Department  of  Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
THE  PEER  REVIEW  ORGANIZATIONS 
AND  STATE  MEDICAL  BOARDS: 
A  VITAL  LINK 
A  MANAGEMENT  ADVISORY  REPORT 
APRIL  1993 
 OFFICE  OF INSPECTOR  GENERAL 
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 three OIG  operating  components:  the Office of Audit  Services, the 
Office of Investigations,  and the Office of Evaluation  and Inspections.  The OIG  also informs 
the Secretary of HHS  of program and management problems and recommends courses to 
correct  them. 
OFFICE  OF AUDIT  SERVICES 
The OIGs  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 
assessmentsof HHS  programs and operations  in order  to reduce waste, abuse, and 
mismanagement and to promote  economy and efficiency throughout  the Department. 
OFFICE  OF INVESTIGATIONS 
The OIGs  Office  of Investigations  (01)  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 01 lead to criminal  convictions, 
administrative  sanctions, or civil money penalties.  The 01 also oversees State Medicaid  fraud 
control  units which  investigate and prosecute fraud and patient  abuse in the Medicaid  program. 
OFFICE  OF EVALUATION  AND  INSPECTIONS 
The OIGs  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 these inspection 
reports  generate rapid, accurate, and up-to-date  information  on the efficiency, vulnerability, 
and effectiveness of departmental  programs. 
This report  was prepared  under the direction  of Mark  R. Yessian, Ph.D., Regional  Inspector 
General,  and Martha  B. Kvaal, Deputy  Regional  Inspector  General,  Boston Region,  Office of 
Evaluation  and Inspections.  Participating  in this project were the following  people: 
Boston  Headquartem 
Russell W. Hereford,  Ph.D., Project Leader  Alan  S. Levine 
Joyce M. Greenleaf, Lead Analyst 
To obtain  a copy of this report,  call  the Boston  Regional  Office  at  (617)  565-1050.  Department  of  Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
THE  PEER  REVIEW  ORGANIZATIONS 
AND  STATE  MEDICAL  BOARDS: 
A  VITAL  LINK 
A  MANAGEMENT  ADVISORY  REPORT 
APRIL  1993  OEI-Ol-92-00530  EXECUTIVE  SUMMARY 
PURPOSE 
To review the status of Peer Review Organization  (PRO)  efforts to provide State 
medical boards with  information  about physicians responsible for substandard medical 
care. 
BACKGROUND 
The PROS identify  physicians responsible for serious quality-of-care  problems, but they 

seldom inform  State medical boards about these physicians.  In prior  reports, we have 

expressed concern that this lack of information  sharing inhibits  the boards 

effectiveness in protecting  Medicare  and Medicaid  beneficiaries  and other citizens of 

their  States. 

Most recently, in a 1990 report  entitled  State Medical  Boards and Medical 

Discipline,  we urged the passage of legislation  that would  require  PROS to share case 

information  with  boards when they send a first sanction notice to a physician. 

Congress passed such legislation  in 1990. 

FINDING 

l%e 1990 legislation has had little if any t#ect. 

The  1990 legislation  included  a provision that the case sharing occur after the PROS 

grant physicians notice and hearing.  Because of uncertainty  about the meaning of 

this notice and hearing provision, however, PROS still share little  information  with 

the boards. 

RECOMMENDATION 
The Health  Care Financing Admindration  should propme kgidation  manduting that 
PROSprovide case information  to State medical boar&  when thq  have confirmx&  after 
medical review, that a physician is mqxmsible for  medical mimanagement  resulting in 
s&nijicant  adverseejJect3on the patknt. 
This approach would  provide increased protection  to Medicare  beneficiaries  and rests 
on a solid overall rationale: 
It  limits  referrals  to serious quality-of-care  cases. 

b 
b  It  is clear-cut  and  workable. 

b  It  would  be fair  to physicians. 

b  It  would  provide  valuable  information  to boards. 

i  We received comments on the draft  report  from  the Health  Care Financing 
Administration  (HCFA),  Public Health  Service (PHS), and Assistant Secretary for 
Planning and Evaluation  (ASPE)  within  the Department.  The American  Medical 
Association  (AMA),  American  Medical  Peer Review Association  (AMPRA),  and 
American  Association  of Retired  Persons (AARP)  also provided  comments.  The full 
text of each comment  appears in appendix A. 
The HCFA,  ASPE, and the AMA  disagree with  our recommendation.  The HCFA 
believes that our recommendation  for legislation would  not solve the problem  because 
of the confusion created by the two current amendments.  The HCFA,  ASPE, and 
the AMA  believe that the pending fourth  scope of work,  and its efforts to foster a 
more cooperative relationship  between PROS and physicians, will  move toward 
achieving this goal. 
The PHS, AMPRA,  and AARP  concur with  our recommendation  to HCFA.  The 
PHS notes that a report  from  the PROS would  be consistent with  the requirements  for 
reporting  other types of peer review activity to the National  Practitioner  Data Bank 
(NPDB)  and should provide  useful information  for the State medical boards. 
We have retained  our recommendation  as presented in the draft  report. 
ii  TABLE  OF  CONTENTS 
Executive  Summary 

Introduction  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1 

PROS and State Medical  Boards 

A  Review of Recent History 

Finding  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3 

Recommendation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5 

CommentsontheDraft  Report  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7 

Appendices 

A.  Detailed  Comments on the Draft  Report  . . . . . . . . . . . . . . . . . . . . . . . .  A-l 
B.  Endnotes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  B-l  INTRODUCTION 
PURPOSE 
To review the status of Peer Review Organization  (PRO)  efforts to provide State 
medical boards with  information  about physicians responsible for substandard medical 
care. 
BACKGROUND 
PROS  and  State  Medical  Boards 
The PROS are organizations funded by the U.S. Department  of Health  and Human 

