Department of  Health  and Human  Services 
. 
OFFICE  OF 
INSPECTOR  GENERAL 
 
THE  SANCTION  REFERRAL  AUTHORllY 
OF  PEER  REVIEW  ORGANIZATIONS 
APRIL  1993  OEI-01-92-002S0   
 
 
.- EXECUTIVE  SUMMARY

PURPOSE 
The purpose  of this  study is to assess  the  trends  and  problems  associated  with  the 
Peer  Review  Organizations  use of their  sanction  referral  authority. 
BACKGROUND 
Since  their  establishment  in 1982, the  Peer  Review  Organizations  (PROS)  have 
reviewed  millions  of inpatient  medical  records  to confirm  the  necessity,  quality,  and 
appropriateness  of care  rendered  to Medicare  beneficiaries.  One  controversial  aspect 
of the  PROS responsibilities  has been  their  sanction  referral  authority,  which  requires 
them  to recommend  that  the  Office  of Inspector  General  (OIG)  sanction  physicians 
and  hospitals  responsible  for violating  their  Medicare  obligations,  as specified  in 
section  1156(a)  of the  Social  Security  Act.  If the  OIG  accepts  a PROs 
recommendation,  it can  sanction  physicians  and  hospitals  by excluding  them  from 
participating  in Medicare  and  all State  health  care  programs  or by imposing  a 
monetary  penalty. 
In this report,  we provide  an update  on the  extent  to which  the  PROS have  been  using 
that  authority  and  the  difficulties  they  experience  with  it.  We  offer  three  options  for 
policymakers  to consider.  We reviewed  the  PRO  sanction  referral  data  for FYs  1986 
through  1992 and  intemiewed  representatives  of 10 pROs.  Among  those  10 were 
PROS that,  during  Fiscal  Years  1990 and  1991, had  made  at least  1 referral  leading  to 
a sanction,  PROS  that  had  made  referrals  that  were  rejected  by the  OIG,  and  PROS 
that  had  made  no referrals. 
. 
FINDINGS 
PRO sanctbn  rejkn=ds have dwhdki 
	 PRO  sanction  referrals  to the  OIG  have  fallen  from  a high of 72 in FY  1987 to 
a low of  12 in FY  1991 and  14 in FY  1992. 
	 PROS for  seven  States  have  never  referred  a physician  or hospital  for sanction. 
Twenty-three  of the  43 PROS have  referred  no physician  or hospital  for 
sanction  in FYs  1991 and  1992. 
F	 OIG  sanctions  based  on PRO  referrals  have  fallen  from  a high of 50 in 
FY  1987 to a low of 6 in FY  1992.  Only  1 monetary  penalty  has been  imposed 
since  FY  1988. 
i  71iree major factom  account for the drop h  sanctiim  rflemak 
E  The  statutory  unwilling  or unable  requirement  remains  a significant  barrier  to 
sanction  referrals.  This  requirement  stipulates  that  even  where  physicians  or 
hospitals  have  violated  Medicare  obligations,  they  cannot  be  sanctioned  unless 
they  have  demonstrated  an unwillingness  or lack  of ability to comply  with 
those  obligations. 
 
F  The  PROS negative  experiences  with the  sanction  process  deter  referrals. 
They  see  the  process  as costly, complex,  and  contentious,  and  are  unsure  that 
their  recommendations  will be  upheld. 
F  The  PROS see  themselves  increasingly  as educators  in addressing  quality-of-care 
problems. 
Despite dwindlihg refemak, all the PRO  oficiak  we titetied  belkve  that the sanctiixz 
refemal authmity  & important  to achievikg their rniwion because it gives them  kvemge 
with the medikal  commun
w= 
 
POLICY  OPTIONS 
Given  our  findings  and  the  moribund  state  of the  PROS sanction  referral  authority, 
 
we believe  the  authority  needs  reexamining.  In that  light, we offer  three  options  for 
consideration  by the  Department  of Health  and  Human  Services,  the  Congress, 
interest  groups,  and  other  concerned  parties.  The  options  are  not  mutually  exclusive. 
 
Any of the  three  could  be  adopted  separately,  but  in combination  they  could 
substantially  strengthen  protection  for Medicare  beneficiaries  under  the  PRO  program. 
 
F Re~al  or substantiidly  modifi  the unwillikg or unable requirement 
E  Ihcrease the monetary penalty  sanction substantidy. 
 
F Maihtaih  PROS sanction referral authontyas it exiYtsnow, but mandatt? refmaik  to 
State medical  boanik when PROS confiim  serious quality-of<are  probkmx 
CmiMJmm 
 
We  received  comments  on the  draft  report  from  the  Health  Care  Financing 
Administration  (HCFA),  Public  Health  Service  (PHS),  and  Assistant  Secreta~  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 the  comments  and  our  responses  to each  appear  in appendix  C. 
The  HCFA  and  AMA  oppose  changes  in the  unwilling  and  unable  requirement,  while 
PHS, AMPR~  and  AARP  support  its repeal  or modification.  The  HCF~  PHS, 
ii  ASPE,  AMPIQ  and  HP  support  increases  in the  monetary  penalty,  while  the 
AMA  opposes  it. 
With  regard  to the  third  policy option,  HCFA  indicates  it will consider  this option  in 
its development  of regulations  that  govern  the  sharing  of confidential  information 
between  PROS and  State  medical  boards.  The  PHS  sees  merit  in requiring  PROS to 
report  serious  quality-of-care  cases  to State  medical  boards,  but  cautions  that  this 
option  could  require  that  State  boards  add  to their  investigatory  and  monitoring 
capacity.  The  ASPE  does  not  support  this proposal,  citing the  pending  fourth  scope  of 
work,  and  a potential  for parallel  investigation  by pROs  and  medical  boards.  The 
AMA  supports  this option  conceptually  for  serious  quality-of-care  problems  that  have 
been  confirmed  by the  PRO  following  specialty-specific  physician  review  and 
completion  of due  process  rights  at the  PRO  level.  The  AMPRA  and  AARP  support 
mandating  referrals  to State  medical  boards  when  PROS confirm  serious  quality-of-
care  problems. 
Each  of the  respondents,  both  within  the  Department  and  from  outside  organizations, 
expressed  concerns  that  two  of the  options  proposed  in the  draft  report  could  have 
negative  consequences:  Elimination  of the  sanction  referral  authority  and  providing 
that  authority  directly  to the  PROS.  In  response  to their  comments,  we eliminated 
these  policy options  from  the  final  report. 
... 
111   TABLE  OF  CONTENTS

Executive Summary 
Introduction . . . . . . . . ,.  .  . . . . . . . .  . .  1 
...0    00...,  ...00.    ..**.*  .0  ...00    *

Findings 
Dwindling referrals  . . . . . . . . . . . . . .  . .  3 
   ...0.  .  .  ...00  .  .  .  ...0    *...**    0

Factomaccounting  forthe  drop  . . . . .  5 
. . . . .  . . ..  00...  . . . . . . .    0000..    0
   
PRO suppoti for referral authority  . . .  7 
..  0.0..  . .  . . . .  . . ..*...  .*  ***=*    *
 .0 
Poliqmptions.  . . . . . . . . . . . . . . .  . . . .  8 
  ..0...  .  .  ..  *O.  .0  .00..  9******    O
 ,0 
Comments on the Draft Report  . . . . . . .  .  10 
  ..0.0    .0...  .  .  ...0    ..0..    *****

Appendices

.

