.,'" 
Department of Health and Human 
Services

OFFICE OF

INSPECTOR GENERAL

SURGERY IN OUTPATIENT SETTINGS:

A FOUR-STATE STUDY

\ Sf.RVIC'to 
Richard P. Kusserow 
INSPECTOR GENERAL 
"III-aoa  APRIL 1992  OFFICE OF INSPECfOR GENERA

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 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 in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout the Department. 
OFFICE OF INSTIGATIONS 
The OIG's 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. 
AN 
OFFICE OF EVALUATION  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 these inspection 
reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, 
and effectiveness of departmental programs. 
This report was prepared in the Kansas City Regional Office under the direction of Don 
McLaughlin, Regional Inspector General and Jim Wolf, Deputy Regional Inspector General. 
Project staff: 
Kansas City  Headquarters 
Dennis Tharp (Project Leader)  Cathaleen Ahern 
Tim Dold 
Hope Hartshorn 
Deborah Walden 
Julie Quirin  "",. 

Department of Health and Human 
Services

OFFICE OF

INSPECTOR GENERAL

SURGERY IN OUTPATIENT SETTINGS:

A FOUR-STATE STUDY

\ Sf.RVIC'to 
Richard P. Kusserow 
INSPECTOR GENERAL 
1-
"III-aoa  OEI-07-91-01470  EXECUTIVE  SUMMAR 

PUROSE 
To determine the tyes of surgical procedures which are commonly performed in 
outpatient settings in four States and the extent to which such outpatient settings are 
subject to licensure or accreditation.

BACKGROUN 
An increasing number of surgical procedures performed in freestanding outpatient 
facilities has raised concerns about the appropriateness of the setting and the quality 
of care. Since many procedures are no longer performed in hospitals, consumers need 
to be confident that they will receive adequate quality of care in an outpatient setting. 
This inspection is a companion to a related study conducted 
by the Office of Inspector 
General entitled "Surgery in Outpatient Settings: Forms of Oversight" (OEI-07-91
00690). In that report, we identified the forms of oversight in place in each State. 
Both studies were requested by the Subcommittee on Regulation, Business 
Opportunities and Energy of the House Committee on Small Business. 
METHODOLOGY 
We chose four States on a judgmental, non-random basis. The four States selected 
include California, Texas, Ohio, and Maryland. We then selected 160 facilities from 
the directories for those areas. We targeted non-Medicare certified facilities that 
perform risk-associated procedures. We also targeted facilities which advertised 
surgery or emergency servces. We conducted 40 on-site visits consisting of intervews 
and a tour of the facilities (10 per State). We conducted telephone intervews with 
representatives from another 
120 facilties (30 per State). 
FIINGS 
Thireen Perent of the Faciiti We Sureyed Condt Procedes Which We Clasi as 
High-RilC' 
Thirteen percent of the facilities conduct procedures we classify as "high-risk" 
procedures employing general anesthesia or intravenous sedation. 
Faci 
Over Thee-Fourhs of the Sureyed  Are Neither Licensed Nor Accredited; A 
Faciit 
Third of the  Performing "High-RilC' Procedes Are Neither Licened Nor 
Accreded 
Of the 160 facilities in our sample, 131 are neither licensed nor accredited. Of the 21  facilties performing procedures we have classified as "high-risk " 7 (33 percent) are 
neither licensed nor accredited.

Emeen Eqpmet An 
Medical  Procedes Are Not Uniform Availble 
Over half of the sampled facilities have no written medical emergency procedures or 
could not produce them during an on-site visit. Eight percent of the sampled 
facilities 
have no life support/resuscitation equipment available. 
Faci 
Emeen Seres 
Some  Inaccuately Adverted Surer or 
Some facilties in our sample advertised surgery or emergency servces. However 
when reviewed, these servces were seldom offered on-site. 
RECOMMNDATION 
Ru 
States Shoul Exmin the Licene  to Ense Qualit of "High-RilC' Procedes 
Perorm in Outpatit Settgs 
States nationwide should examine their rules for licensure and procedures for 
oversight and make any necessary changes to ensure the quality of surgery performed 
in outpatient settings, particularly in those facilties performing "high-risk" procedures.  ................................................ ...... .................. 
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , 
. ..  ..  ..  ..  ..  ...   ....    .....     .....     .....     .....     .....     .....     .....     .....     ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      .....     .....     .....     .... .   . ...  .  . .. .   .. .  ..  ..  .. .  ..  ..  ..  ...  
TABLE OF CONTENTS

EXECUSUMY 
INODUCfON................................................. 
Puse.............. .......... 

