useful in many respects, including identifying training needsfor state surveyors, it also has a serious limitation as a way to evaluatestate performance. HCFA's presence may make state surveyors moreattentive to their survey tasks than when they are not being observed (theHawthorne effect); therefore, this approach does not necessarily provide avalid assessment of typical performance.

A second HCFA oversight mechanism also has significant shortcomings.About 3 years ago, HCFA implemented the State Agency QualityImprovement Program (siA), a program under which the state agencydoes a self-assessment to inform HCrA, at least once a year, whether thestate is in compliance with seven standard requirements For instance, allstates are expected to evaluate their surveyors' ability to correctlydocument deficiencies in nursing homes and to conduct complaintinvestigations effectively. sP is limited as an oversight program,however, because HCFA (1) does not independently validate theinformation that the states provide, so it is uncertain whether all seriousproblems are identified or whether identified problems are beingcorrected, and (2) has no policy regarding consequences for states that donot comply. For example, in our prior work, we found that some stateswere not promptly reviewing complaints filed against nursing homes andthat these slates had not identified this problem in their ssaP reports toHcAr7 SAQIP also includes four indicators of state performance that Hmca,rather than the slates, assesses. aSiA specifies, for example, that HcFA willdetermine whether states conduct nursing home surveys within specifictime frames and enter the survey results into HCFA's database. However,the four indicators do not address some important aspects of a stateagency's perfonmance, such as the predictability of the timing of statesurveys

In addition to these weaknesses in its oversight programs, HCFA regions areuneven in the way they implement them, resulting in limited assurance

-that states are being held equally accountable to federal standards,including the recent initiatives. Although mc7A established the currentfederal monitoring surveys to develop a uniform national approach forregions to follow in conducting federal oversight surveys, the regions usedifferent methods for selecting oversight reviews and conducting themSome regions, for instance, comply with HcFA guidance to select homeswith no established pattern of deficiencies, while other regions focus on

'GaOMsEH%80, M.. 22, 19s.

Pro 4

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homes that the state has already identified as having serious deficiencies.Regions that take the latter approach are unlikely to identify situations inwhich state surveyors underreport serious deficiencies. The regions also,on average, spend very different amounts of time on observationalsurveys. While the average time spent on these surveys is 52 hours, theregions range from about 27 hours to about 71 hours to complete thesesurveys, thus raising questions about the level of effort some regionsdevote to gauging state performance. In addition, HCFA regional officialshave varying views about sAsp's effectiveness as an oversight program. Asa result, some regions supplement sAQgP Information by extensivelyanalyzing available survey performance data, while other regions do notbelieve there is a need to use these supplemental data to assess statesurvey performance.

Even if HCFA Identifies inadequate state agency performance, It currentlydoes not have a sufficient anray of effective remedies or sanctions at itsdisposal to ensure adequate state performance. When HcrA Identifies poorstate agency survey performance, it can employ one or more of severalremedies, such as requiring the state to submtt a plan of correction orproviding special training to the state surveyors. If these remedies do notbring te stare agency into compuance with survey standards, HCFA hastwo sanctions available-reducing a state's survey and certificationfunding or terminating the agency's survey contract Because of theextreme nature of these sanctions, Hca has only once reduced statefunding and has never terminated a state agency's contract. Although HnoAis considering additional sanctions, on the basis of our review of them, webelieve that their potential to compel a state to Improve Its performance isdoubtMA

To assist "A in effectively overseeing state agencies and achieving thegoals of its broader initiatives, we are recommending that HCFa Improvethe scope and rigor of its state oversight mechanisms, improve theconsistency of Its oversight across its regions, and further explore thefeasibility of additional remedies and sanctions for states that prove^orunable a. to mee Rae as peetonrOnce siandards.

HCFA is required by statute to establish an oversight program for evaluatingthe adequacy and effectiveness of each stale's nursing home surveyprocess.' If HcFA determines that a state agency's survey performance isInadequate, it is authorized to impose appropriate remedies or sanctions

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against the state agency. Among HCFA's remedies and sanctions arerequiring the state to submit a written plan of correction explaining how itplans to eliminate the identified deficiencies; reducing federal funds forstate survey and certification activities; and, ultimately, terminating H(ac'scontract with the state. HCFA surveyors in its 10 regional offices carry outthe oversight of state agenies

Every nursing home that receives Medicare or Medicaid funding mustundergo a standard survey conducted by the state agency no less thanevery 15 months. This survey entails a team of state surveyors spendingseveral days on-site conducting a broad review of whether the care andservices delivered meet the assessed needs of the residents.