A  Statutory  Provisions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  A-1 
..0..  ..0=0.

B:  Overview  of Data  from  the  Office  of Investigations  . . . . . . . . . . . . . . . . .
 B-1 
c:  Detailed  Comments  on the  Draft  Report  . . . . . . . . . . . . . . . . . . . . . . . .
 c-1 
D:  Endnotes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 D-1   
  INTRODUCTION 
PURPOSE 
The purpose  of this study is to assess the  trends  and  problems  associated  with  the 
Peer  Review  Organizations  use of their  sanction  referral  authority. 
BACKGROUND 
Since  their  establishment  in  1982, the  Peer  Review  Organizations  (PROS)  have 
reviewed  millions  of inpatient  medical  records  to confi~m the  necessity,  quality,  and 
appropriateness  of care  rendered  to Medicare  beneficiaries.  Although  at first  PROS 
functioned  primarily  as cost controllers,  legislative,  regulatory,  and  contractual  changes 
have  shifted  their  focus  increasingly  toward  quality  assurance. 
-- The  PROS Sanction  Referral Authority 
One  controversial  aspect  of the  PROS  responsibilities  has been  their  sanction  referral 
authority.  This  authority  requires  the  P120s  to  recommend  that  the  Office  of 
Inspector  General  (OIG)  sanction  physicians  and  hospitals  in two instances.  One 
involves  physicians  and  hospitals  who  substantially  violate  their  Medicare  obligations  in 
a substantial  number  of cases,  as specified  in section  1156(a)  of the  Social  Security  Act 
(see  appendix  A).1  In this instance,  the  PRO  must  identi~  a pattern  of inappropriate 
or unnecessary  care.  The  other  instance  involves  those  who grossly and  flagrantly 
violate  their  obligations,  even  in a single case.  To  find a gross and  flagrant  violation, 
the  PRO  must  find that  the  violation  placed  the  Medicare  beneficiary  in danger. 
To  make  either  type  of referral  to the  OIG,  the  PRO  must  also provide  a 
recommendation  that  supports  that  the  physician  or hospital  has demonstrated  an 
unwillingness  or lack  of ability  substantially  to complyz with the  Medicare  obligations 
(hereafter  referred  to as the  unwilling  or unable  requirement).  If willingness  or ability 
to comply  is demonstrated,  then  that  physician  or hospital  cannot  be  sanctioned. 
The  Secretary  of Health  and  Human  Sex-vices,rather  than  the  PROS, is authorized  to 
impose  sanctions  against  Medicare  providers.  The  Secretary  has delegated  that 
authority  to the  OIG.  Upon  receiving  a referral  from  a PRO,  the  Inspector  General 
can  accept,  modi&,  or reject  the  PROs  recommendation.  The  Inspector  General  may 
exclude  the  physician  or hospital  from  participating  in Medicare  for a period  of time 
or may impose  a monetary  penalty  that  cannot  exceed  the  cost of the  medically 
unnecessary  or improper  services  rendered. 
Sanctioned  physicians  and  hospitals  can  appeal  their  sanction  to administrative  law 
judges  (ALJs)  within  the  Department,  who  conduct  hearings  and  can  affirm,  reverse, 
or modi~  the  sanction  imposed  by the  OIG.  AU  decisions  can be appealed  to the 
Departmental  Appeals  Board,  and  then  to Federal  district  courts. 
1  In a prior  report,  we addressed  issues  concerning  the  J?ROS  sanction  referral 
authority.3  We  noted  the  low level of sanction  activity  among  the  PROS, the  conflict 
between  the  PROS educational  and  enforcement  roles,  and  problems  with  interpreting 
the  regulations  and  providing  adequate  due  process  protection. 
 
In this report,  we provide  an  update  on the  extent  to which  the  PROS have  been  using 
their  sanction  referral  authority  and  any difficulties  they  continue  to experience  with it. 
We  conclude  the  report  with  three  options  for policymakers. 
Methodology 
We  draw  on three  sources  of information  for this study:  (1) analysis  of the  PRO 
sanction  data  from  FY  1986 through  Fy  1992 maintained  by the  OIG,  (2) telephone 
 
interviews  with  staff from  a purposive  sample  of 10 PROS4 and  other  groups 
interested  in sanction  activity,  including  regional  staff from  the  Health  Care  Financing 
Administration  (HCFA)  and  OIG,  and  representatives  of the  American  Medical  Peer 
. 
Review  Association,  the  American  Medical  Association,  the  American  Hospital 
Association,  and  the  American  Association  of Retired  Persons,  and  (3) a review  of the 
relevant  literature.  We chose  the  10 PROS  in  such  a way  as  to  ensure  that  our  sample 
contained  PROS that,  during  FYs  1990 and  1991, had  made  at  least  1 referral  leading 
to a sanction,  PROS  that  had  made  referrals  that  were  rejected  by  the  OIG,  and  PROS 
that  had  made  no referrals. 
 
We conducted  our  review  in accordance  with the  Interim  Standards for Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
. 
 
