Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

CMS O
VERSIGHT OF 

S -T A C
HORT ERM  CUTE  ARE 

N H
ONACCREDITED  OSPITALS

Daniel R. Levinson

Inspector General 

August 2005

OEI-01-04-00020
 Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs. This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The OIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout the department. 
Office of Evaluation and Inspections 
The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management 
and program evaluations (called inspections) that focus on issues of concern to the 
department, the Congress, and the public. The findings and recommendations contained 
in the inspections reports generate rapid, accurate, and up-to-date information on the 
efficiency, vulnerability, and effectiveness of departmental programs. The OEI also 
oversees State Medicaid fraud control units, which investigate and prosecute fraud and 
patient abuse in the Medicaid program. 
Office of Investigations 
The OIG's Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations. The OCIG imposes program exclusions and 
civil monetary penalties on health care providers and litigates those actions within the 
department. The OCIG also represents OIG in the global settlement of cases arising 
under the Civil False Claims Act, develops and monitors corporate integrity agreements, 
develops compliance program guidances, renders advisory opinions on OIG sanctions to 
the health care community, and issues fraud alerts and other industry guidance.    E X E C U T I V E   S U M M A R Y  

OBJECTIVE 
To assess the extent to which the frequency of short-term acute care 
nonaccredited hospital surveys has changed since the 1999 Office of 
Inspector General (OIG) reports on hospital oversight. 
BACKGROUND 
This report serves as a followup to a series of reports released by OIG in 
1999 on the external review of quality oversight in hospitals.  One of 
those reports found that a large and growing number of short-term 
acute care nonaccredited hospitals had not been surveyed within    
3 years.  In its response, the Centers for Medicare & Medicaid Services 
(CMS) committed to surveying all nonaccredited hospitals with the 
same frequency as accredited hospitals, every 3 years, and to obtaining 
the funds necessary to establish a more frequent survey cycle.   
To receive Medicare reimbursement, hospitals must demonstrate to 
CMS their initial and ongoing ability to meet a set of minimum quality 
and safety standards, referred to as conditions of participation. 
Hospitals can do this in two ways:  by paying for accreditation or by 
receiving certification from the State survey and certification agencies 
at no charge. While about 83 percent of hospitals choose accreditation, 
about 17 percent of the nations 4,020 hospitals are nonaccredited.  CMS 
oversees nonaccredited hospitals through routine certification surveys 
and complaint (allegation) surveys conducted by the States.  In this 
report, we focused on short-term acute care nonaccredited hospitals, 
which constitute 72 percent of all nonaccredited hospitals. 
We based our assessment of survey and complaint data on two sources 
of data: the Online Survey Certification and Reporting System data and 
CMSs State Survey and Certification Budget Call Letters.  The Budget 
Call Letters establish the priority for survey activities for all types of 
facilities for the States. The States use the information to prepare their 
yearly budgets. 
FINDINGS 
In 2003, States surveyed 79 percent of short-term acute care 
nonaccredited hospitals within 3 years compared to 50 percent in 
1997. The percent of short-term acute care nonaccredited hospitals 
surveyed within 3 years grew from 49 percent in 2001 to 62 percent in 
2002 and 79 percent in 2003. 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  i  E X E C U T I V E   S U M M A R Y  
However, the national annual survey rate is too low to sustain this 
progress. The national annual survey rate reflects the number of 
short-term acute care nonaccredited hospitals surveyed each year 
divided by the total number of such hospitals in all 50 States in each 
fiscal year.  To ensure that all short-term acute care nonaccredited 
hospitals are surveyed once every 3 years, at least 33 percent of 
hospitals should be surveyed each year over a 3-year period, assuming 
that the number of hospitals does not change and no hospital is 
surveyed more than once.  In 2001, States surveyed 25 percent of short-
term acute care nonaccredited hospitals nationally.  The national 
annual survey rate grew to 28 percent in 2002. However, States 
surveyed only 21 percent of such hospitals in 2003.  Several factors 
contributed to these declines in surveys for nonaccredited hospitals:  
Conversions to critical access hospitals necessitated additional surveys by State 
agencies. The number of nonaccredited hospitals decreased from 