9The Omnibus

Budget Reconciliation Act of 1987 (oBRA s7) requires HCFA surveyors toconduct federal oversight surveys in at least 5 percent of the nursinghomes in each state each year within 2 months of the state's completion ofIts survey.'

0The following table shows the number of nursing homes per

HatA region, the number of federal monitoring surveys each region inrequired to conduct in fiscal year 1999, and the number of federalsurveyors who conduct nursing home monitoring surveys as ofAugust 1999.

TA. l. i rNiund Hanm. ReIutredFedd ure, endriSurveyors Avallable, by HCFA Region

Regioma rowlooBostonNow YorkPhiladelphiaAtantaChicagoDasKanas OtyDenverSan FranclscoSeameTotwl

Federal monitoring Federal nursingsurveys required to home sunrasyar

Nursing mea 5% requirement In aaitlableas ofhoem fisNca yewr 1999 August1999

1.170 63 121.020 56 71.526 84 12

2.772 139 193.784 1s9 222,398 122 111,693 84 12

666 37 81.681 89 11

497 32 917,207 895 122

-rne Endd. w l -W t> met HCFA7b _410M t.mob$ fivw U.11 -

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HCFA's recent initiatives relating to assessing state agency performance arethe latest in a series of approaches HaoA has used since oesA 8r wasenacted Until 1992, HCYA conducted only comparative swrveys, in whichfederal surveyors performed an Independent survey of a home andcompared their results with the states. Since 1992, HcFA has used a mix ofcomparative and different variations of observational surveys. Forinstance, from 1992 until July 1995, the regions used surveys in which theydirectiy observed individual state surveyors as they performed a survey,but did not communicate with them until the last day of the survey.Starting in I995, HCFA regional surveyonr observed the state surveyors andactively communicated with them during the suvey. Under Utis approach,federal surveyors provided on-the-spot training to the state surveyors.Starting n July 1996, HCFA allowed the regions to develop variations of thisapproach, and by 1998, multiple regional variations existed. Among thesewere partial observational surveys that focused on only parts of thesurvey, and participatory surveys in which federal surveyors becamemembers of the state agency teams.

As part of its broader nursing home initiatives, in October 1998 HCYAintroduced its current program of overseeing state swuvey agencypexiromance, referred to as te federal monnormg survey. mrs programmodified HClA's prior oversight prograams and has two componenms Thefirst component is a comparative survey, in which a team of federalsurveyors conducts a complete, Independent srrvey of a nursing boomeafter the state has completed its survey, and then compares the resultswith the state's" The second component, which is HcPA's primarymonitoring technique, is an observational survey, in which generally oneor two federal surveyors accomPany state surveyors to a nursing homeeither as part of the home's annual standard survey or as part of a revisitor a complaint invweslgaionu During these observational surveys, federalsrrveyors watch the state surveyors perform a variety of tasks, give thesurveyors verbal feedback, and later provide a written rating of the statesurveyors performance to state manager Basicaly, the currentobservational surveys represent an extension of the several types ofob = .01 so0 tGZO HC.' rgoAA S aI be use o. e. ur pII V Ouyears. However, unrlike earlier observational surveys, the revised surveysare intended to have a national standard protocol, a national focal point

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for collecting data about the surveys, and a single national database fortracking survey results.

In addition to the formal review activities required under the federalmonitoring surveys, HCFA has other sources of information available forevaluating state agency performance. One such source, SAQip, initiated in1996, requires states, in partnership and collaboration with HCFA, todevelop and implement quality improvement action plans to addressdeficiencies in the state's survey process that either the state or HCFA hasidentified. In addition to SAQtP, a few regions also use information fromHCFA'S database on survey results to assess state performance in areassuch as timeliness of providing information to nusing homes regardingidentified deficiencies and the timeliness of enforcement actions.

Limitations HinderHCFA OversightPrograms'Effectiveness inAssessing StateSurvey Performance

HCFA's Use ofComparative Surveys IsNeglgible

HCFA'S current strategy for assessing state agency survey performance haslimitations that prevent HCFA from developing accurate and reliableassessments. The number of comparative surveys required to becompleted each year is negligible in that only one or two are required inmost of the states, and over half of the comparative surveys are startedmore than a month after the state completes its survey. Observationalsurveys are also limited in their effectiveness because these tend to causestate surveyors to perform their survey tasks more attentively than theywould if federal surveyors were not present (the Hawthorne effect), thusmasking a state's typical performance. Observational surveys have alsohad other problems during their first year of implementation, such as thefact that federal surveyors are not required to observe state surveyorsperforming most survey tasks, the lack of an effective data system forrecording results, and the slowness of written feedback to state surveyors.Finally, &AQn' does not require independent verification of states'self-reported performance, and its standards do not address all importantaspects of the state survey process.