 
2  FINDINGS

PRO sanctiim  rejimuik huve dwindti 
F  PRO sanction referrals to the OIG have fallen from a high of 72 in FY  1987 to 
alowof12in  W1991and14ti  FY  1992. 
FIGURE  1 
PRO SANCTION~  TO OIG 
FY1986-FY1992 
72 
60-

so-

40-
 37 
29 
30-
la

!!
20-

10-
o 
1986  1987  1988  1990  1991  l!xn 
ImcAYkR 
Sourux Officeof Investigations, Offii  of Inspector General 
During  the  first  2 years  of the  program,  the  PROS  referred  138 physicians  and 
hospitals  for sanction  (figure  1).  This was the  peak  level  of activity.  In the  next  five 
years,  though  the  number  of physicians  in the  United  States  rose  steadily,b the  PROS 
used  the  sanction  referral  authority  much  less often.  In fact,  by FY  1992 they were 
hardly  using it at all. 
Throughout  the  seven-year  period,  the  PROS have  referred  many  more  physicians 
than  hospitals  (see  appendix  B).  All but  17 of the  252 PRO  sanction  referrals  made 
between  FYs  1986 and  1992 involved  physicians.  And  all but  1 of the  55 referrals 
made  in the  last  3 fiscal years  involved  physicians. 
3
 	 PROS for seven States have never referred a physitim or hospital for sanction. 
Twenty-thr=  of the 43 PROS have referral  no physitia  or hospital for 
sanction in FYs  1991 and 1992. 
Four  of the  seven  States  with no PRO  sanction  referrals  are  in New England: 
Connecticut,  Massachusetts,  Rhode  Island,  and  Vermont.  The  others  are  Alaska,  . 
Wyoming,  and  Hawaii. 
The  23 PROS8 that  made  no referrals  in FYs  1991 or  1992 are  responsible  for States 
having  more  than  160,000 patient-care  physicians.g  These  States  are  scattered 
throughout  the  country. 
b	 OIG  sanctions  based on PRO referr~  have fallen horn a high of 50 in 
 
l?Y 1987 to a low of (j b  Fy  1$)$)2.Ody  1 monc~  ~n~ty  h=  ~n  im@ 
1988. 
SiIICe  FY 
FIGURE  2 
PRO-RE~  SANCIIONSIMPOSEDBY OIG 
W  1986- FY  1992 
so 
 
&gC&i 
 
I  l--Y-
22 
w 
14 
11  12 
6  . 
1986  1987  19r88  19I89  19t 90  19I  91  19192
FISCALYEAR 
Sourw  Office of Invesugatbm,  Office of Inspeuor General 
The  drop  in OIG  sanctions  reflects  the  drop  in the  PRO  sanction  referrals  on which 
the  OIG  actions  are  based.  The  peak  of activity  occurred  in the  earliest  years  of the 
PRO  program  (figure  2).  And  as with referrals,  more  physicians  than  hospitals  have 
been  sanctioned.l 
4
 Each  year,  exclusions  have  outnumbered  monetary  penalties  (see  appendix  B), which 
are  limited  to Medicares  cost of that  portion  of the  care  deemed  medically 
unnecessary  or improper.  The  costs  to the  OIG  and  the  PROS of pursuing  monetary 
penalties  usually  have  exceeded  the  amount  of the  fines.  The  fines have  ranged  from 
$65.44 to $17,512.11,  but  average  less than  $5,000.11  Exclusions  have  ranged  from 
six months  to permanent,  with  a mean  length  of three  years.12 
l%ree major factom  account for the dkop ih sanctin  re$ewak 
  The  statutory unwillingor unable  requirement remains a significantbarrier to 
sanction referrals.  This requirement stipulates that even where physiciansor 
hospitals have violated Medicare  obligatio~  they  cannot be sanctioned unless 
they have demonstrated an unwillingnesosr lack of abilityto comply with 
those obligations. 
In our  1988 study, we reported  that  the  statutory  unwilling  or unable  requirement  was 
a major  flaw that  undermined  the  effectiveness  of the  PROS sanction  referral 
authority.  Drawing  on interviews  with all the  PROS,  we  noted  that  they were  confused 
over what  documentation  was necessary  to establish  unwillingness  or inability.13 
Shortly  after  we issued  that  report,  the  Administrative  Conference  of the  United 
States  reached  a similar  conclusion  based  on its own review.  In its  1989 report,  it 
stated  that  the  violations  the  PROS  and  the  OIG  find to be  substantial  or gross  and 
flagrant  already  serve  as indicators  of inability  or unwillingness  to comply.  It added 
that  the  requirement  calls for the  PROS  and  OIG  to  prove  what  amounts  to a 
speculative  negative  and  is an inappropriate  burden  of proof.14 
Despite  an attempt  to make  the  requirement  more  workable,  it remains  an  obstacle. 
Congress,  through  the  Omnibus  Budget  Reconciliation  Act  of 1990 (PL  101-508), 
attempted  to clarify the  unwilling  or unable  requirement.  It specified  that  PROS could 
accept  a physicians  failure  to participate  in a corrective  action  plan  (CAP)15 as a 
demonstrated  unwillingness  or inability  to comply.  Despite  that  clarification,  PRO 
officials  told  us that  as long as a physician  agrees  to a CAP,  it remains  exceedingly 
difficult  to proceed  with a sanction  referral.  One  PRO  official  noted  that  a physicians 
lack  of response  to repeated  calls and  letters  from  the  PRO  was not  considered 
evidence  of unwillingness  or inability. 
The  PROS experiences  with  the  unwilling  or unable  requirement  have  made  them 
cautious  in making  sanction  referrals.  They  remain  keenly  aware  that  it has  accounted 
for more  OIG  rejections  of PRO  sanction  referrals  than  any other  reason.  From  FY 
1986 to FY  1992, 42 of the  106 sanction  referrals  rejected  by the  OIG  have  been 
because  of the  unwilling  or unable  requirement  (see  appendix  B).  Among  the  10 
 