Backgound 
Methodology  . . . . . . . . . . . . . . . 2 
FIINGS 
. . . . . . . . . . . . . . . . . . . 4 
Theen 
Percent of the Facities We 
Sureyed Conduct 
Procdures Whch We Oassif as ''Hgh-Rik'' . . . . . . . . . . . . . . . . . . . . . . . . . . 4 
Over Thee-Fourhs of the Sureyed Facities Are

Neither Licensed Nor Accedited; A Thd of the

Facities Performg ''Hgh-Rik'' Procures Are

Neither Licensed Nor Accedited

Medica Emergency Equipment And Procdures Are Not

Uniorm Avaable. . 
. . . . . . . . 8 
Some Facities Inaccately Advertd 
Surgery or 
Emergency Servces  . . . . . . . . . . 9 
RECOMMNDAlll0N ............................................

APPENDIX A . . . . . . . . 
. . . . . . . A INTRODUCTION

PUROSE 
To determine the tyes of surgical procedures which are commonly performed in 
outpatient settings in four States and the extent to which such outpatient settings are 
subject to licensure or accreditation.

BACKGROUN 
This inspection is a companion to a related study conducted by the Office of Inspector 
General entitled "Surgery in Outpatient Settings: Forms of Oversight" (OEI-07-91
00690). In that report, we identified the forms of oversight in place in each State. 
Both studies were requested by the Subcommittee on Regulation, Business 
Opportunities and Energy of the House Committee on Small Business. 
Ouatit Settgs 
Shif Toward 
Th 
Over the past ten years, there has been a visible shift in the health care marketplace. 
Many risk-associated procedures! traditionally conducted only in hospitals on an 
2 This trend is 
inpatient basis are now performed in freestanding facilties. expected to 
continue. 
Surgical volume was approximately 2 milion in 1989 and is expected to grow to 3. 
milion procedures by the end of 1992.  The Joint Commission on Accreditation of 
Health Care Organizations (JCAHO) estimates that by 1995, 65 percent of all surgical 
procedures will be performed outside the hospital. Several factors have contributed to 
this shift. 
Advances in technology, anesthesia, and surgical techniques have increased the 
number of procedures that can be safely performed on an outpatient basis. 
Outpatient procedures are usually less expensive and more convenient for the 
patient. 
Risk-associated Procedures: medical procedures involving the prior and/or
concurrent administration of general, spinal, regional or local anesthesia or of 
sedation and/or analgesia that is sufficient to compromise a patient s protective 
reflexes. 
Freestanding Facilities: medical facilties where physicians conduct risk-
associated procedures on an outpatient basis. 
Health Care Competition Week.  Vol. 7, No. 28, 1990.  Medicare and some private insurance companies provide incentives for risk-
associated procedures performed on an outpatient basis by authorizing payment 
of facility fees and other 
physician incentives for outpatient surgery. 
Faci 
Type of Freestanding 
Freestanding facilties vary greatly. Due to increased technology and specialization 
many tyes of facilties conduct a variety of risk-associated procedures. These facilities 
include, but are not limited to, physician s offices, ambulatory surgical centers, cancer 
treatment centers, emergency/minor emergency centers, abortion clinics 
cosmetic/plastic surgery centers, pain treatment centers, and diagnostic imaging 
centers. 
Form of Overght 
The principal forms of oversight in place for outpatient facilities which perform 
surgery are licensure, certification, and accreditation. Other forms of oversight are 
provided by peer review organizations, insurance companies, and professional medical
organizations. For a complete discussion of the forms of oversight in place in each 
State, see our companion report "Surgery in Outpatient Settings: Forms of Oversight"
(OEI-07-91-00690). 
METHODOLOGY 
We selected four States on a judgmental, non-random basis. The four States selected 
include California, Texas, Ohio, and Maryland. We selected 
California as a State that 
has comparatively extensive requirements for regulation of freestanding facilties 
and 
Texas, Maryland, and Ohio as States where regulation is less extensive. We 
determined this from data collected for the inspection entitled "Surgery in Outpatient
Settings: Forms of Oversight" (OEI-07-91-00690). 
We selected the largest metropolitan area in each State to conduct on-site 
visits to 10 
different facilities. We selected these facilties from the metropolitan areas 
directories. We targeted non-Medicare certified facilties that perform risk-associated 
procedures. We also targeted facilties which advertised surgery or emergency 
servces. Facility  consideration in selection of the sample as we sought 
tye was a 
facilities representing a variety of specialties. (For a list of sampled facilities by tye
see Appendix A). 
While visiting each facility, we intervewed either the office manager
, physician
registered nurse (RN), or other person familar with the 
specific operation of the
facility. We asked questions addressing the tyes of procedures performed in the
facilty. We also inquired about the regulation of the facility, staffing of the facility, 
and medical emergency equipment and procedures. Mter completing the intervew
we toured the facility to observe emergency equipment and procedures that the 
facility  had available. We also gathered information about the physical layout of the facility, 
advertising strategies, and general cleanliness. 
To complete the sample, we selected an additional 30 facilties from each of the four 
States in the sample. We selected these facilities from the metropolitan areas 
directories. Our goal was to target facilities that perform risk-associated procedures. 
We conducted telephone intervews with either the office manager, physician, or RN 
of these facilities. For consistency, we used identical intervew guides for on-site visits 
and for telephone intervews. 
Int 
We conducted our review in accordance  Standrds for Inspectins 
with the 
issued by the President's Council on Integrity and Efficiency.  FINDINGS