Although comparative surveys are the only oversight tool that furnishes anindependent federal survey where results can be compared with those ofthe states, HcFA's use of them is negligible. Conducting a sufficient numberof these comparisons is important because of concern that some statesurvey agencies miss significant problems. For example, HCFA surveyorsfound deficiencies that were more serious than those found by the stalesurveyors in about two-thirds of the comparative surveys they conductedbetween October 1998 and July 1999.

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As we reported In July 1998, state agency surveyors can miss problemsthat affect the health and safety of residents.h' In addition, HcrA data showsignificant variation in the extent to which state surveyors Identify seriousdeficiencies For example, state survey agencies in Idaho, Kansas, NorthDakota, and Washington identified serious deficiencies in more than halfof their surveys. On the other hand, state surveyors in Maine, Colorado,Tennessee, and Oklahoma identified such problems in only 8 to 13 percentof their surveys." With such a range in identified serious deficiencies innursing homes, H'crA needs to know to what extent such data accuratelyportray the quality of care provided or the adequacy of state survey agencyperformance.

Of the 64 comparative surveys that HCFA completed between October 1998and July 1999, 44 (69 percent) identified a more serious deficiency thanhad the stat surveyors For example, during a comparative surveyconducted at a nursing home in Missouri in November 1998, HCFA found 24defidencies that It believes state surveyors should have, but did not,Identify during their review about 6 weeks earlier. One of thesedeficiencies Identified six residents whose nutritional status was not beingadequately assessed by the nursing home, resulting in significant weightloss to several of them One retiderint n1! 19 firnt of his s, idht hew,June and October 1998. His weight at the time of HcPFA's survey was 93pounds, which aurA indicated was significantly below the resident'sminimally acceptable body weight of 108 pounds. Less than 4 monthas afterthis resident's admission to the home, he had also developed twomoderately severe pressure sores, which the nursing home wasinappropriately treating with a cream that its manufacturer stated was notintended to heal pressure sores but rather to prevent irritation to the skin.

Until 1992, comparative surveys were the sole method HCFA used to carryout state agency oveSight responsibilities. According to HcFA documents,the agency began to decrease its reliance on comparative surveys in 1992because (1) it was difficult to adjust for changes in the nursing home thatmay have arisen between the dates of the state and the federal surveys,(2) two separate surveys during a short time period created a strain on thenursing home, (3) too much time had passed between the completion ofthe state survey and the time the state received feedback bfom federalsurveyors for the state surveyors to recall the details of the survey, and(4) comparative surveys were resourcentensive.

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Under the revised federal monitoring surveys, started in October 1998,HCFA acknowledged the need to do more comparative surveys than the 21that had been done over the previous 2 years. Nevertheless, under thisprogram, only about 10 percent of the federal monitoring surveyscompleted each year must be comparative surveys, and the remaining90 percent may be observational surveys. Specifically, HCPA now requires aminimum of one comparative survey in states having fewer than 200nursing homes, two in states with 200 to 599 nursing homes, and three instates with 600 or more homes. Table 2 shows the minimum number ofcomparative surveys to be completed in each state and the District ofColumbia.

Table 2: Minimum Number ofMinimum

number ofcomparetie

Number of home surveysIn stae (ae of May required each19F 9) t nwFewver than 200 1

Number ofSlatee ststes

20 Alaska, Arizona. Delaware,District of Columbia. Hawaii.Idaho. Maine. Montana. Nevada.New Hampshire. New Mexico.North Dakota. Oregon, RhodeIsland, South Carolina. SouthDakota. Utah. Vermont. WestVir-inia Wuu-nn

200 to 599 2 24 Alabamna. Arkansas. Colorado.Connechcut, Georgia. Indiana.Iowa, Kansas. Kentucky,Louisiana, Maryland,Massachusetts. Michigan.Minnesota. Mississippi. Missouri.Nebraska, New Jersey. NorthCarolina. Oklahoma. Tennessee,Virginia. Washington. Wisconsmn

600 or more 3 7 Calormia. Rorida. Illinois, NewYork, Ohio, Pennsyhania, Texas

While providing important information, the low number of comparativesurveys will not permit HCFA to determine how representative these one tothree su