Services (HHS)  to determine  the appropriateness and quality  of medical  care provided 

to Medicare  beneficiaries.  They do this primarily  by reviewing samples of inpatient 

medical records against standards of established medical practice.  Once they 

confirm  that a physician is responsible for a quality-of-care  problem,  their  response 

depends on the seriousness of the problem.  Even in the most serious cases,however, 

their  response is almost always educational. 2  In fiscal year 1992, the PROS took the 

punitive  approach of recommending  that HHS  exclude a physician from  further 

participation  in the Medicare  and Medicaid  programs only 14 times.3 

The State medical boards license and discipline physicians.  Since 1965, when the 

Medicare  and Medicaid  programs were established, the Federal government  has relied 

upon them to determine  when physicians are legally authorized  to participate  in these 

programs and, when necessary, to discipline physicians.  Most boards initiate 

investigations of physicians primarily  on the basis of complaints  or referrals made to 

them.  The violations  they identify  sometimes involve quality-of-care  problems, but 

more often they concern drug and alcohol abuse, sexual misconduct, and criminal 

behavior.  Their  response ranges from  a license revocation to a letter  of warning.  In 

1991, the boards took  2,804 prejudicial  actions against physicians, of which 959 

involved a loss of license or license privileges and 1,110 involved a restriction  of 

license or license privileges.4 

A  Review  of Recent  History 
From  the beginning  of the PRO program  in 1984-86, we have been concerned that 
PROS seldom provide  the boards with  information  about physicians whom  they find  to 
be responsible for serious quality-of-care  problems.  We have held that this lack of 
information  sharing inhibits  the boards effectiveness in protecting  the citizens of their 
States.  Boards, we have pointed  out, may not even know the identity  of physicians 
whom  the PROS, after extensive medical review, have found  responsible for 
substandard or unnecessary medical care in one or more incidents. 
1 
 We first  addressed this issue in a 1986 report  entitled  Medical  Licensure and 
Discipline:  An  Overview (P-01-86-00064).  We addressed it again, more forcefully,  in 
a 1990 report  entitled  State Medical  Boards and Medical  Discipline  (OEI-Ol-89-
00560).  In that report  and in testimony before  Congress,5 we called for legislation 
mandating  that the PROS share case information  with  the boards when the first 
sanction notice is sent to a physician.  Such a notice rarely leads to an actual sanction 
referral  to the Federal government, but it does reflect  a PROs considered judgment 
about the quality  of medical care rendered to a patient.6  This recommendation  for a 
statutory  amendment,  which had considerable support, would  have addressed PROS 
concerns about how the sharing of case information  could violate  confidentiality 
requirements  under existing law.7 
In  1990, Congress passed legislation  calling for the PROS to share case information 
with  the boards.  The legislation was passed in response to concerns raised by us, the 
Federation  of State Medical  Boards, and others about the lack of information  sharing 
between PROS and boards. 
2 
 FINDING 

The 1990 legishrion has had little if any fleck 
b 
Upon  passage of the legislation, the Health  Care Financing Administration  (HCFA), 
which funds and oversees the PROS, followed  up by amending the PROS scope of 
work  to require  that they inform  boards of physicians to whom they have sent a first 
sanction notice.  Subsequently, however, HCFA  rescinded this requirement  in response 
to concerns that it was not in accordance with  the congressional stipulation  that the 
PROS must grant physicians notice and hearing before sending information  about 
them to the boards.  The New York  regional office of HCFA  characterized the 
legislation  as follows: 
The statutory provisions added by section 4205(d) of OBRA  90 about PRO 
responsibility  to notify  licensing bodies concerning certain PRO actions are 
inherently  inconsistent.  These provisions do not provide  clear authority  for the 
disclosure of information  other than sanction reports submitted  to the Secretary 
pursuant to section 1156 (b)(l)  of the Act.8 
The actual sharing of case information  still appears to be minimal,  even for the most 
serious cases. This was the clear message of a March  1992 report  of the Citizen 
Advocacy Center (CAC)  funded by the American  Association  of Retired  Persons 
(AARP).9  In that report,  the CAC  reviewed the recent experiences of 10 States 
where the PROS and medical boards had shown an interest in more active information 
sharing.  Among  those States, it found that only the Ohio PRO was sending much 
information  to the medical board. 
The CAC  extended its survey to all 50 States.  In a November  1992 report,  it 
confirmed  that little  information  exchange is taking place nationwide.  In addition  to 
Ohio, CAC  found  that only in Mississippi, New York,  and to a lesser extent Texas, are 
much data flowing  from  PROS to medical boards concerning physicians who might be 
candidates for  disciplinary  action. 
Ohios endeavor illustrates the potential  for  such an information  exchange.  From  May 
1990 until  April  1992, the Ohio PRO has referred  75 casesto the Ohio  medical board. 
Of these, the board has dismissed 13 without  any active investigation  and another 37 
after conducting some investigation.  The remaining  25 are in various stages of review, 
with  8 of them at an advanced stage involving the initiation  of a formal  action against 
a physician. i2 
The table on the next page summarizes the key actions from  1986 to 1991 related to 
PROS sharing information  with  medical boards. 
3 
 TABLE  I 