OIG-imposed  sanctions  that  have  been  reversed  by the  ALJs,  3 were  based  on that 
requirement. 
5  E	 The PROS negative experiences with the sanction process deter referrals. 
They see the process as costly, comple~ and contentio~  and are unsure that 
their recommendations willbe upheld 
PRO  officials  cited  the  high costs in staff,  time,  and  funds  in referring  sanctions  to the 
OIG.  As they had  in our  earlier  report,lG they  noted  contending  with  late  and 
inadequate  payments  from  the  Health  Care  Financing  Administration  (HCFA)  for 
sanction-related  legal  and  expert  witness  fees.  A PRO  often  spends  many  months 
preparing  the  referral,  but  receives  supplemental  reimbursement  for legal  fees  only if 
and  after  a case  is referred  to the  OIG. 
Interpreting  instructions  governing  the  sanction  referral  process  from  HCFA  and  the 
OIG  has also  confused  the  PROS.  For  example,  PRO  officials  cited  HCFAS 
instruction  that  corrective  action  plans  (CAPS) be used  in al] but  the  most  egregious 
situations.1  The  PROS  expressed  uncertainty  on how to interpret  egregious.  That 
word  never  appears  in the  statute--which  calls for  CAPS only if appropriate.  They 
also noted  that  HCFAS requirement  that  they  consider  referring  a physician  or 
hospital  for sanction  based  on a single  quality-of-care  problem  conflicts  with  OIG 
guidance. 
PRO  officials  cited  frustrations  with the  due  process  protection,  which were  designed 
to balance  the  physicians  rights  for due  process  and  the  beneficiaries  need  for quality 
care.  Although  recognizing  their  importance,  the  PROS noted  that  ensuring  those 
protection  complicates  the  referral  process.  Because  the  due  process  requirements  for 
gross  and  flagrant  violations  differ  from  those  for substantial  violations,18 referrals 
involving both  types  become  even  more  complex.  And with  expert  witnesses  and 
attorneys  involved,  the  process  often  becomes  contentious. 
From  their  experience  with  the  sanction  process  over  the  years,  the  PROS  understand 
that  any of these  factors  can  undermine  the  process.  The  OIG  has rejected  referrals 
not  only on the  ground  of the  unwilling  or unable  requirement  but  also on grounds 
that  the  PROS failed  to follow regulato~  requirements,  such as those  that  guarantee 
due  process19 (42 rejections).  And  finally, the  OIG  has  rejected  referrals  based  on 
insufficient  medical  evidence  (20 rejections)  .20 The  ALJs  have  overturned  OIG-
 
imposed  sanctions  on similar  grounds.21  Although  most  sanctions  appealed  to an 
~  (51 of 61) have  resulted  in some  sanction  being  imposed,  in many  cases  the 
sanction  terms  were  reduced  during  settlement  (see  appendix  B). 
 
b  The PROS see themselves increasinglyas educators in addressing quality-of-e 
problems. 
The  thrust  of the  PRO  program  has been  increasingly  educational  rather  than 
punitive.  The  move  toward  a more  educational  focus began  with  a shift from 
utilization  to quality  review  in the  PROS second  contract  period  (1986-88).22  The 
third  contract,  which  also stressed  quality  assurance,  advanced  this shift by adding 
6  specific  instructions  for  addressing  quality-of-care  problems  with educational 
interventions.  The  HCFA  has  also expanded  the  use of educational  CAPS over  the 
years  and  now requires  the  PROS to use  CAPS before  making  a sanction  referral  in 
all but  the  most  egregious  situations.u  And  the  PROS educational  slant  is further 
bolstered  in HCFAS discussion  of its emerging  Health  Care  Quality  Improvement 
Initiative  in the  fourth  scope  of work: 
In the  Fourth  SOW,  HCFA  begins  a fundamental  change  in the  way 
PROS carry  out  their  responsibilities.  PROS will place  less emphasis  on 
dealing  with  individual  clinical  concerns  and  focus  more  attention  on 
helping  physicians  and  providers  improve  the  mainstream  of care.x 
This  shift toward  education  is in accordance  with the  continuous  quality  improvement 
movement  emerging  in the  quality  assurance  field.x  That  movement  stresses 
improving  overall  performance  over  identifying  and  correcting  poor  performers  at the 
margin. 
The  PROS  consider  sanction  referrals  as failures  of their  educational  efforts,  which  far 
outnumber  their  sanction  activities.  According  to HCF~27  4,140 physicians  and 
1,327 hospitals  received  educational  interventions  from  the  PROS during  the  third 
scope  of work,  while  they  issued just  464 sanction  notices.= 
 
Despite dwindling rejiemdk, all the PRO  o-k  we interukwed  bekkwe that the sanction 
rejimzl  authaiiy  k impatant  to achievikg their znksiim because it giwx them kvemge 
with the mxikal  community. 
The  PRO  officials  stress  that  the  value  of their  sanction  referral  authority  is twofold: 
.  (1) it is available  when  they need  it to deal  with  those  providing  dangerously  poor 
quality care,  and  (2) it provides  a threat  that  gives the  PROS clout  with physicians  and 
hospitals.  When  the  PROS  preferred  educational  approaches  fail, they  need  the 
 
teeth  or stick that  the  sanction  authority  provides.  That  threat  can be  enough  to 
convince  a reluctant  physician  to cooperate  with a CAP.  Without  the  authority,  the 
PRO  officials  question  whether  the  medical  community  would  take  their  interventions 
seriously  enough.  They  believe  it exerts  a sentinel  effect  that  contributes  to their 
overall  mission.  POLICY  OPTIONS 
As currently  constituted,  it is not  at all clear  that  the  PRO  sanction  referral  authority 
is helping  to protect  the  public  from  poor  medical  care.  We  do not  advocate  a target 
number  of sanction  referrals.  Nevertheless,  we are  compelled  to note  that  in FY  1992, 
when  more  than  400,000 physicians  were  practicing  in the  United  States,  the  PROS 
made  14 sanction  referrals. 
PRO  officials  told  us that  the  authority  is important  to achieving  their  overall  mission. 
The  basic  reason,  as we have  indicated,  rests with  the  threat  that  the  authority  carries. 
But  as the  medical  community  becomes  more  aware  of just  how infrequently  the 
sanction  authority  is used,  that  threat  is likely to seem  remote,  even  to the  most 
 
unskilled  practicing  physician. 
We believe  that  the  findings  of this report  identi$  a need  to reexamine  the  PRO 
 
sanction  referral  authority.  We do not  make  formal  recommendations,  but  we offer 
three  options  as a starting  point  for  discussion.  The  OIG  has  expressed  support 
previously  for  each  of these  options. 29 Given  the  moribund  state  of the  sanction 
referral  authority,  we believe  that  each  option  warrants  serious  consideration  by the 
Department,  the  Congress,  interest  groups,  and  other  concerned  parties. 
E  Repal  or substantially  modifi  the unwilllng or unuble requirement 
Upon  finding  that  a physician  has violated  statuto~  obligations  for participating  in 
Medicare,  the  PRO  could  make  a sanction  referral,  without  having  to provide 
additional  evidentiary  proof  of unwillingness  or inability.  We  recommended  this in a 
prior  reportw  and  the  OIG  has developed  a legislative  proposal  to delete  the 
separate  requirement  of a determination  of unwillingness  or lack  of ability.  This 
proposal  is under  review  in the  Department. 
??ZW  Would  make  the  referral  process  less cumbersome.  Would  enable  PROS to 
move  more  quickly  on serious  cases.  Would  base  decisions  on a physicians 
demonstrated  ability  and  quality  rather  than  speculation  about  future  actions. 
Cks:  Could  make  PROS less eager  to develop  corrective  action  plans  when 
appropriate.  Could  be  seen  as conflicting  with PROS educational  and  quality 
improvement  orientation. 
 