1,361 to 640 between 1997 and 2003.  During this period, many 
nonaccredited hospitals converted to critical access hospitals.  
Between 2000 and 2003, the number of critical access hospitals 
increased from 318 to 855.  These conversions add more surveys to 
States already full workload. 
Other surveys take priority over nonaccredited hospital surveys.  Other 
survey priorities can limit the attention and resources that States can 
spend on surveys of nonaccredited hospitals.  Complaint surveys, 
which are limited to investigating the conditions of participation in 
question, require an onsite survey at both accredited and 
nonaccredited hospitals.  These surveys grew 79 percent, from 2,079 to 
3,721 between 1997 and 2003. In addition, completing surveys at 
facilities with legislatively mandated survey cycles, such as nursing 
homes and home health agencies, is a higher priority than performing 
surveys at nonaccredited hospitals. 
Budget Call Letter Language.  CMS committed to establishing a more 
frequent survey cycle for nonaccredited hospitals so that they would 
be surveyed with the same frequency as that established by the Joint 
Commission on Accreditation of Healthcare Organizations for 
accredited hospitals.  Rather than establishing a 3-year survey cycle 
for nonaccredited hospitals, the CMS Budget Call Letter calls for 
States to survey 33 percent of their nonaccredited hospitals annually.  
Though on the surface it might appear that this language is 
equivalent to a 3-year survey cycle, this is not the case.  By repeatedly 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  ii  E X E C U T I V E   S U M M A R Y  
surveying some hospitals and not surveying others, which may be 
necessary to ensure safety and quality, States can consistently meet 
the 33 percent annual survey rate for their nonaccredited hospitals, 
but not survey all nonaccredited hospitals within 3 years.   
SUMMARY 
Certification and complaint surveys remain the principal way that CMS 
and State agencies can ascertain whether nonaccredited hospitals meet 
Federal health, safety, and program standards.  While the percent of 
short-term acute care nonaccredited hospitals surveyed within 3 years 
has increased, the national annual survey rate has dropped and is now 
too low to sustain this progress.  To ensure that all short-term acute 
care nonaccredited hospitals are surveyed once every 3 years, at least 33 
percent of hospitals should be surveyed each year over a 3-year period, 
assuming that the number of hospitals does not change and no hospital 
is surveyed more than once. 
AGENCY COMMENTS 
CMS agreed that recent survey rates make sustained improvement in 
the percent of short-term acute care nonaccredited hospitals surveyed 
within 3 years uncertain.  It further noted that it has additional survey 
responsibilities and that resources are limited. 
CMS identified adjustments it will make in response to our report. 
First, it will lower the priority of its earlier commitment to survey 
nonaccredited hospitals once every 3 years.  It will also create a new, 
higher priority goal of surveying nonaccredited hospitals an average of 
every 4.5 years. Further, it will require States to target certain 
hospitals that are more likely to have systemic quality problems for 
more frequent surveys. Finally, it will add a performance standard for 
States to ensure that the top priority survey frequencies are met. For 
CMSs complete comments, see page 11 of this report. 
OIG RESPONSE 
We are pleased that CMS agrees with our summary that although the 
percentage of short-term acute care nonaccredited hospitals surveyed 
within 3 years has improved, recent national annual survey rates raise 
concern that the improvement may not be sustainable.  However, CMS 
also proposes changes to the survey commitment it made in response to 
OIGs previous report (that it survey nonaccredited hospitals every 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  iii  E X E C U T I V E   S U M M A R Y  
3 years, which is the same frequency as that of the Joint Commission on 
Accreditation of Healthcare Organizations).   
We acknowledge that CMS faces resource limitations.  However, we 
remain concerned that its adjustments could result in some 
nonaccredited hospitals operating without a survey for considerable 
lengths of time.  Because CMS proposes an average of 4.5 years between 
surveys, by definition the gap between surveys at some nonaccredited 
hospitals will exceed that length of time, and some could exceed it by a 
considerable number of years. 
At the same time, we appreciate the role that targeting some hospitals 
for more frequent surveys can serve in protecting Medicare 
beneficiaries.  Furthermore, we also appreciate CMSs addition of 
performance standards for States. 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  iv    T A B L E   O F   C O N T E N T S  