Faci 
Thireen Perent of the  We Sureyed Condt Predes Which We Clasi as 
High-RilC' 
We asked the representative(s) from each facilty about the procedures they perform 
in their facilty and whether these procedures require the use of any form of 
anesthetic. For purposes of this study, anesthesia is an indication of the risk 
associated with a procedure. We classify "high-risk" as those procedures involving 
general anesthesia or intravenous (IV) sedation.

The following chart provides the percentage of the sampled facilities determined by 
the tye of anesthetic. 
Sampled Facilities 
Anesthesia Used 
Legend 
Lol Anesthesa 
IV Seation 
Geneal Anesthsia

No Aneshesa 
(9%) 
Thirteen percent of the facilities conduct procedures that utilze IV sedation (9 
percent) or general anesthesia (4 percent). Seventy-eight percent of the facilties use 
local anesthesia (low risk), and 9 percent use no anesthesia. 
Single specialty and multi-specialty physician s offices have the largest variance in the 
tyes of procedures performed in the facility. Intervewees mentioned 22 different 
procedures they conduct in their freestanding facilities. Usually, we found that they 
utilize local anesthetia during these procedures. 
In the remaining facilties the physician did not perform such a large variance of 
procedures. This is primarily due to the 
increased specialization of the other facility 
tyes. Table 1 on the following page presents the facilty tye, examples of the highest  risk procedures performed in any of the particular facilties, and the tye of anesthesia 
used for that procedure. 
Table 1