Iiacrease the monetary penalty  sanction substantially. 
 
 
Current  law restricts  monetary  penalties  to the  cost involved  for Medicare.  These 
penalties  could  be  increased  to make  them  a more  meaningful  sanction.  We 
recommended  this in a prior  report31 and  the  OIG  has developed  a legislative 
8   proposal  to authorize  penalties  of Up  to  $25,000 in lieu  of exclusion.  This  proposal  is 
under  review  in the  Department. 
-:  Would  provide  an alternative  to excluding  a physician  or hospital  from 
participation  in Medicare.  Could  help  to reinforce  the  sanction  threat.  Could  result 
in fewer  appeals.  Could  help  Government  recover  funds  expended  in sanctioning. 
Cons:  Could  appear  as an inadequate  sanction.  Could  further  discourage  PROS from 
recommending  exclusions  when  warranted. 
Maiktain  PROS sandon  refemal authdy  as it &&  now, bti  rnundate rejkrnzk to 
 
State medical  boanik when PROS conjinn setius  quality-of+are  pmblenw 
The  PROS would  continue  to refer  cases  to OIG  as they  currently  do.  This  authority 
would  be  supplemented  with  a mandate  to refer  physicians  responsible  for serious 
quality-of-care  problems  to State  medical  boards,  which would  then  investigate  and 
take  whatever  action  was necessary.32  Likewise,  PROS could  refer  hospitals  to their 
State  licensure  agencies.  We  recommend  such a mandate  in our  recent  report  Z%e 
Peer Review  Organizations and State Medical Boards:  A  V2talLink.33 
l%as:  Adds  its own threat  apart  from  that  of the  sanction  referral  authority  and  its 
  constraints.  Allows  PROS to concentrate  more  fully on their  educational  mission. 
Allows for increased  State-level  peer  review.  Recent  experiences  from  Ohio  suggest 
that  the  approach  has  potential.w 
Cbns:  Directs  to State  medical  boards  responsibility  for reviewing  quality  of care  in 
individual  cases,  not  part  of many  boards  current  practice.  Could  require  additional 
  investigatory  and  monitoring  capacity.  Raises  possibility  of PROS and  boards  taking 
conflicting  approaches  toward  a physician.  Could  further  discourage  PROS from  using 
their  sanction  referral  authority.  Board  authority  varies  from  State  to State. 
 
9
 COMMENTS  ON  THE  DRAFT  REPORT 
We  received  comments  on the  draft  report  from  the  Health  Care  Financing 
Administration  (HCFA),  Public  Health  Sex-vice (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 the  comments  and  our  responses  to each  appear  in appendix  C. 
We  have  included  updated  figures  on the  number  of sanctions  imposed  through  Fiscal 
Year  1992, because  the  more  recent  data  are  available.  In the  draft  report,  the  data 
were  presented  only through  FY  1991.  ne  FY  1992 data  provide  further  support  to 
our  findings  stated  in the  draft  report. 
 
We  have  omitted  from  the  final report  two  policy  Options  that  appeared  in the  draft 
report--elimination  of the  sanction  referral  authority  and  providing  that  authority 
directly  to the  PROS.  We  agree  with  the  comments  we received  from  all of the 
respondents,  both  within  the  Department  and  from  outside  organizations,  that 
adopting  either  of these  options  could  have  negative  consequences. 
We discuss the  remaining  three  options  here.  We wish to stress  that  these  options  are 
not  mutually  exclusive.  Any of the  three  could  be  adopted  separately,  but  in 
strengthen
combination  they  could  substantially  protection  for  Medicare  beneficiaries 
under  the  PRO  program. 
  Repeal or substantiallymodi& the unwillingor unable requirement 
The  HCFA  and  AMA  oppose  changes  in this requirement,  while  PHS,  AMP~  and   
AARP  support  its repeal  or modification. 
Zhe unwilling and unable provision remains an obstacle  to sanction referrals  Despite 
legislative changes in 1990 that attempted  to clarifi the definition of unwilling or unable, 
experience since then leaves little reason to believe  that  they  have  eased  the problem.  In 
FY 1991, PROS referred 12 cases for sanction,  and in W  1992 they refen-ed 14 cases.  In 
our interviews, the PROS themselves cited the provision  as a continuing obstacle. 
It k important  that PROS have the capaci~  to use  the sanction refen-al authority when it 
h appropnate to do so, in order to protect  Medicare  beneficianesfi-om harm.  In those 
situations,  the PROS should be able to move swiftly  and  effectively, without having to 
speculate  on the future behavior of individual physicians.  The evidence  on the physician h 
past  record should be su.cient  to make  this judgernent. 
10  Increase the monetary penalties substantially. 
 
The  HCF~  PHS,  ASPE,  AMPR~  and  AARP  support  this option,  while  the  AMA 
opposes  it. 
This option has widespread suppon  within the Depa~ment.  Clearly, an increase in the 
monetary penalties  k necessary if thzk is to become  an effective sanction.  As curently 
constituted,  thti provision  is virtually meaningless.  me  amount  of money involved k so 
small, that the threat of monetary penalties  has little if any detenent  effect.  Only one 
moneta~  penalty  has been imposed  since FY 1988. 
Maintain PROS sanction referral authority as it exists now, but mandate 
 