E XE C U T IV E S U MMA R Y ................................................... i

I N T R O DUC T IO N ............................................................. 1 

F I N D IN GS .....................................................................5

Percent of nonaccredited hospitals surveyed increased .............. 5 

However, annual survey rate too low to sustain progress ........... 5 

S U MM A R Y ..................................................................... 9 

A G E N C Y C O M M EN T S .....................................................11 

A PP EN D IXE S ................................................................15 

A:  Methodology ........................................................15 

B: Critical access hospitals ...........................................17 

A C K NO WL  E D G M E N T S  ....................................................18 

E N D  N O T ES ..................................................................19
   I N T R O D U C T I O N  

OBJECTIVE 
To assess the extent to which the frequency of short-term acute care 
nonaccredited hospital surveys has changed since the 1999 Office of 
Inspector General (OIG) reports on hospital oversight. 
BACKGROUND 
In 1999, OIG released a series of reports on the external review of 
quality oversight in hospitals.  This report serves as a followup to one of 
the reports in that series entitled The External Review of Hospital 
Quality: The Role of Medicare Certification, OEI-01-97-00052.  Since 
that series, increasing attention has been paid to the importance of 
assuring safety and quality in hospital care. In 1999, the Institute of 
Medicine released the report, To Err is Human, in which it estimated 
that as many as 98,000 patients die each year from medical errors that 
occur in hospitals. A study released in 2003 found that medical injuries 
that occurred during hospitalization pose a significant threat to length 
of stay and increased medical expenses and mortality for patients.1 In 
addition, a 2002 survey of hospital risk managers reports that 
preventable harm is not consistently and thoroughly disclosed to 
patients.2 
Medicare Certification and Hospital Accreditation 
For hospitals to receive Medicare reimbursement, they must 
demonstrate to the Centers for Medicare & Medicaid Services (CMS) 
their initial and ongoing ability to meet a set of minimum quality and 
safety standards, referred to as the conditions of participation.3 
Hospitals can choose one of two ways to do this. They can either pay for 
accreditation by the Joint Commission on Accreditation of Healthcare 
Organizations (hereafter referred to as Joint Commission) or the 
American Osteopathic Association, or they can receive certification from 
the State survey and certification agencies at no charge.4 Accrediting 
organizations survey hospitals every 3 years. 
While about 83 percent of the nations 4,020 acute care hospitals choose 
accreditation, the remaining 17 percent are certified rather than 
accredited. These hospitals are commonly referred to as nonaccredited 
hospitals. Nonaccredited hospitals play an important role in the health 
care system by providing care in areas that are often rural and remote.5 
Nonaccredited hospitals demonstrate their compliance with conditions 
of participation to CMS by receiving Medicare certification through 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  1  I N T R O D U C T I O N  
surveys that State agencies conduct under CMS funding and guidelines. 
CMS does not charge hospitals for these surveys.6 
Medicare Certification and Complaint Surveys    
Certification and complaint surveys are CMSs and the State agencies 
main tools to ascertain whether nonaccredited hospitals meet Federal 
health, safety, and program standards.  Because private accreditation 
organizations do not oversee nonaccredited hospitals, CMS relies on 
information from State surveys to determine that these hospitals are 
qualified to serve Medicare patients.  State agencies conduct these 
surveys on behalf of CMS according to procedures outlined in CMSs 
State Operations Manual.7 
State agencies use complaint (allegation) surveys as another mechanism 
to oversee hospitals.  State agencies are responsible for investigating 
complaints at both accredited and nonaccredited hospitals.  Complaints 
may originate from a variety of sources including in person, by phone, in 
writing, or from newspaper or magazine articles.  Though certification 
surveys are always announced, complaint surveys are unannounced.  
Complaint surveys do not substitute for a standard survey.  These 
surveys cover only conditions of participation related to the complaint, 