KEY  AClYIONS  CONCERNING 
THE  PRO-STATE  MEDICAL  BOARD  LINKAGE 
DATE  ACI-ION 
June  An OIG  report,  Medical Licensure and Discipline:  An Overview, concludes that 
1986  PROS are an unproductive  source of casesfor boards; recommends that PRO 
regulations  be amended to require more extensive and timely information  to boards. 
March  The HCFA  issues draft regulation  stating that PROS may without  a request, and must, 
1988  upon a request, disclose to boards confidential  information  relating  to a specific case 
(or) a possible pattern of substandard care. 
October  The HCFA,  in third  scope of work, calls for PROS to consider sharing confidential 
1988  case information  with boards when serious quality-of-care  problems are found under 
the quality  intervention  plan.  This serves to operationalize  the regulation  first issued 
in draft in March  1988. 
May Missouri  PRO indicates that 55 percent of the 38 PROS responding to a national 
1989  survey regarded their  relationship  with  the board to be good or excellent, but that 
about two-thirds  of the PROS still  had not reported any physicians to boards during 
the past 12 months. 
December  The AARP  convenes workshop to identity  ways of achieving closer ties between PROS 
1989 	 and boards.  The workshop included representatives of PROS and boards from 10 
States. Participants stressed need for clearer legislative or regulatory  direction  on what 
information  can be shared. 
August  An OIG  report, State Medical Boards and Medical Discipline,  finds that PROS still 
1990  refer few casesto boards.  In 8 sample States, only  1 of 188 disciplinary  actions taken 
by the boards is found to originate  from a PRO referral.  OIG  recommends legislation 
mandating that PROS share case information  with  boards when the first sanction notice 
is sent to a physician. 
December  Congress, in Omnibus Budget Reconciliation  Act, requires that PROS notify  boards of 
1990  physicians whom they have found responsible for serious quality-of-care  problems. 
Congress stipulates, however, that notification  is not to occur until  after notice and 
hearing are granted to the physicians involved. 
February  The HCFA  adds a provision  to an early draft of the fourth  scope of work stipulating 
1991  that once the PRO issues a first sanction notice to a physician, it must notify  the board 
of its findings and decisions. 
November  The HCFA,  in response to concerns expressed that the above-noted provision  does not 
1991  reflect the intent  of the 1990 legislation,  removed the provision  from that early draft 
fourth  scope of work. 
March  The Citizen Advocacy Center, sponsored by the AARP,  releases a report  providing 
1992  results of a survey of the 10 States that had participated  in the December 1989 AARP 
conference on PRO-board relationships.  The report concludes that, except in Ohio, 
very little  information  is being exchanged. 
November  The CAC publishes findings from a nationwide  survey.  The report concludes that, in 
1992  addition  to Ohio, only in Mississippi, New York,  and to a lesser extent Texas, is much 
data flowing  from the PRO to the board. 
4 
 RECOMMENDATION 
Ihe  Heal&  Care Financing Adminhution  shoukipmpme  legislation mandating that 

PROSpmvide case information  to State naedkal boar&  when they have con- afkr 

medical review, that a physician ir responsiblefor medical miwnanagement resulting in 

significant adverse#ects  on the patient. 

There  is considerable agreement that PROS should limit  their  referrals  to the State 

medical boards to casesinvolving serious quality-of-care  problems.  The problem  is in 

defining  at what point  in the PRO review process the referral  should be made. 

In our last report,  we identified  the first sanction notice as the best point  of referral. 

Such casesclearly are serious and would  have involved at most a few hundred 

referrals  a year in the entire  country.  Congress took  the same approach, but in 

drafting  the legislation  added a hearing requirement  that in effect has precluded 

HCFA  from  requiring  that information  be shared at the point  of the first sanction 

notice.  In fact, at least one major  State medical society has argued that the legislatic3n 

allows for  a PRO to refer  a case to a board only when it makes a fina2 sanction 

recommendation  after all due process procedures are carried out.13 As we noted 

earlier,  there were only 14 such referrals made in FY  1992. 

We now recommend  that the PROS share case information  with  the boards at the 

point  when they have confirmed,  after medical review, that a physician is responsible 

for medical mismanagement resulting in significant adverse effects on the patient.  The 

HCFA  would  need to specify what the case information  would  include, but it could 

include not only demographic  information  on the physicians but also information  on 

the type of quality-of-care  problems involved and even the locations at which the 

problems  occurred. 

If  our recommendation  were enacted, information  sharing between PROS and boards 

would  involve a limited  number  of cases. Based on the recent efforts  of the PROS, 

enactment of our recommendation  would  result in perhaps 1,000 to  1,500 referrals for 

the entire  nation.14 This is more than the few hundred expected if our prior 

recommendation  had been enacted as we intended, but it is still quite modest in view 

of the more than 400,000 patient-care  physicians in the United  States.  This approach 

would  provide  increased protection  to Medicare  beneficiaries  and rests on a solid 

overall rationale  as indicated below. 

It  hit3  refer-ah to serious quality-of-care cases. It is clearly a serious case when PRO 

physician consultants have determined  that a physician is responsible for care 

contributing  to significant patient  harm. %  Although  it does not necessarily follow 

that such a physician is incompetent  or should be investigated or disciplined  by the 

State medical board, it certainly is reasonable to send a report  on him or her to the 

State board responsible for protecting  the public from  substandard medical care. 

