July 21, 1999

/s/

June Gibbs Brown

Inspector General

Legislative Recommendation to Improve Hospital Reporting to the National Practitioner Data

Bank, OEI-12-99-00250

Claude Earl Fox, M.D., M.P.H.

Administrator 

Health Resources and Services Administration

ISSUE 
There are indications that hospitals may not be complying with the reporting requirements of 
the National Practitioner Data Bank (Data Bank).  We are therefore recommending that the 
Health Resources and Services Administration (HRSA) initiate a legislative proposal (A-19) to 
provide for a civil money penalty of up to $10,000 for each instance of a hospitals failure to 
report an applicable adverse action to the Data Bank. 
CURRENT LAW 
Section 423 of the Health Care Quality Improvement Act (42 U.S.C. 11133) requires that each 
hospital or health care entity which takes a professional review action that adversely affects the 
clinical privileges of a physician or dentist for a period of longer than 30 days report to the 
appropriate State board of medical examiners the name of the physician or dentist involved and 
a description of the acts or omissions or other reasons for the action.  Each board of medical 
examiners is required to report this information to the Data Bank. 
Section 411(b) provides that in the case of a hospital or health care entity that is found to have 
committed a pattern of non-reporting be given notice of noncompliance, an opportunity to 
correct the noncompliance, and a hearing before the Secretary.  Subsequently, if the Secretary 
determines that the entity has failed to comply, its name will be published in the Federal 
Register and it will lose its immunity protections for a period of 3 years; such immunity 
provides liability protections for professional review activities. 
EVIDENCE OF THE PROBLEM 
Hospitals Reporting to the Data Bank 
In February 1995, we issued a report entitled Hospital Reporting to the National Practitioner 
Data Bank, OEI-O1-94-00050.  This study, which was done at the request of HRSA, found  that for the period September 1, 1990, when the Data Bank became operational, to December 
Page 2 - Claude Earl Fox, M.D., M.P.H. 
1993 about 75 percent of all hospitals in the United States had never reported an adverse 
action.  More current data indicates that for the  period September 1990 through September 
30, 1998 about 67 percent of hospitals have never reported an adverse action. 
Prior to the opening of the Data Bank, in a planning document submitted to the Office of 
Management and Budget, the Public Health Service estimated there would be 5,000 hospital 
adverse action reports a year. In a separate analysis, the American Medical Association 
estimated that there would be 10,000 such reports annually.  In actual fact, a total of only 
7,453 reports have been received over the 8-year operational history of the Data Bank, i.e. less 
than 1,000 per year. 
A national conference of major medical and health organizations sponsored by HRSA in 
October 1996 reached a consensus that the number of reports in the Data Bank is unreasonably 
low compared with what would be expected if hospitals pursued disciplinary actions 
aggressively and reported all such actions.  The attendees included representatives from the 
American Medical Association, American Hospital Association, Joint Commission on 
Accreditation of Healthcare Organizations, Health Care Financing Administration, patient 
advocacy organizations, Federation of State Medical Boards, Office of Inspector General, and 
a major university teaching hospital. 
An October 1994 study of 144 rural hospitals in the Pacific Northwest funded by HRSA and 
performed by the University of Washington School of Medicine, found that 20 percent of 
hospitals reported an increase in activities that could obviate the need to submit an adverse 
report to the Data Bank.  For example, imposing disciplinary periods of shorter than 31 days 
had increased in 5 percent of the hospitals.  Other hospitals (12 percent) reported an increase 
in requiring continued medical education instead of restricting clinical privileges. 
Hospitals Reporting to States 
According to the Federation of State Medical Boards, almost all States have mandatory 
reporting laws relating to the reporting of adverse actions to State medical boards.  California 
for example, requires a health care facility to report to the State medical board any denial, 
termination or relocation of privileges for a cumulative period of 30 days or more for any 12-
month period.  Colorado and a number of other States have no time threshold for reporting, 
that is, all adverse actions must be reported.  Fourteen States have a civil or money penalty 
associated with failure to report to State medical boards.  California, for example, can impose a 
fine of up to $10,000 against the facility and a fine of up to $5,000 against an individual for 
failure to report. 
The Citizen Advocacy Center (CAC), which is a national association of public members of 
State licensing boards, released a HRSA funded study in March 1997 that found indications of 
non-compliance with State mandatory reporting laws.  The Center quotes the President of the  Page 3 - Claude Earl Fox, M.D., M.P.H. 
California Medical Board as stating the following in the January 1995 issue of the boards 
newsletter: 
The issue of 805 (peer review) reporting is one of the most important and most 
misunderstood Medical Practice Act requirements.  Over the past year, we have noted 
a deterioration in the cooperation required between hospitals and the Board in 
protecting consumer/patient safety.  We have experienced incomplete reports and, on 
some occasions, excuses for not reporting at all. 
Based on its survey, the center offered  four possible reasons for under-reporting to State 
boards: (1) a cultural aversion to reporting a colleague (snitching); (2) deficiencies in 
reporting laws ; (3) lax enforcement; and (4) lack of knowledge on the part of hospitals about 
their duty to report. 
Because of concerns involving under-reporting, the CAC, in cooperation with the 
Administrators of Medicine (directors of State medical boards), drafted a model State 
reporting law. The  model law calls for a financial penalty of $1,000 per day for the period of 
non-compliance, up to a maximum fine of $250,000 for each incident of failure to report. 
A recently completed HRSA-funded study by the University of Washington Medical School 
concerning hospital reporting and State peer review protections statutes found that ...Data 
also revealed that more adverse actions are reported to the Data Bank in States which impose 
significant penalties upon hospitals for failure to report certain peer review actions to State 
licensing board (sic).  This raises significant concern that hospitals are not fully reporting 
adverse peer review actions to appropriate governmental agencies and stronger laws are 
needed... 
According to this study, after adjusting for differences in hospital characteristics, hospitals in 
States with strong penalties were 40 percent more likely to have reported an adverse action 
over the 5 years of the study than hospitals in States with no penalties. 
OIG RECOMMENDATION 
To more fully encourage hospitals to follow the intent of Section 423 of the Health Care 
Quality Improvement Act (Act), we recommend that HRSA propose legislation that would 
establish a civil money penalty of up to $10,000 for each instance of a hospitals failure to 
report to the Data Bank in accordance with the requirements of Section 423.  This penalty is 
consistent with the current civil money penalty sanction that can be imposed for failure to 
report a malpractice settlement or judgement.  Section 421 of the Act provides that any entity 
that fails to report a malpractice payment ...shall be subject to a civil money penalty of not 
more than $10,000. for each payment involved...  Page 4 - Claude Earl Fox, M.D., M.P.H. 
Under our recommendation,  the Department would continue to have the discretion to remove 
a hospitals peer review immunity protection under the Act. 
The HRSA concurred with the recommendation and indicated that their legislative proposal 
would cover reporting by all health care entities (including managed care organizations).  The 
HRSA also indicated that they are considering increasing the Civil Money Penalty to more than 
the $10,000 recommended by the Office of Inspector General.  A copy of the full HRSA 
response is attached. 
Could you please submit within 60 days from the date of this memorandum report your plans 
to implement the recommendation.  If you have any questions or comments, please call me or 
George Grob, Deputy Inspector General for Evaluation and Inspections, or have your staff 
contact Elise Stein at (202) 619-2686. 
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