although surveyors may expand the scope if they find other unmet 
conditions during their focused investigation.8 
CMS State Survey and Certification Budget Call Letter 
Each year CMS establishes the priority for survey and certification 
activities for all types of facilities in its Budget Call Letter to the State 
survey agencies.  The States use that information to prepare their 
yearly budget requests for survey and certification activities. Starting 
with the 2001 Budget Call Letter, CMS increased the guidelines for the 
percent of all nonaccredited hospitals that it expects States to survey 
annually to 33 percent, up from 15 percent in 1997 and 11 percent in 
2000. 
Prior Work 
In 1999, OIG released a series of reports that identified strengths and 
limitations in CMSs oversight of both accredited and nonaccredited 
hospitals.  One of these reports, which focused on short-term acute care 
nonaccredited hospital certification, found that CMS and State agencies 
placed a low priority on the large and growing backlog of nonaccredited 
hospitals that had not been surveyed within 3 years. Although the 
Joint Commission had established a period of 3 years between surveys 
as the industry standard for accredited hospitals, CMS did not hold 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  2  II NN TT RR OO DD UU CC TT II OO NN
nonaccredited hospitals to that standard. In 1997, 50 percent of short-
term acute care nonaccredited hospitals had not been surveyed within 
3 years. At the time, CMS funded hospital survey activity at a level 
that would allow for surveying nonaccredited hospitals once every 
10 years. In contrast, the funding for home health agencies allowed for 
surveying facilities once every 18 months. The reports found that most 
of CMSs hospital survey budget was dedicated to investigations of 
complaints and serious incidents, which CMS considered a priority. The 
reports also found that CMS did little to hold the State agencies 
accountable for their performance in overseeing hospitals. 
Based on this assessment, OIG recommended that CMS determine the 
appropriate minimum cycle for conducting certification surveys of 
nonaccredited hospitals. In a written response to the report, CMS 
committed to surveying all nonaccredited hospitals as frequently as 
accredited hospitals (every 3 years) as well as to obtaining the funds 
necessary to establish a more frequent survey cycle. 
METHODOLOGY 
We based our analysis of certification and complaint surveys for 
nonaccredited hospitals on two sources of data: the Online Survey 
Certification and Reporting System (OSCAR) data and CMSs State 
Survey and Certification Budget Call Letters. 
OSCAR Data. We analyzed OSCAR data, which compiles the results of 
certification as well as complaint surveys for nonaccredited hospitals. 
Our survey analysis is based on data downloaded in July 2004. The 
OSCAR system, at any given time, only contains survey information for 
each hospitals four most recently conducted certification surveys. Data 
are not retained for surveys conducted before the most recent four 
surveys for each hospital. Because of this limitation, the data in the 
OSCAR system available for this follow-up report lack the historical 
survey data used for the original study. Therefore, we used the OSCAR 
data pulled for the original inspection for years 1995, 1996, and 1997. 
As with the previous inspection, this analysis looked only at short-term 
acute care hospitals, which represent 72 percent of nonaccredited 
hospitals. We did not include long-term care, rehabilitation, psychiatric 
or childrens hospitals in our analysis so that we could make more 
accurate comparisons to our previous work. Furthermore, we did no 
analysis on the survey frequency of these other types of nonaccredited 
hospitals. States are responsible for surveying all nonaccredited 
OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  3  II NN TT RR OO DD UU CC TT II OO NN
hospitals in the Budget Call Letter, and we recognize this as a 
limitation of our analysis. 
Our analysis of hospital complaints is based on OSCAR data 
downloaded in February 2004. These data reflect complaints for all 
hospitals. Though not all complaints are entered into the OSCAR 
system, the system does contain all complaints that require States to 
conduct onsite surveys. For more detail on our OSCAR analysis, see 
Appendix A. 
Budget Call Letters. We reviewed the Budget Call Letters from 1999 
through 2004. 
We conducted this inspection in accordance with the Quality Standards 
for Inspections issued by the Presidents Council on Integrity and 
Efficiency. 
OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  4  F I N D I N G S  
  F I N D I N G S