5 
 It  ir clearcut  in intent and work-able. Making  a judgment  on whether  a physician is 
responsible for medical mismanagement resulting in patient  harm is clearly a part of 
the PROS responsibilities.  Under  our recommendation,  the PRO would  automatically 
inform  the board once it confirmed  and documented patient  mismanagement  resulting 
in significant  adverse effects on the patient.16 
It  wouiZ be fair  to the physicians.  The PROS determinations  in these casesare made 
only after PRO physicians have reviewed the relevant case information  and after the 
physicians under review have been granted an opportunity  to explain the medical care 
being questioned.  If  a State medical board then decides to pursue the case, the 
physician is, of course, entitled  to the full  range of due process and appeal rights 
granted under State law. 
It  woz&provide  valuable infomation  to the boards.  From  the boards perspective, the 
PRO referrals would  facilitate  reviews of quality-of-care  casesbecause they are based 
on prior  medical judgments  of physician reviewers.  Even when such casesdid not 
result in a disciplinary  action, they would  provide information  that boards could 
incorporate  in a computer  data base to develop a profile  of at-risk physicians.  Such 
information  could provide valuable markers on the kind  of preventive efforts boards 
could take to avert the need for  disciplinary  action. 
6 
 COMMENTS  ON  THE  DRAFT  REPORT 
We received comments on the draft  report  from  the Health  Care Financing 
Administration  (HCFA),  Public Health  Service (PHS), and Assistant Secretary for 
Planning and Evaluation  (ASPE)  within  the Department.  The American  Medical 
Association  (AMA),  American  Medical  Peer Review Association  (AMPRA),  and 
American  Association  of Retired  Persons (AARP)  also provided  comments.  The full 
text of each comment  appears in appendix A. 
Health  Care  Financing  Administration 
The HCFA  disagrees with  our recommendation  for three reasons.  First, it believes 
that our proposal for legislation would  not solve the problem  because of the 
confusion created by the two current  amendments.  Second, it does not believe that 
every initial  violation  or proposed action against a physician should be reported  to 
State medical boards.  Third,  it is concerned that such a requirement  could damage 
the cooperative relationship  between PROS and physicians that HCFA  is seeking to 
foster under the fourth  scope of work. 
With  regard  to the first point,  if the language  we propose  is insuficient,  we offer  to work 
with  HCFA  to draft  legislative  language  that  would  alleviate  the problem. 
With regard  to the second point,  we agree that  actions  brought  against  a physician  that 
are resolved  on  the basis of evidence presented  to the PRO  should  not  be reported  to the 
State medical  board.  We recommend  that  PROS share  case information  with  medical 
boards  only for  those cases that  are judged  to have significant  adverse impacts  on patients. 
This referral  would  take place  after  a physician  has interacted  with  PRO physicians  and 
after  PRO physicians  have determined  that  this is a serious quality-of-care  problem  that 
requires  attention,  but  before  a formal  sanction  recommendation  to the  OIG.  The boards 
already  receive information  on malpractice  claims  and  hospital  adverse actions  against 
physicians.  It  clearly  makes sense for  the boards  to receive information  from  the PROS 
when  they confirm  serious quality-of-care  problems  after  medical  review. 
With  regard  to the third  point,  we recognize  that  the fourth scope of work  contains 
substantial  changes  in the role  of the PROS.  We have included  revisions  in our  endnotes 
to reflect  the final  request for proposals  that  HCFA  issued for  this contract.  The fourth 
scope will focus  on pattern  analysis  and  information  sharing  as a way of improving  overall 
patient  outcomes  and  the quality  of care.  We applaud  broad-based  efforts  to improve  the 
quality  of care for  Medicare  beneficiaries  and for  the population  at large. 
Notwithstanding  HCFA  s new  approach,  the PROS continue  to have a critical 
responsibility  to protect  the health  of Medicare  beneficiaries.  This responsibility  may  call 
for  taking  action  against  individual  physicians  who  have significant  deficiencies  in their 
PRO
medical  knowledge  and/or  practice  skill&  and  it may  mean  that  the  needs to share 
information  about  these practitioners  with  the medical  board. 
7  Public  Health  Service 
The PHS concurs with  our recommendation  to HCFA.  The PHS notes that a report 
from  the PROS would  be consistent with  the requirements  for reporting  other types of 
peer review activity to the National  Practitioner  Data Bank (NPDB)  and should 
provide  useful information  for the State medical boards. 
We appreciate  the PHS  positive  response.  We also wish  to note  that  the types of cases we 
recommend  be reported  to State medical  boards--cases  that  result  in significant  adverse 
effects on a patient--are  more  serious  than  many  of the malpractice  actions  required  to be 
filed  with  the NPDB. 
Assistant  Secretary  for  Planning  and  Evaluation 
The ASPE  does not support our recommendation.  It believes that memoranda  of 
agreement between PROS and State medical boards, required  under the fourth  scope 
of work, will  address the problem.  The ASPE also questions whether  our 
recommendation  would  lead to exchange of information  at a stage that is too early in 
the process. 
We believe that  it is important  to have in place  memoranda  of agreement  between  PROS 
and  State medical  boards  regarding  the exchange of information.  Unless they require  the 
exchange  of meaningful  and  useful  information,  such  memoranda,  in  and  of themselves, 
may  do  little  to address physicians  with  quality-of-care  problems.  Without  the legislative 
change  we recommend,  the information  exchanged  may have no  more  impact  than  it does 
at present. 
We disagree with  ASPE  that  our  recommendation  would  lead  to exchange  of information 
too  early in  the process.  Information  on these cases will  be shared  with  the State medical 
boards  only  after  they have been confirmed  through  medical  review  involving  the physician 
and  the PRO physicians. 
We also are concerned  that ASPEs  comments  may reflect  some misunderstanding.  We 
wish  to clanjcL that  this report  refers strictly  to the role  of State medical  boards,  not  to 
State medical  societies. 
American  Medical  Association 
The American  Medical  Association  supports, in principle,  efforts to improve  the 
sharing of case information  between PROS and State medical boards.  The AMA, 
however, disagrees with  our recommendation.  It believes that existing law and the 
pending fourth  scope of work  are adequate to achieve this goal. 
We disagree that  existing law  is adequate  to improve  this information  exchange.  The I990 
legislation  has had  little  effect, and  the actual  sharing  of case information  continues  to be 
minimal.  We are concerned  that  the PROS, during  the fourth  scope of work  with  its focus 
8  on improving  the mainstream  of care through  pattern  analysis,  may  neglect  to address 
serious quality-of-care  problems  that  require  disciplinary  action  against  individual 
physicians. 
American  Medical  Peer  Review  Association 
The American  Medical  Peer Review Association supports our recommendation  and a 
a legislative fix to OBRA  90 that would  correct the drafting  errors and render the 
language implementable. 
We welcome  AMPRA  s support  and find  it significant  that  the organization  representing 
the PROS regards the mandated  referral  to State boards  of serious quality-of-care  cases to 
be consistent  with  their  mission.  Such  a mandate  need not preclude  PROS from  stressing 
the educational  objectives  called for  under  the fourth  scope of work. 
American  Association  of Retired  Persons 
The American  Association  of Retired  Persons supports our recommendation.  It 
suggeststhat we call for HCFA  to either pursue the legislative amendment we identify, 
or use its rulemaking  authority  to achieve the desired result. 
We appreciate  the AARPs  positive  response.  In  its response to our recommendation, 
HCFA  cites confusion  created  by the existing  OBRA  90 amendments,  indicating  that 
regulatory  redress of this provision  will  not solve the problem.  Legislative  change  would 
make  it absolutely  clear  that  the type of information  exchange  we call for  is required. 
9 
 APPENDIX  A 
DETAILED  COMMENTS  ON THE  DRAFT  REPORT 
In this appendix we present the full  comments on the draft  report.  The comments 
presented in this appendix are from: 
Page 
The Health  Care Financing Administration  .............................  A-2 