referrals to State medical boards when PROS confirm  serious  quality-of-care 
problems. 
The  HCFA  indicates  it will consider  this option  in its development  of regulations  that 
govern  the  sharing  of confidential  information  between  PROS and  State  medical 
boards.  The  PHS  sees  merit  in requiring  PROS to report  serious  quality-of-care  cases 
to State  medical  boards,  but  cautions  that  this option  could  have  implications  for the 
boards:  it could  require  additional  capacity  for investigation  and  monitoring,  and  may 
not  provide  a uniform  standard  because  States  vary in their  sanctions,  authority,  and 
.  practices.  The  ASPE  does  not  support  this proposal,  citing the  pending  fourth  scope 
of work,  and  a potential  for parallel  investigation  by PROS and  medical  boards. 
The  AMA  supports  this option  conceptually  for serious  quality-of-care  problems  that 
have  been  confirmed  by the  PRO  following  specialty-specific  physician  review  and 
completion  of due  process  rights  at the  PRO  level.  The  AMPRA  and  *P  SUppOrt 
the  option  to require  this information  exchange. 
X%k option would supplement  the current provkion  that PROS provide  informahon to 
State medical  boards after they have made  a sanction referral to the OIG.  The option 
presented in this report advocates  that PROS share case information  with medical  boar~ 
in senousquality-of-care  cases before a formal  recommendahon for sanction.  Still, these 
cases would not be minor problems--the  case reportzngwould take place  a_ftera physician 
has interacted  with PRO physicians  and after PRO physicians have determined  that this ti 
a senousquality of care problem  that requires attenhon.  Once such a problem is 
con.nned,  the PRO  would be required to provide  the case information to the State 
medical  licensure board.  l%e boards already receive informa~onabout physicians on 
malpractice  claims  and hospital advezse actions.  It clearly makes sense for the boards to 
receive information from  the PROS when they con.rm  senousquality-of-care problems 
after medical  review. 
l%e fourth scope  of work contains substantial  changes in the role of the PROS.  Included 
among these changes, PROS will be required to develop  wnttenmemoranda  of agreement 
with State medical  boards.  The HCFA  could provide guidance to the PROS on the timing 
11  and content  of thti information  exchange.  The agency could specifi  that thti information 
sharing take place  at the point  when the PROS have conjirmed,  after medical  review, that 
a physician  is responsible for medical  mismanagement  resulting in significant adve~e 
effects on the patient.  Should it determine  that legislation is necessa~  to effect thh 
change, HCFA  could propose  such legislation. 
We recognize, as PHS has pointed  out, that implementing  this option  could require 
additional  resources and skills for many State boards.  We have added  these points  in the 
text that discusses th~ option. 
12  APPENDIX  A

STATUTORY  PROVISIONS 
Obligationsof Health Care Practitioners and Providers 
of Health Care Semice~ Sanctions and Penaltiw, 
Hearings and Review 
[42 U.S.C.  1320C-5] 
Sec. 1156. (a)  It shall be  the  obligation  of any health  care  practitioner  and  any 
other  person  (including  a hospital  or other  health  care  facility, organization,  or agency) 
who provides  health  care  services  for which  payment  may be  made  (in whole  or in 
.  part)  under  this Act,  to assure,  to the  extent  of his authority  that  services  or items 
ordered  or provided  by such practitioner  or person  to beneficiaries  and  recipients 
under  this Act
(1) will be  provided  economically  and  only when,  and  to the  extent,  medically

necessary;

  (2) will be  of a quality  which  meets  professionally  recognized  standards  of

health  care;  and

(3) will be  supported  by evidence  of medical  necessity  and  quality  in such form

and  fashion  and  at such time  as may reasonably  be  required  by a reviewing

peer  review  organization  in the  exercise  of its duties  and  responsibilities.

(b)(1)  If after  reasonable  notice  and  opportunity  for discussion  with the 
practitioner  or person  concerned,  and,  if appropriate,  after  the  practitioner  or person 
has been  given  a reasonable  opportunity  to enter  into  and  complete  a corrective 
action  plan  (which  may include  remedial  education)  agreed  to by the  organization,  and 
has failed  successfully  to complete  such  plan,  any organization  having  a contract  with 
the  Secretary  under  this part  determines  that  such practitioner  or person  has
(A) failed  in a substantial  number  of cases  substantially  to comply  with any

obligations  imposed  on him under  subsection  (a),  or

 
(B) grossly and  flagrantly  violated  any such obligation  in one  or more  instances,

such organization  shall submit  a report  and  recommendations  to the  Secretary.  If the 
Secretary  agrees  with  such determination,  and  determines  that  such practitioner  or 
person,  in providing  health  care  services  over which  such organization  has  review 
responsibility  and  for which payment  (in whole  or in part)  may be made  under  this 
. 
Act,  has demonstrated  an unwillingness  or a lack of ability  substantially  to comply with 
such obligations,  the  Secretary  (in addition  to any other  sanction  provided  under  law) 
may exclude  (permanently  or for such period  as the  Secretary  may prescribe)  such 
A-1  practitioner  or person  from  eligibility  to provide  services  under  this Act  on a 
reimbursable  basis.  In determining  whether  a practitioner  or person  has demonstrated 
an unwillingness  or lack  of ability  substantially  to comply  with  such  obligations,  the 
Secretary  shall consider  the  practitioners  or persons  willingness  or lack of ability, 
during  the  period  before  the  organization  submits  its report  and  recommendations,  to 
enter  into  and  successfully  complete  a corrective  action  plan.  If the  Secretary  fails to 
act  upon  the  recommendations  submitted  to him by such organization  within  120 days 
after  such submission,  such  practitioner  or person  shall be  excluded  from  eligibility  to 
provide  services  on a reimbursable  basis  until  such time  as the  Secretary  determines 
otherwise. 
(2) A determination  made  by the  Secretary  under  this subsection  to exclude  a 
practitioner  or person  shall be  effective  on the  same  date  and  in the  same  manner  as 
an exclusion  from  participation  under  the  programs  under  this Act  becomes  effective 
under  section  1128(c),  and  shall remain  in effect  until  the  Secretary  finds and  gives 
reasonable  notice  to the  public  that  the  basis  for  such determination  has been 
removed  and  that  there  is reasonable  assurance  that  it will not  recur. 
(3)  In lieu  of the  sanction  authorized  by paragraph  (l),  the  Secreta~  may require 
that  (as a condition  to the  continued  eligibility  of such practitioner  or person  to 
provide  such health  care  services  on a reimbursable  basis)  such  practitioner  or person 
pays to the  United  States,  in case  such acts  or conduct  involved  the  provision  or 
ordering  by such  practitioner  or person  of health  care  services  which were  medically 
improper  or unnecessary,  an amount  not  in excess  of the  actual  or estimated  cost  of 
the  medically  improper  or unnecessary  services  so provided.  Such  amount  may be 
deducted  from  any sums owing by the  United  States  (or  any instrumentality  thereof) 
to the  practitioner  or person  from  whom  such amount  is claimed. 
(4) Any practitioner  or person  furnishing  services  described  in paragraph  (1) who 
is dissatisfied  with a determination  made  by the  Secretary  under  this subsection  shall 
be  entitled  to reasonable  notice  and  opportunity  for a hearing  thereon  by the 
Secretary  to the  same  extent  as provided  in section  205(b),  and  to judicial  review  of 
the  Secretarys  final  decision  after  such  hearing  as provided  in section  205(g). 
(5) Before  the  Secretary  may effect  an exclusion  under  paragraph  (2) in the  case 
of a provider  or practitioner  located  in a rural  health  manpower  shortage  area 
(HMSA)  or in a county  with  a population  of less than  70,000, the  provider  or 
practitioner  adversely  affected  by the  determination  is entitled  to a hearing  before  an 
administrative  law judge  (described  in section  205(b))  respecting  whether  the  provider 
or practitioner  should  be  able  to continue  furnishing  services  to individuals  entitled  to 
benefits  under  this Act,  pending  completion  of the  administrative  review  procedure 
under  paragraph  (4).  If the judge  does  not  determine,  by a preponderance  of the 
evidence,  that  the  provider  or practitioner  will pose  a serious  risk to such individuals  if 
permitted  to continue  furnishing  such sefices,  the  Secretary  shall  not  effect  the 
exclusion  under  paragraph  (2) until  the  provider  or practitioner  has been  provided 
A-2  reasonable  notice  and  opportunity  for an administrative  hearing  thereon  under 
paragraph  (4). 
(6) When  the  Secretary  effects  an exclusion  of a physician  under  paragraph  (2), 
the  Secretary  shall  notify the  State  board  responsible  for the  licensing  of the  physician 
of the  exclusion. 
(c) It shall  be  the  duty of each  utilization  and  quality  control  peer  review 
organization  to use  such authority  or influence  it may possess  as a professional 
organization,  and  to enlist  the  support  of any other  professional  or governmental 
organization  having  influence  or authority  over  health  care  practitioners  and  any other 
person  (including  a hospital  or other  health  care  facility, organization,  or agency) 
providing  health  care  services  in the  area  served  by such review  organization,  in 
assuring  that  each  practitioner  or person  (referred  to in subsection  (a))  providing 
health  care  services  in such area  shall  comply with  all obligations  imposed  on him 
under  subsection  (a). 
A-3
  