In 2003, States surveyed 79 percent of  Our previous report showed that 
short-term acute care nonaccredited  the percentage of short-term acute 
care nonaccredited hospitals States 
hospitals within 3 years compared with  
surveyed within 3 years fell from  
50 percent in 1997 
72 to 50 percent between 1995 and 
1997. In response to our original report, CMS committed to surveying 
all nonaccredited hospitals every 3 years, the same frequency as that 
established by the Joint Commission for accredited hospitals.  In 2001, 
States surveyed 49 percent of short-term acute care nonaccredited 
hospitals within 3 years. This number grew to 62 percent in 2002, and 
79 percent in 2003.  Like our previous report, this analysis includes 
only short-term acute care nonaccredited hospitals, which represent 
72 percent of nonaccredited hospitals. 
The remaining 21 percent of short-term acute care nonaccredited 
hospitals that had not been surveyed within 3 years in 2003 lacked 
routine oversight to ensure that they meet Federal health and safety 
standards. Furthermore, 12 percent (80 hospitals) had not received a 
State survey within 5 years. Of the 44 States with short-term acute 
care nonaccredited hospitals in 2003, 29 States had at least 1 hospital 
that had not been surveyed in 3 years and 1 State had as many as   
21 hospitals not surveyed within a 3-year timeframe. 
However, the national annual survey rate is too 
 The national annual survey 

low to sustain this progress  rate reflects the number of 
short-term acute care 
nonaccredited hospitals surveyed each year divided by the total number 
of such hospitals in all 50 States in each fiscal year.  To ensure that all 
short-term acute care nonaccredited hospitals are surveyed once every  
3 years, at least 33 percent of hospitals should be surveyed each year 
over a 3-year period, assuming that the number of hospitals does not 
change and no hospital is surveyed more than once.  In 2001, States 
surveyed 25 percent of short-term acute care nonaccredited hospitals 
nationally. The national annual survey rate grew to 28 percent in 2002. 
However, States surveyed only 21 percent of such hospitals in 2003.  
(See Table 1 on the following page.)  Unless the national annual survey 
rate for short-term acute care nonaccredited hospitals increases, States 
will be unable to maintain a survey frequency that ensures that these 
hospitals are surveyed once every 3 years.  
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  5  FF II NN DD II NN GG SS
  