The Public Health  Service  .........................................  A-6 

The Assistant Secretary for Planning and Evaluation  .....................  A-9 

The American  Medical  Association  .................................  A-13 

The American  Medical  Peer Review Association  .......................  A-15 

The American  Association  of Retired  Persons  ..........................  A-18 

A -1 
 Hearth  Care 
DEPARTMENT  OF HEALTH  & HUMAN  SERVICES  Finananq  Admfnlstratlon 
Memorandum 
sub,ecrOffice of Inspector  General  (OIG)  Draft  Management  Advisory  Report:  The  Peer 
Review  Organizations  (PRO)  and State Medicai  Boards: A  Vital  Link.!  OEI-01-92-00530 
To 	 Bryan  B. Mitchell 
Principal  Deputy  Inspector  General 
We have reviewed  the subject  draft  management  advisory report  which  concerns 
the status of PRO  efforts  to provide  State medical  boards with  information  about 
physicians responsible  for substandard  medical  care.  The  Omnibus  Budget 
Reconciliation  Act  of  1990 (OBRA  90) mandates that  PROS share information  with 
State medicai  boards. 
OIG  found  that  the  1990 legislation  mandating  this information  sharing has had 
little,  if any, effect  on improving  the reiease of information  from  PROS to State medical 
boards.  OIG  believes  that  PROS share little  information  with  the boards because the 
boards are uncertain  about  the meaning  of the notice  and hearing  provision  included  in 
OBRA  90. 
In response to the passage of OBRA  90, the Health  Care Financing  Administration 
(HCFA)  amended  the PROS scope of work  to require  that  they inform  State .Medical 
boards about  physicians to whom  they have sent a first  sanction  notice.  However. 
HCFA  later  rescinded  the requirement  in response to concerns that  the procedure  was 
not  in accordance with  the Congressionai  stipuiation  that  PROS must grant physicians 
notice  and hearing  before  sending  information  about  them  to the boards. 
OIG  recommends  that  HCFA  propose  legislation  mandating  that  PROS provide 
case information  to State medicai  boards when  they have confirmed,  after  medicai 
review,  that a physician  is responsible  for  medical  mismanagement  resulting  in significant 
adverse effects on the patient.  HCFA  does not concur with  the recommendation.  We 
beiieve  the proposed  legisiation  would  not correct  the confusion  created  by the existing 
OBRA  90 amendments  related  to this issue.  Our  specific  comments  are attached  for 
your  consideration. 
Thank  you  for  the opportunity  to  review and comment  on this draft  management 
advisory report.  Please advise us whether  you agree with  our position  on the reports 
recommendation  ar your  earliest  convenience. 
Attachment 
A-2 
 Comments  of the Heaith  Care  Financing Administration  (HCF.4) 
on the Office  of Insuector  General  fOIGI  Draft  Management 
Advisors  Reuort:  The  Peer Review Organizations  And  State 
,vedicai  Boards:  ,A Vital  Link.  OET-01-92-00530 
OIG  Recommendation 
HCFA  should  propose  legisiation  mandating  that peer review  organizations  (PROS) 
provide  case information  to State medical  boards when  they have confirmed.  after 
medical  review,  that  a physician is responsible for medicai  mismanagement  resulting  in 
significant  adverse effects on the patient. 
HCFA  Response 
HCFA  does not  concur  with  the recommendation.  Although  we do agree that  the 
provision  in the Omnibus  Budget  Reconciliation  Act  of  1990 (OBRA  90) relating  to this 
issue has had little  impact  we do not  beiieve OIGs  recommendation  would  solve this 
problem. 
The  proposed  legislation  does not address, and would  not  correct,  the confusion  created 
by the two current  amendments.  .Any proposed correction  should,  at a minimum, 
remove  the phrase  after  notice  and hearing  from  section  1154(a)(9)(B)  of the Social 
Security  Act  (the  Act),  and clearly  state that the PRO  is required  to report  to State 
medical  boards oniy  when it makes a recommendation  to OIG  for  sanctions. 
We do not believe  that  an expansion of the reporting  requirement  to require  PROS to 
report  every initiai  violation  or even every proposed action  against a physician should be 
considered.  .Many violations  are not actionable  by themselves,  and many actions brought 
against physicians on the basis of evidence initially  available  to the PRO  are resolved 
LIpon presentation  of additiona  evidence in the informal  discussion or reconsideration  bb 
the PRO.  In these cases. since the physician  was found  in compliance  with  the 
provisions  of section  1154 of the Act.  there  is no basis for  any report  to the State 
medical  board.  and any earlier  report  would  have to be corrected.  Therefore.  we do not 
believe  that  PROS shouid  report  physicians to State medicai  boards until  PROS are 
referring  a recommended  sanction  to OIG. 
HCFA  supports  an approach which  encourages PROS and State medical  boards to work 
cooperativeiy  and share information  in a way that heips each of them  carry out  their 
compiementary  functions.  The  proposed  legisiative  change could  damage the 
cooperative  relationship  benveen PROS and physicians that  HCFA  is attempting  to 
foster under  its new  Health  Care Quality  Improvement  Initiative. 
PRO  disclosure  of confidentiai  information  to State medical  boards  is currently 
regulated  in the Code  of Federal  Regulations  (CFR).  A  PRO  must  disclose information 
lIpon  request from  State or Federai  licensing  boards, and a PRO  may provide  such 
information  at its own  discretion  without  a formal  request  according  to 
A-3  Page 2 
12 CFR  476.138(a)(l  and 2).  HCFA  is currently  considering  ways to encourage 
information  sharing  between the PROS and medical  boards under  this reguiation. 
In this regard,  the PRO  confidentiality  regulations  are currently  being revised.  We wiii 
consider including  the requirement  of mandatory  disclosures to the licensing  boards 