.  APPENDIX  B

OVERVIEW  OF  DATA  FROM  THE  OFFICE  OF  INVESTIGATIONS 
B-1.  PRO Sanction Referrals to the OIG, FY  1986 through FY  1992 
A  By Type of Violation 
Type  of  FY86  FY87  FY88  FY89  FY90  FY91  FY92  Total 
Violation: 
Gross  &  46  60  27  17 24  11 9  194 
Flagrant 
Substantial  I  19  I12I1O  5  I  5  I  1 I  5  I  57 
Lack  of  1 0 0  0  0  0 0  1 
Documentation 
Total  66172137  22  29  12 14  252 
B.  By Type  of Provider 
Type  of  FY86  FY87  FY88  FY89  FY90  FY91  FY92  Total 
Provider: 
Physicians  60 66 34 21 29 12 13  235 
(MD  or DO) 
Hospitals  6 6 3 1 0 0 1  17 
Total  66 72 37 22 29 12 14  252 
B-1  B-2.  OIG Dispositionof Referrals from PROS, FY  1986 through FY  1992 
A  Sanctions Imposed by the OIG 
Type  of  FY86  FY87  FY88  FY89  FY90  FY91  FY92  Total 
Sanction 
Exclusions  21  34  18  10  13  10  5  111 
Monetary  9  16  2  0  0  0  1  28 
Penalties 
Pre-exclusion 
Retirements*  o  0  2  1  1  2  0  6 
Total  30  50  22  11  14  12  6  145 
*Pre-exclusion  retirement  results  from  an agreement  among  the  PRO,  the  physician, 
and  the  OIG  that  the  physician  retire  from  practice  rather  than  be  excluded.  Because 
the  retirement  would  not  have  occurred  without  the  sanction  referral,  the  OIG  counts 
these  as actions  taken. 
B.  Referrals Rejected or Closed by the OIG without Sanction 
Rejection  Based  FY86  FY87  FY88  FY89  FY90  FY91  FY92  Total 
On: 
Unwilling  or 
Unable  o  19  11  4  4  2  2  42 
Requirement 
Failed  to Follow 
Regulatory  4  10  12  6  2  1  7  42 
Process 
I_ack of Medical 
Evidence  6  5  0  2  2  5  0  20 
Closed  Due  to 
Physicians  2  0  0  0  0  0  0  2 
Death 
Total  12  34  23  12  8  8  9  106 
B-2  B-3.  Outcomes of Sanction Appeals to AdministrativeLaw Judges 
FY  1986 through FY  1991 
Total  number  appealed  to the  ALJ  61 
Appeal  withdrawn  or settled**  32 
IIOIG  decision  upheld  (concurrence)  I  19  II 
IIOIG  decision  overturned  I  10  II 
**Cases  withdrawn  or settled  resulted  in a sanction. 
Explanato~  Note: 
The  data  in Table  B-1 are  based  on the  date  that  a sanction  referral  was received  by 
the  OIG.  The  data  in Table  B-2 are  based  on the  date  on which  a sanction  was 
imposed.  For  example,  a sanction  referred  by the  pRO  late  in FY  1991 might  not  be 
.  have  been  acted  on by the  OIG  until  FY  1992.  Consequently,  the  numbers  of 
referrals  and  sanctions  imposed  in any single year  are  not  equal,  since  they  are 
referring  to different  actions. 
B-3   APPENDIX  C 
DETAILED  COMMENTS ON THE  DRAIW REPORT 
In this appendix  we present  the  full comments  on the  draft  report  and  the  OIG 
response  to each.  The  comments  presented  in this appendix  are  from: 
Page 
     