Table 1. National Annual Survey Data: 2000-2003 
Short-Term Acute Care Nonaccredited Hospitals 
2000  2001  2002  2003 
National annual survey rates for 
short-term acute care  19%  25%  28%  21% 
nonaccredited hospitals 
National annual number of short-
term acute care nonaccredited  196  231  212  134 
hospital surveys 
National number of short-term 
acute care nonaccredited  1,044  908  766  640
hospitals 
Source: OIG analysis of OSCAR data and Budget Call Letters, 2004.
Several factors contributed to these declines in surveys for short-term 
acute care nonaccredited hospitals: 
Conversions to critical access hospitals necessitated additional 
surveys by State agencies. The number of nonaccredited hospitals 
decreased from 1,361 to 640 between 1997 and 2003. During this 
period, many nonaccredited hospitals converted to critical access 
hospitals. Participating States can grant critical access hospital 
status to certain limited service rural hospitals that participate in 
the Rural Hospital Flexibility Program, which the Balanced Budget 
Act of 1997 established to promote health care delivery in rural 
areas. (See Appendix B for more detailed information.) Incentives 
exist for eligible nonaccredited hospitals to convert: cost-based 
reimbursement from Medicare, rather than prospective payment; 
partnerships with acute care hospitals for support and expansion of 
services; and capital improvement costs included when determining 
Medicare reimbursement.9 Between calendar years (CY) 
2000 and 2003, the number of critical access hospitals increased 
from 318 to 855.10 Likewise, the number of States with such 
hospitals rose from 35 to 45 between CY 2000 and CY 2003. 
These conversions add more surveys to States already full workload. 
In the fiscal year (FY) 2001 Budget Call Letter, CMS calls for States 
to survey 33 percent of approved critical access hospitals annually, 
the same survey frequency as nonaccredited hospitals. CMS 
considers critical access hospitals the same priority level as 
OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  6  F I N D I N G
 S  
nonaccredited hospitals.  However, CMS also requires an initial 
survey for each hospital that chooses to convert to a critical access 
hospital.  In addition, CMS expects them to be resurveyed 1 year 
after their conversion survey. 
Other surveys take priority over nonaccredited hospital surveys. 
Between FY 1997 and FY 2003, the number of hospital complaints that 
required an onsite survey at any hospital, accredited or nonaccredited, 
grew 79 percent, from 2,079 to 3,721.  Responding to complaints and 
adverse events remains as high a priority among State survey and 
certification activities as it was in 1997.  In CMSs FY 2003 Budget 
Call Letter, complaint surveys are given the highest priority after 
surveys of facilities with legislatively mandated survey cycles.  This 
places complaint surveys at a higher priority than surveys of 
nonaccredited hospitals. 
CMS also expects States to allocate resources to surveying facilities 
with legislatively mandated survey cycles before surveying 
nonaccredited hospitals. These mandated priorities for Medicare 
include annual certifications of nursing homes, certifications of home 
health agencies within 3 years, and validation surveys of accredited 
hospitals.11  For Medicaid, they include annual certifications of nursing 
homes and annual certifications of intermediate care facilities for 
people with mental retardation.  Nursing home surveys represent the 
largest and most predictable part of the States survey workload.  In 
1998, States conducted 12,555 nursing home certification surveys. In 
2001, this grew to just over 15,000 nursing home surveys, a 20 percent 
increase.12 
Budget Call Letter Language. CMS committed to establishing a 
more frequent survey cycle for nonaccredited hospitals so that they 
would be surveyed with the same frequency that the Joint Commission 
accredits hospitals. Hospitals accredited by the Joint Commission are 
surveyed on a 3-year cycle, but CMS did not establish a 3-year survey 
cycle for nonaccredited hospitals.  Rather, the CMS Budget Call Letter 
since 2001 has called for States to annually survey 33 percent of all 
nonaccredited hospitals, up from the previous rates of 15 percent in 
1997 and 11 percent in 2000.13  Though on the surface it might appear 
that this language is equivalent to a 3-year survey cycle, this is not the 
case.  By repeatedly surveying some hospitals and not surveying 
others, it may be possible for States to consistently meet the 33 percent 
annual survey rate for their nonaccredited hospitals but at the same 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  7  F I N D I N G S  
time not survey all nonaccredited hospitals within 3 years. 
Resurveying the same nonaccredited hospitals may be appropriate in 
some cases to ensure safety and quality.  However, the annual survey 
percentage called for in the Budget Call Letter does not account for 
such additional surveys in the annual 33 percent determination. 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  8    S U M M A R Y  