without  a request  and clarification  on what  information  may  be disclosed to whom  and 
under what  circumstances. 
As a requirement  of the Fourth  Scope of Work  (SOW),  HCFA  is requiring  PROS to do 
the following: 
Meet  with  the State medical  board,  as well  as other  relevant  licensing 
0 	
agencies. near the beginning  of their  fourth  round  contracts.  to discuss the 
type of information  that wouid  be useful to the board  and the PRO; 
Establish  a memorandum  of agreement with  the board within  the 
0 	
first  60 days of the contract  to exchange agreed upon  information  within 
specific  timeframes;  and 
Implement  a process for  the  ongoing, routine  exchange of the agreed upon 
0 	
information  in conformance  with  confidentiality  and disclosure  requirements 
in the statute  and regulations. 
Additional  Comments 
Regarding  the OBRA  90 amendmenf  we note that whiie  the requirements  of 
section  1154(a)(9)(B)  of the Act  are on hold.  a provision  included  in our proposed 
regulation,  HSQ-135-F,  is consistent  with  section 4205(d)  of OBRA  90.  This part  added 
a new paragraph  (D)  to section  1160(b)(l)  of the Act  requiring  PROS to provide  notice 
to the State medical  board  when  the  PRO  submits a physician  sanction  recommendation 
to OIG.  The  provision  that wii1 be implemented  in HSQ-135-F  requires  a PRO  to 
provide  relevant  portions  of any PRO  sanction  report  forwarded  to OIG  to StatelFederai 
licensing  bodies  or national  accreditation  bodies if the report  concerns practitioners  or 
facilities  that  are subject  to the licensing  or accreditation  bodies jurisdiction. 
Page 1 - Background.  1st paragranh.  last sentence 
the number  12 the number  of cases that  OIG  agreed to effectuate  the recommended 
IS 
exclusion(s)?  Did  PROS recommend  sanction  in more  than  12 cases? 
A-4 
 Page 3 
Paee 3 - 1st paraerauh.  2d sentence 
HCFA  rescinded  the  requirement  because the statute was not clear  in its intent. 
Pace 4 - December  1990 Box 
There  is also a provision  for notification  when sanction recommendations  are sent to 
OIG. 
Page 4 - Februarv  1991 Box 
The  Fourth  SOW  requires  PROS to develop memorandums  of agreement  with  State 
licensing boards regarding  information  to be exchanged.  Also,  it requires  PRO 
notification  to boards when sanction  recommendations  are made  to OIG. 
Paee 5 - 3rd DaragraDh. last sentence 
Same comment  as page 1 - Background. 
Page A-l.  6 
The  following  language  should  be included  after  the word  violating,  in a gross and 
flagrant  manner  or  substantially  in a substantial  number  of cases. 
Page A-2.  15 
The next PRO  contracts  wiil  include  a significantly  different  approach  to quality  review. 
The focus of the quaiity  review will  be on:  (a) description  of the quality  concern, 
(b) outcomes,  (c) causality,  (d) source: and (e) type of deficiency.  We recently 
established  a Quaiity  Review Task  Force composed of representatives  from  the 
and 
4merican  Medical  Association,  American  Hospital  Association,  several PROS, 
HCFAs  central  and  regional  office  staffs.  The  task force  is to develop  consistent and 
uniform  methods  of  documenting  the quality  review process/findings  for  implementing 
the SOW  requirements. 
A-5 
 DEPARTMENT  OF HEALTH  8r HUMAN  SERVICES  Public  Health  Service 
Memorandum 
OCT  I 3 
Date    1992 
From 
Assistant  Secretary  for  Health 
Sublecr  Office  of  Inspector  General  (OIG)  Draft  Report  "The  Peer 
Review  Organizations  and  State  Medical  Boards:  A  Vital  Link" 
To  Acting  Inspector  General,  OS 
Attached  are  the  Public  Health  Services  (PHS)  comments  on  the 
subject  report.  Although  the  report  contains  no 
recommendations  for  PHS,  we  offer  general  comments  and  a 
series  of  technical  for  your  consideration. 
Attachment 
A-6 
 PUBLIC  HEALTH  SERVICE  (PHS)  COMMENTS ON THE  OFFICE  OF  INSPECTOR 
GENERAL  I OIG)  DRAFT  REPORT  "THE  PEER  REVIEW  ORGANIZATIONS  AND 
STATE  MEDICAL  BOARDS:  A  VITAL  LINE,"  OEI-01-92-00530 
General  Comments 
The  single  recommendation  in  this  report  is  not  directed  to  PHS. 
However,  we  have  reviewed  its  contents  and  concur  with  the 
recommendation  that  "the  Health  Care  Financing  Administration 
(HCFA)  should  propose  legislation  mandating  that  Peer  Review 
Organizations  (PRO)  provide  case  information  to  State  medical 
boards  when  they  have  confirmed,  after  medical  review,  that  a 
physician  is  responsible  for  medical  mismanagement  resulting  in 
significant  adverse  effects  on  the  patient."  Requiring  that  a 
report  be  filed  with  the  State  medical  board  after  a  medical 
review  is  consistent  with  requirements  for  reporting  other  types 
of  peer  review  activity  to  the  National  Practitioner  Data  Bank 
(NPDB).  Such  reports  from  the  PROS,  along  with  NPDB reports, 
should  provide  State  medical  boards  with  additional  useful 
information  for  conducting  their  proceedings. 
Technical  Comments 
Following  are  several  suggested  modifications  to  the  text  of  this 
draft  report. 
1. 	 The  first  paragraph  of  the  Background  section  in  the 
Executive  Summary  states  that  the  lack  of  PRO information 
reaching  State  medical  boards  inhibits  the  boards' 
effectiveness  in  protecting  Medicare  and  Medicaid 
beneficiaries  and  other  citizens  in  their  States.  We would 
suggest  that  the  report  state  that  the  lack  of  sharing  of 
PRO information  probably  inhibits  the  effectiveness  of  the 
boards. 
2. 	 The  report  states  on  page  1,  paragraph  3,  that  "The 
violations  they  (State  medical  boards)  identify  sometimes 
involve  quality-of-care  problems,  but  more  often  they 
concern  drug  and  alcohol  abuse,  sexual  misconduct,  and 
criminal  behavior."  It  may  be  more  appropriate  to  revise 
this  sentence  as  follows:  "The  actions  they  (boards)  take 
against  physicians  are  more  likely  to  be  based  on  drug  and 