TYE OF PROCDUR PERFORMD IN VAROUS FACILIT 
FACILIT TYE  PROCDUR  ANTHTIC 
Ambulatory Surgical Ctr.  Laparoscopy  General 
Abortion Clinic  Abortion  General 
Cosmetic Surgery Ctr.  Face Lift  General 
Ophthalmologist 
Cataract Surgery  IV Sedation/Lcal 
Dermatologist  Dermabrasion 
IV Sedation/Lcal 
Pain Treatment Ctr.  Nerve Block  IV Sedation/Lcal 
Physician s Office  Sigmoidoscopy 
IV Sedation 
Podiatrist Office  Toenail Removal  Local 
Multi-specialty Office  Repair Lacerations  Local 
Emergency Ctr.  Repair Lacerations  Local 
Cancer Treatment Ctr.  Bone Marrow Biopsy  Local 
Diagnostic Imaging Ctr.  Breast Biopsy  Local 
Kidney Dialysis Ctr.  Needle Insertion  Local 
Birthing Ctr.  Child Birth  None 
Of the 21 facilities performing "high-risk" procedures, 7 of the facilities use general 
anesthesia. These facilities include ambulatory surgical centers, abortion clinics, and 
cosmetic and plastic surgery centers. Fourteen  sedation. 
facilties use 
The sampled facilities also varied in who administered anesthesia when it is 
necessary.
This variance was due to the tye of procedure and the tye of anesthetic utilzed. 
the seven sampled facilities that perform "high-risk" procedures utilzing general
anesthesia, three use a Certified Registered Nurse Anesthetist (CRNA) and 
four use 
an anesthesiologist. Of the 14 sampled facilties that perform "high-risk" procedures
utilizing IV sedation, five facilities use physicians, three use registered nurses, five use
CRNA'  , and one uses an anesthesiologist to administer the IV sedation. 
We found that the State Nursing Boards in the three States conducting procedures
utilizing IV sedation administered by an RN were aware of this occurrence. 
We found 
that these States allowed an RN to administer IV sedation under a physician s order  and under the supervsion of a physician. However, an RN performing this procedure 
presents a potential vulnerability in quality of care if the nurse has not received 
adequate training and if there is no emergency equipment on-site. Only one of the 
facilities utilizing an RN to administer IV sedation is licensed. None of the three 
facilities are accredited. Two of the three facilties had no emergency procedures, with 
one of the two stating they had procedures, yet unable to produce them on-site. 
We found that the three most common procedures utilzing general anesthesia were 
abortions, face lifts, and breast augmentation procedures. We found that the three 
most common procedures utilzing IV sedation were cataract surgeries, abortions, and 
facial reconstruction procedures. The graphs below show the tye of anesthesia used 
and who administers the anesthesia in those facilities performing "high-risk" 
procedures. 
Anesthesia Used and Administered 
High Risk" Facilties 
General Anesthesia  IV Sedation 
(57%)  Leend  (36%)  Leend 
Aneslois 
Anesesiois 
ii C.  ii C.

(7%) I& Phsician 
Regisere nurse

(21%) 
(36%)  Faci  Nei 
Over Thee-Fourhs of the Sureyed  Are  Licened Nor Accredited; A 
Faci 
Predes 
Thir  of the  Perorming "High-RilC'  Are Neihe Licened Nor 
Accredit 
Of the 160 facilties in our sample, 131 are neither licensed nor accredited. A large 
portion of these facilties are physician offices, which have tyically been left 
unregulated by the States. Of the 21 facilities performing procedures we have 
classified as "high-risk " 7 (33 percent) are neither licensed nor accredited. These 
include an ambulatory surgical center, an abortion clinic, a plastic surgery center, a 
pain treatment center, and three physician offices. 
For the purposes of this study, we considered only medical licenses as criteria for 
licensed medical facilities. We found that many facilities are licensed by a 
governmental entity (e.  , city, county) as a business. These licenses are no different 
for a medical facilty than for a restaurant, hardware store, or barber shop. In our 
analysis, a business license was not considered licensure as a medical facility. 
Likewise, individual physician licensure should not be mistaken for facility licensure. 
Twelve of 21 (57 percent) of the sampled facilties that conduct "high-risk" procedures 
requiring IV sedation or a general anesthetic are not licensed. These facilities include 
six plastic surgery centers, three physician offices, one abortion clinic, one ambulatory 
surgical center, and one pain treatment center. 
Also, three-fourths (76 percent) of these 21 facilities are not accredited. These 
facilities are four abortion clinics, three physician offices, three ambulatory surgical 
centers, two plastic surgery centers, two ophthalmologists, one dermatologist, and one 
pain treatment center. All of the accredited facilties performing these "high-risk" 
procedures are plastic surgery centers. 
Even when facilties are licensed, standards and monitoring vary. Of the licensed or 
accredited facilities, 59 percent of the licensed facilties do not have specific 
requirements for staff, equipment, or the physical facilty. Six-five percent of the 
licensed facilities have not been inspected other than for their initial licensure. Only 
about one-third (35 percent) of the licensed facilities are inspected regularly. 
Facilities which receive accreditation are generally reviewed at least every two or three 
years by an on-site reviewer. Accredited facilties must meet certain criteria in many 
areas such as emergency procedures, equipment standards, operational efficiency, and 
medical and educational standards of the staff to obtain and maintain accreditation 
status. 
The Office of Inspector General companion report to this study entitled "Surgery in
Outpatient Settings: Forms of Oversight" (OEI-07-91-00690) found that many facilties 
are not subject to licensure by the States and that physician s offices have little or no 
formal oversight. The report also found that the States are not consistent in their  regulation of freestanding medical facilties. These findings are substantiated by data 
from this study. 
Medal Emeen Eqpmet An Predes Are Not Uniorm Availble 
Medical emergency equipment and procedures vary greatly by facilty. Over half of 
the sampled facilties (82 of 160) have no written medical emergency procedures or 
could not produce them during an on-site visit. 
Eight percent (13 of 160) of the sampled facilties have no life support/resuscitation 
equipment available. One of the physician offices performing procedures requiring 
sedation did not have emergency equipment. Some of these facilties mentioned local 
medical emergency "911" servces within minutes and access to a hospital across the 
street. Table 2 provides a summary of the facilities with no emergency equipment 
on-site. 
Table 2