SUMMARY 
Certification and complaint surveys remain the principal way that CMS 
and State agencies can ascertain whether nonaccredited hospitals meet 
Federal health, safety, and program standards.  While the percent of 
short-term acute care nonaccredited hospitals surveyed within 3 years 
has increased, the national annual survey rate has dropped and is now 
too low to sustain this progress.  To ensure that all short-term acute care 
nonaccredited hospitals are surveyed once every 3 years, at least 33 
percent of hospitals should be surveyed each year over a 3-year period, 
assuming that the number of hospitals does not change and no hospital is 
surveyed more than once. 
AGENCY COMMENTS 
CMS agreed that recent survey rates make sustained improvement in the 
percent of short-term acute care nonaccredited hospitals surveyed within 
3 years uncertain. It further noted that it has additional survey 
responsibilities and that resources are limited. 
CMS identified adjustments it will make in response to our report. First, 
it will lower the priority of its earlier commitment to survey 
nonaccredited hospitals once every 3 years.  It will also create a new, 
higher priority goal of surveying nonaccredited hospitals an average of 
every 4.5 years. Further, it will require States to target certain hospitals 
that are more likely to have systemic quality problems for more frequent 
surveys. Finally, it will add a performance standard for States to ensure 
that the top priority survey frequencies are met.  For CMSs complete 
comments, see page 11 of this report. 
OIG RESPONSE 
We are pleased that CMS agrees with our summary that although the 
percentage of short-term acute care nonaccredited hospitals surveyed 
within 3 years has improved, recent national annual survey rates raise 
concern that the improvement may not be sustainable.  However, CMS 
also proposes changes to the survey commitment it made in response to 
the OIGs previous report (that it survey nonaccredited hospitals every 
3 years, which is the same frequency as that of the Joint Commission).  
We acknowledge that CMS faces resource limitations.  However, we 
remain concerned that its adjustments could result in some nonaccredited 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  9  S U M M A R Y  
hospitals operating without a survey for considerable lengths of time. 
Because CMS proposes an average of 4.5 years between surveys, by 
definition the gap between surveys at some nonaccredited hospitals will 
exceed that length of time, and some could exceed it by a considerable 
number of years. 
At the same time we appreciate the role that targeting some hospitals for 
more frequent surveys can serve in protecting Medicare beneficiaries. 
Furthermore, we also appreciate CMSs addition of performance 
standards for States.  
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  10  A G E N C Y   C O M M E N T S
  A G E N C Y   C O M M E N T S  

  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  11  A G E N C Y   C O M M E N T S

  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  12  A G E N C Y   C O M M E N T S

  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  13  A G E N C Y   C O M M E N T S

  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  14    A P P E N D I X   ~   A   M E T H O D O L O G Y

OSCAR Data.  We included short-term acute care nonaccredited hospitals 
participating in Medicare on the first day of each FY in our analysis.  To 
further refine the list of active nonaccredited short-term acute care 
hospitals, we removed data on certain hospitals from OSCAR:  those 
listed in OSCAR as leaving the program before the first day of the FY; 
those that entered the Medicare program after the first day of the  
FY accredited; those accredited by the Joint Commission; those that were 
 Table 2.  Short-term Acute Care Nonaccredited Hospitals 
Dropped from Dataset 
Fiscal Year  2000  2001  2002  2003 
Original Nonaccredited 
1,908  1,908  1,908   1,908 
Hospital Count 
Nonaccredited hospitals that 
left program before 1st day of  609  779  941   1,099 
given fiscal year 
Nonaccredited hospitals that 
entered program after 1st day  185  151  128  96 
of given fiscal year 
Joint Commission accredited   43    44    46  47 
U.S. territories   23    24    24  23 
Hospitals that did not bill 
 4  2  3  3 
Medicare for 2 years
Final Nonaccredited 
1,044  908  766  640
Hospital Count 
Source:  OIG analysis of OSCAR and CMS Customer Information System data, 2004. 
located in U.S. territories; and those that did not bill Medicare for  
2 consecutive years.  (See Table 2 above.) 
We used FYs to determine the annual number of hospitals and the 
elapsed time since their most recent surveys.  Annual nonaccredited 
hospital totals for each FY reflect hospitals listed in OSCAR as active on 
the first day of each FY.  Elapsed time since each hospitals most recent 
survey reflects the time between October 1st of the relevant FY and the 
most recent prior survey.   
We removed hospitals that were listed on the Joint Commissions Web 
site as accredited and that went 5 or more years without a survey. 
We compared our FY lists of active hospitals against CY billing data from 
the CMS Customer Information System (HCIS).  If a hospital on the 
OSCAR list had not billed Medicare in 2 years, the hospital was removed 
from the list.  We checked our active nonaccredited hospital lists from 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  15  A P P E N D I X   ~   A   M E T H O D O L O G Y  
OSCAR for FYs 2000 through 2003 against HCIS billing data for  
CYs 1998 through 2002. 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  16    AA PP PP EE NN DD II XX    ~~    BB   