alcohol  abuse,  sexual  misconduct,  and  criminal  behavior 

since  evidence  of  a  legal  nature  is  required  and  can  be 

obtained  and  used  in  such  cases."  State  practice 

legislation  requires  legal  evidence.  Proving  incompetence 

legally  is  very  difficult  and  thus  boards  are  often  less 

able  to  take  action  against  an  "incompetent"  practitioner.

Nevertheless,  PROS should  send  appropriate  information  to 

the  State  boards. 

A-7 
 2 

3. 	 The  same  concept  as  discussed  in  number  2  above  appears  on 
page  3,  paragraph  4.  Rather  than  repeating  the  same  wording 
regarding  the  boards,  we  would  suggest  that  the  report 
include  a  paragraph  near  the  beginning  that  identifies  legal 
requirements  facing  State  medical  boards  versus  the 
decision-making  of  the  PROS.  Emphasis  should  be  placed  on 
the  PROS providing  appropriate  material  to  the  boards. 
4. 	 On  page  5,  paragraph  4,  the  report  states  that  HCFA  would 
need  to  specify  what  information  PROS  should  send  to  the 
boards  which  " . ..couid  include..  .information  on  the  type  of 
quality-ofkare  problems  involved  and  even  the  Ioeations  at 
which  the  problems  occurred."  We suggest  that  the  report 
recommend  that  PROS be  required  to  provide  this  information. 
A-8 
 : 
5.  DEPARTMENTOFHEALTH  &HUMANSERVICES  Oftkeot meS~aemrv
:
5 d & 
-> -
'+a+27 
'*VW3 
Wasfmgton.  DC.  20201 
TO: 	 Bryan  Mitchell 
Pri  ncipai  Deputlr  Inspector  General 
FROM: 	 Assistant  Secretary  for 
Planning  and  Evaiuation 
SUBJECT: 	 OIG  Draft  Management  Advisory  Reports:  "The  Sanction 
Referral  Authority  of  Peer  Review  Organizationsfl  (OEI-
01-92-00250)  and  "The  Peer  Review  Organizations  and 
State  Medical  Boards:  A  Vital  Link"  (OEI-01-92-00530)
--  COMPENTS 
I  offer  the  following  comments  on  the  two  subject  draft  reports, 

which  I  have  linked  due  to  the  interreiatedness  of  their 

recommendations. 

In  the  first  report,  you  reviewed  the  sanction  referral  authority

of  peer  review  organizations  (PROS),  of  which  referral  to  state 

medical  boards  is  one  element.  You  recommended  several  policy

options  for  imDrovement,  including  a  recommendation  requiring

that  state  medical  boards  be  informed  whenever  a  serious  quality 

of  care  problem  is  confirmed  through  medical  review;  this  is  a 

lesser  standard  than  is  currently  in  place.  In  the  second 

report,  you  specifically  examined  the  low  frequency  with  which 

PROS referred  cases  involving  physicians  cited  for  poor  quality 

of  care  to  state  medical  boards.  You  reiterated  the 

recommendation  concerning  PRO-medical  board  contact  contained  in 

the  first  report. 

I  agree  with  the  observations  made  in  these  reports  that  the 

formal  sanction  referral  process  is  not  often  used. 

Nevertheless,  I  feel  that  the  process  is  critical  and,  with 

improvements,  some  of  which  you  propose  in  your  reports,  I 

believe  it  will  play  an  important  role  in  the  primarily

educational  efforts  of  the  PROS under  the  Fourth  Scope  of  Work 

(SOW).  I  have  the  following  comments  about  the  findings,  policy 

options  and  recommendations  of  your  reports. 