SUMMAY OF 13 FACILITIES WITH NO EMERGENCY EQUIPMENT 
FACILITY TYPE  ANESTHETIC USED  OVERSIGHT 
Physician s Office  Local  None 
Physician s Office  Local  Accredited 
Physician s Office  Local  None 
Physician s Office  IV Sedation  None 
Physician s Office  Local  None 
Physician s Office  Local  None 
Physician s Office  Local  None 
Podiatrist Office  Local  None 
Emergency Center  Local  None 
Cosmetic Surgeon  Local  None 
Cosmetic Surgeon  Local  None 
Dermatologist  Local  None 
Pain Treatment Ctr.  None  None 
Our review entailed visiting 40 of the 160 medical facilities on-site. We conducted the 
remaining 120 intervews over the telephone. Tryng to verify responses to the 
telephone intervew question "whether a facilty has written medical emergency  , "
procedures " we asked several of the facilties which had procedures to forward them 
to us. Of those facilties stating that they had procedures, we received only one 
response. 
Regarding preparedness for emergency response, 19 percent (31 of 160) of the 
medical facilities employ at least one physician who does not have admitting privileges 
at a local hospital. These  admit patients to hospitals or 
physicians either prefer not to 
they have a network of physicians to whom they refer patients for admission. Also, a 
few of these physicians are retired, working part-time only. 
Faci 
Emeen Seres 
Some  Inaccutely Advered Surer or 
We found that some facilities in our sample advertised surgery or emergency servces. 
However, when we visited these facilities, these tyes of servces were seldom offered 
on-site. 
In conducting our study, we called providers which listed emergency and surgical 
servces in the metropolitan areas' directories. However , when we spoke with the 
facility representatives, we found that most of the facilties were performing minor 
procedures with local anesthesia only. Most medical facilities are not performing 
high-risk" medical procedures, yet some of the facilties advertise performing major 
surgical procedures. 
The following examples are  what we found at some of the outpatient 
tyical of 
facilities. At one facilty, a sign on the exterior of the physician office building 
advertised in-office surgery. During the intervew, we learned that the physician no 
longer performed outpatient surgery in his office. The outdated advertisement 
remained posted, although the physician stopped performing in-office surgery years 
ago. 
At a single specialty physician office facilty which advertised "EMERGENCY CARE 
personnel informed us that the medical emergency kit ("crash cart") was within 
immediate access. Upon a tour of the facilty, staffers had to move several boxes of 
supplies from a back closet to retrieve the emergency kit. Also, at another facility, we 
asked to see the facilty' s medical emergency kit. The physician produced a small 
briefcase then opened it up and said  , that s not it. . . I think it is back there in 
another room." The physician did not produce the emergency kit.  RECOMMENDATION

States Shoul Exmi the Licene Ru to Ense Quli of "High-RilC' Procedes 
Outi 
Perorm in  Settgs 
States nationwide should examine their rules for licensure and procedures for 
oversight and make any necessary changes to ensure the quality of surgery performed 
in outpatient settings, particularly in those facilties performing "high-risk" procedures.  APPENDIX A

SAMLED FACILIT BY TYE 
Single Specialty Physician s Office 
Multi-Specialty Physician s Office 
CosmeticlPlastic Surgery Center 
Emergency/Mnor Emergency Center 
Abortion Clinic 
Podiatrist Office 
Ophthalmologist 
Dermatologist 
Pain Treatment Center 
Ambulatory Surgical Center 
Cancer Treatment Center

Diagnostic Imaging Center 
Kidney Dialysis Center 
Birthing Center 
TOTAL  160