Critical Access Hospitals 
States can designate critical access hospitals (CAH) as those limited-
service hospitals participating in a program developed to strengthen rural 
health providers.  A hospital can convert to CAH status if the State in 
which it is located has a Medicare Rural Flexibility Program approved by 
CMS. Under this program, a hospital that meets the State CAH 
eligibility requirements can convert to CAH status through a State survey 
or through accreditation. 
CMS requires CAHs to meet a more limited set of conditions of 
participation compared to those of hospitals.  Upon converting to CAHs, 
facilities also receive different provider numbers to reflect the CAH 
designation. CMS requires an initial survey for each hospital that 
chooses to convert to a CAH.  A 1-year follow-up survey will occur to 
ensure continued compliance with the conditions of participation.  After 
this followup, the CAH will be on the same survey cycle as other 
nonaccredited hospitals, 33 percent annually. 
Hospitals that do convert to CAH status receive cost-based 
reimbursement, as well as other financial incentives.  The CAHs are 
required to enter into agreements with a larger hospital.  The program 
was intended to strengthen rural health care by encouraging the 
development of stronger networks for the provision of health care in rural 
areas. 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  17     A C K N O W L E D G M E N T S  

This report was prepared under the direction of Joyce M. Greenleaf, 
Regional Inspector General for Evaluation and Inspections. Other 
principal Office of Evaluation and Inspections staff who contributed 
include: 
Danielle Fletcher, Team Leader 
Steve Keenan, Lead Analyst 
Bambi Straw, Program Specialist 
Tricia Davis, Director, Medicare and Medicaid Branch 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  18    E N D   N O T E S  

1  Zhan, Chunliu and Miller, Marlene.  Excess Length of Stay, Charges, 
and Mortality Attributable to Medical Injuries During Hospitalization. 
Journal of the American Medical Association. 2003; 290:1867-1874. 
2  Lamb, RM, Studdert, D, Bohmer, R., Berwick, D, and Brennan, T. 
Hospital Disclosure Practices:  Results of a National Survey. Health 
Affairs. 2003; 22: 73-83. 
3  Hospital Conditions of Participation:  42 CFR  482.11-482.13; 
42 CFR  482.21-482.45; 42 CFR  482.51-482.57.  These cover basic 
hospital functions, including staffing and clinical services, as well as 
administrative concerns, such as compliance with Federal, State, and 
local laws. 
4 Pursuant to the Social Security Act, hospitals are deemed to be in 
compliance with the conditions of participation with either the Joint 
Commission or American Osteopathy Association accreditation.     
(42 USC  1395bb). 
5  Institute of Medicine.  Medicare:  A Strategy for Quality Assurance, 
Volume I.  Washington, D.C.:  National Academy Press, 1990. 
6  Hospital Conditions of Participation:  42 CFR  482.11-482.13; 
42 CFR  482.21-482.45; 42 CFR  482.51-482.57. 
7  Centers for Medicare & Medicaid Services.  State Operations Manual 
(CMS-Pub. 7). 
8 Ibid. 
9  Rural Assistance Center: 
www.raconline.org/info_guides/hospital/cahfaq.php. 
10 This total includes both nonaccredited critical access hospitals and 
accredited critical access hospitals listed in HCIS that billed Medicare 
in CYs 2000 and 2003.  
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  19  11 CMS FY 2004 State Survey and Certification Budget Call Program 
Requirements and Budget Guidelines. 
12 Department of Health and Human Services, Office of Inspector 
General, Office of Evaluation and Inspections.  Nursing Home 
Deficiency Trends and Survey and Certification Process Consistency. 
OEI-02-01-00600. March 2003. 
13 The Budget Call Letters do not specify a dollar amount to accomplish 
this task, nor do States account for the funds by survey type.  
Therefore, it is difficult to assess if States received sufficient funds to 
meet this guideline. 
  OEI-01-04-00020  CMS OVERSIGHT OF SHORT-TERM ACUTE CARE NONACCREDITED HOSPITALS  20