0 	 ReDeal  or  substantiallv  modifv  the  unwillino  or  unable 
reouirement.  (Policv  oution  1.  Reoort  on  the  Sanction 
Referral  Authoritv)  I  agree  that  the  additional  evidentiary 
hurdle  for  sanction  of  demonstrating.  that  a  physician  is 
either  unwilling  or  unable  to  comply  with  a  corrective 
action  plan  is,  at  present,  vague.  The  report  is  written 
from  the  perspective  of  complete  repeal,  however,  and  does 
not  idenrify  how  the  requirement  could  be  meaningfully 
modified.  I  suggest  that  you  clarify  better  why  the  recent 
legislative  change  --  defining  a  physician's  failure  to 
participate  in  a  car--W- mPtive  action  plan  (CAP)  as 
A-9  Page  2  - aryan  Yitchell 
d~ongtra~ed  unwillingness  cr  inability  compiy  --  is 
to 
inadequate.  Also,  I  urge  you  to  clarify  how  due  process 
protections  wouid  be  prese,?red  in  the  event  that  the 
requirement  was  modified  or  rapeaied. 
Increase  the  monetarr  cenait-7  sanction  substantiailv. 
(Poficv  ootion  2,  Reoort  on  the  Sanction  Referrai  Authorit-:' 
I  agree  that  this  is  an  important  policy  opticn,  and  believe 
that  it  would  be  a  desirable  alternative  for  the  PROS,  where 
patient  safety  would  not  be  compromised. 
'Police 
Eliminate  the  PROS'  sanction  referral  authoritv. 
This 
ootion  3,  Report  on  the  Sanction  Referral  Authorit-;) 
without  the  ability  to  impose 
is  a  theoretical  option  only: 
sanctions  in  the  face  of  aberrant  or  poor  quality  behavior, 
PROS woul2  have  little  clout  in  certain  circumstances  to 
I  would  oppose  this  proposai. 
influence  physician  behavior. 
lPolicv 
Provide  sanction  authcritv  direcfiv  to  the  PROS. 
The 
ootion  4,  Reoort  on  the  Sanction  Referral  Authorirv) 
are  artylal  two  alternatives to  OIG  administration  of  the
sanctionLLwseI   plv roce---_ ss.  _-- T---~_~h  e  first  is  to  decentralize  and , giv .e 
The
the  PROS the  direct  authority  to  ixIpose  sanctiors. 
second  is  to  move  the  authority  from  OIG  to  HCFE.. 
.s  ci .te
Decentralization  would  be  undesirable  for  the  reason 
,  wi .th 
Referral  Authority  report 
on  page  10  of  the  Sanction 
00
the  additional  concern  that  physician  exclusion  is  t 
the
serious  an  outcome  to  cede  without  central  review  to 
'eder *ai
PROS,  who  are  merely  the  contractual  agents  of  the  F
Government. 
having  HCFA  pursue  the  sanction
The  seccnd  alternative,  ~- z--- -a
actions,  also  may  not  be  desi:  rab.l e-,  b' ut  t"n e  report  aoes  IIUL
provide  sufficient  information  to  evaluate  whether  the  OIG 
choice  of  which  cases  to 
has  been  too  conservative  in  its 
pursue,  and  whether  this  restraint  --  rejecting,  for 
is
example,  8  of  12  cases  referred  to  it  in  FY  1991  -- 
itself  contributing  to  the  dwindling  number  of  cases 
It  appears  from  the 
proposed  for  sanctions  by  the  PROS. 
statistics  in  Appendix  B  that  the  PROS may  be  doing  a  bet',=r 
job  at  following  the  proper  procedures  for  developing  a 
solid  case.  No  justification  or  explanation  is  provided, 
however,  for  the  increasincr  rate  of  cases  rejected  by  the 
OIG  for  lack  of  medical  evidence  from  FY  1988  to  1991.  Why 
is  the  OIG  rejecting  the  medical  advice  of  the  PRO 
physicians?  The  reoort  would  be  substantially  strengthened 
by  an  objective  evaluation  of.the  cases  the  OIG  rejected, 
of  the  second  alternative. 
and  by  the  discussion 
Maintain  PROS'  sanction  referral  authoritv  as  it  exists  now. 
0 	
but  mandate  r=-+--p--r rais  tc  State  medical  boards  when  F?Os 
A-10  2age  3  - Zryan  Yitchell 
confirrn  seric~s  cualitv-of-care  nrcblems.  (Policv  ootion  5, 
Reoort  on  :he  Saner:sn  ?.eferrai  Aut,L=or:zv  and  recomendaticn 
of  reT30rf  "The  ?anr  Review  0raanizat:ons  and  State  Medicai 
Boards:  .A Vitai  Link"  !  I  do  not  support  this  prooosal 
for  seve ral  reasons.  I  would  agree  t&hat  the  PROS an5  the 
State  medical  boards  (and  hospital  licensure  authorities, 
etc.)  shouid  be  in  contact.  The  most  recent  -versions 
closer 
of  the  PRO Fourth  Scope  of  Work  include  requirements  that 
each  PRO  memoranda  of  agreement  (MOAs)  with  such 
develop 
entities,  within  60  days  after  the  effective  date  of  its 
contract,  for  the  purpose  cf  mutual  exchange  of  information 
and  data.  Such  mutual  exchange  is  far  more  likely  to 
contribute  to  improvement  of  quality  of  care  than  a 
legislated  requirement  for  unilateral  action. 
I  understand  t,hat  the  provision  of  the  1990  Omnibus  Budget
Reconciliation  Act  reguirlng  PROS to  share  case  information 
with  state  n,etiical  boards  has  not  been  imolemented  because 
it  is  unclear.  I  understand  that  a  technical  correction  to 
require  the  PROS to  inform  boards  when  a  sanction 
recommendation  is  sent  to  the  OIG  has  been  sought  but  that 
it  may  not  have  been  included  among  the  OBRA technicals  in 
the  tax  bill  that  will  be  sent  to  the  President  soon.  If  no 
action  has  been  taken  on  the  technical  change,  it  should  be 
advanced  again  in  the  next  session. 
It  is  not  clear  how  the  OIG's  proposal  would  differ  from  the 
technical  correction  being  sought  by  HCFA.  It  would  seem  to 
require  involvement  of  the  state  medical  societies  at  an 
earlier  stage,  prior  to  issuance  of  the  sanction 
recommendation  to  the  OIG  and  prior  to  the  physician  having 
the  full  opportunity  to  review  and  respond  to  the  concerns 
raised  by  a  PRO.  Except  for  clear  instances  where  patients 
are  in  immediate  danger,  it  does  not  seem  fair  or 
appropriate  to  essentially  initiate  a  parallel  investigation
by  the  medical  society  until  there  has  been  confirmation  of 
a  problem.  This  is  particularly  a  problem  in  those  states 
that  require  all  complaints  made  to  the  state  medical 
society  to  be  made  public,  including  reports  from  the  PROS. 
I  do  not  object  to  such  publicity  where  the  physician  has 
had  amole  opportunity  to  respond  to  the  PRO and  has  been 
unwilling  or  unable  to  cooperate  in  the  development  and 
execution  of  a  meaningful  corrective  action  plan.  However, 
such  publicity  is  probably  more  useful  as  a  potential 
sanction  than  as  a  context  for  obtaining  physician
cooperation  for  changed  behavior. 
Furthermore,  It  is  curious  that  the  OIG  is  calling  for 
mandatory  notification  of  the  medical  board  prior  to  the 
issuance  of  the  sanction  recommendation  to  OIG.  As 
noted  above,  the  OIG  refused  to  pursue  5  of  12  cases 
referred  to  it  in  FY  1991  because  cf  inadequate  medical 
A-11  Page  - aryan  Xitcheil 
4 
evidence  from  the  FROs.  The  reports  do  not  explain  why  it 
would  be  productive  or  appropriate  to  engage  the  state 
medical  societies  based  on  informaticn  that  the  OIG  itself 
feels  is  inadequate  to  justify  a  sanction. 
Finally,  the  first  three  tables  of  Aqendix  B  of  the  report  on 
the  Sanction  Referral  Authority  (sanctions  referred  to  the  OIG, 
referrals  rejected  by  OIG,  sanctions  mosed  by  the  OIG)  do  not 
agree  and  should  be  clarified.  For  FYs1987,  1988,  i989  and  1991, 
the  sum  of  the  sanctions  imposed  and  referrals  rejected 
exceeds 
the  sanctions  referred  (cases  are  resolved  in  a  later  year  than 
they  are  referred?).  Similarly,  the  totals  for  all  years 
involved  do  not  agree. 
If  you  have  any  questions,  please  call  Elise  Smith  at  690-6870. 
A- 12