TheHealthCa reFinancingAd  ministration  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  c-2 
The  Public  Health  Service  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  C-n 
The  Assistant  Secretary  for Planning  and  Evaluation  . . . . . . . . . . . . . . . . . . . .  C-17 
The  American  Medical  Association  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  c-22 
The  American  Medical  Peer  Review  Association  . . . . . . . . . . . . . . . . . . . . . . .  C-25 
The  American  Association  of Retired  Persons  . . . . . . . . . . . . . . . . . . . . . . . . . . C-29 
c-1   Heron  Care 
Fh18~C!ngAd~lfIMUattOf7 
Memorandum 
Date 
Acting  Administrator 
From 
Of  ice of Inspector  General  (OIG)  Draft Report:  The Sanction Rcfemai  Authority  of 
Subject 
Peer  Review  Organizations,  OE1-UI-92-0C)250 
TO  Bryan  B. MitchelJ 
Principal  Deputy  Inspector  General 
We have reviewed the subject repro  which msesses the trends and problems 
associated  with  the  use of sanction  refcrrd  autiofiy  by prof~iond  I?etiew 
Organizations  @ROs).  ne  ~~OS  sa~tion  referral  authority  requires  them  to 
recommend  that  OIG sanction  p~ysitia~  and  hospitals  ~es~nslhlc  for violating their 
-  Medicare  obligatic)n~  as spetied  in section  llS6(a)  of the  Social  Setity  Act. 
OIG  found  that  the  number  of sanction  referrals  made  by PROS  amually  have 
decreased.  ~  ficaj  year (~  ~9s7, PR~  refe~ed  72 ma  for ~jlde  sanction  to 
OIG.  nis  number  kIw of ~2 h  ~  IW1.  p~~  for xvcn  States have 
dropped  to  a 
never referred  a physician or hospital for sanctioIL  In FYs  1~  and  1991, 24 of the 
43 PROS  did  not  refer  any physitim  or hospitais  for  sanctiom  C)IG presented  the 
following  major  factors that  account for the  drop  in the  number  of sanction 
might 
referrals:  the statutory  li.nwilling or mable  requiremen~  PRO#  negative experiences 
mth the sanction  process,  and  the  pROS emp~~k  on edttcational  approaches  to 
quaiiwd  of =re  problems.
OIG  presented  five policy options to be considered: 
o  Repeai  or substantially # modifi.   the  unwilling  or  unable  requirement,
0  Increase  the monetary  penalty  sanction  substantially, 
Eliminate  the PROS sanction refemai  authority, 
0 
0  Protide  sanction  mthoxity  directiy to the  PROS,  and 
0  ,Maintain PROS sanction  rcfemai authority  as it efits  now,  but  mandate 
referrals  to State  medical  boards when PROS cotirrn  seriousquaii~  of 
care problems. 
c-2  Page 2- Principal  Deputy inspector  Gene::: 
HCFAS sm* xific comments  on the options and our proposed  soiution 
problem  are  a~:ached for -y-u-u--r-  c.-u_ rJmAu-_c-m.:w-n. 
Thank  vou for the opportunity  to review md  cement  on this draft  rcpor~, 
Please  advise is  whether you agree with our position  an the  options presented  in the 
A 
repon  at  your  earliest  convenience. 
Attachmem 
C-3  comments  of the  Health Care FinancinAgdministration  (HCFA\ 
on the office  of InspectorGenerti (OIG) Draft ReDon: 
The  Sanction  llefemd~uthotitv  of Peer 
~anizations,  OEI-01.92-00250 
Repeai  or  substantiailv.   modifi9  the  !mwiuing or unable  requirement. 
HCFA ResDonse 
HCFA disagrees  with this poiicv option.  Under section  l156(b)( 1) of the Social 
Security Act (the  Act), the Sec;etq  of the ~epmmc~t  of Hea.ith  and Human 
Sewices is requ~e~  tO emjuate  w~ether  a pro~der  ~ti  demamtratcd  an  unwillingness 
or inability  to  ~mect  a qualitoyfwc  ~rob]emide~fidbya peerRcticw 
Orgamzation  (pRO).  We rem~~e  that  iII past  VCm  the  unwifig  or unable 
reqwremcnt  piaced  a burden  on PROS because t-he PROS had  to determine  if a 
provider was unwilling or unable  to wmect  a qualitv of wc  problem  during the 
informal retiew  process.  However, we beiieve tha;  section 4205 of the Omnibus 
Budget ~e~onciliation  Act (OB~)  of 1~  h=  determination  of the 
~p~ed  tic 
unwilhg  or tmable rcquirernent.  PROS are now  required  to protide  an opportunity.   to 
establish a comemive action plan  (CAP)  e~qt  when  a  W  would  not  be 
appropriate.  The  p~actitioners  or  providers  f~wc  to comply  with  the  CAP  or 
correct  the  ~OJaliO~  after  i~p~emc~tatioof~a CAP wodcibcsufficient evidence tO 
support  the  PROS determination  of unwilling or unable. 
Policv Option  2 
Increase  the monetam  penaltv sanction  substantially.
.  ,  . 
HCFA Response 
HCFA suppons  an increasein monetary  penaitv  ~uthority.  However,  in such cases, it 
is important  tha~ the impact  on Medicare  beneficiaries health  and well being be 
paramount  in considering whether  a physician should be ailowed to continue  practicing* 
versus the imposition and collectionof a monetary  penalty. 
PO1icvOption  3 
Eliminate  the  PROS sanction  rcfcrrai  authority. 
c-4  HCFA Response 
HCFA does not agree with this option.  PROS should retain  their authority  to 
recommend  sanctiom  to the Secretay  when educariond  effons  have failed.  We 
believe the PROS sanction refe~j  autioti~  j,snc~~  for PROS to mfcguard  the 
health and well being of Medicare  beneficiaries. 
Policv Ontion  4 
Provide sanction  authotity  directiy to the PROS.  . 
HCFA Response 
HCFA does not agree with this option.  We beiieve that  the sanction  authoriw 
requirement  would place a signticmt  burden  on PROS.  A resulting  effect  co~id  be 
that PROS wouid be iess decisive in mating  sanction  dctefiatiom  imowing that  they 
must impose  them.  We also beiicve that  PROS would find it extremely dficuit  to 
achieve and maintti  national  consfitenq  when imposing sanctiom  at a State jevci. 
we  aiso beiievc that  it would be inappropriate  to cede to gove~ent  contractors  the 
authority  to  exclude  indtiduals  and  institutio~  born  a gove~cnt  progrm.  For 
those  reasons,  HCFA  beiieves that  OIG should retain  thisauthofi~  for  uniformity and 
 
consistent  in imposing sanctions. 
Policv OtXion  5 
Maintain  PROS sanction refen=ai authority  as it exists now, but mandate  referrals  to 
State medical  boards  when PROS confirm serious quality of care probIems. 
 
H_CFAllesDonse 
 
HCFA  wil consider  this option.  PROS currently  have the authoti~  to disclose 
confirmed  quaiity of care probJems to State  mediczd boards.  Tlc  cumnt  regulations 
at 42 CF2Z476.138 ailow PROS to prcxde rekvant  confidential  information  to State 
medicai boards  on their  own initiative  and rquirc  PROS to provide this information 
when the State  medicd  board  requests  it.  These  regulations,  however, do not address 
mandatory  disclosures without  a request  from the State  medi~l  board.  We arc   
currently rcvking  the PRO  cofidentiali~  regulations  and will consider including the 
requirement  of mandato~  disclosure  to State  medi~i  boards  Wthouta request. 
Fu~hennore,  the Fourth  Scope of Work (SOW) WU1requirePROS  to develop Wriuen 
memoranda  of agreement  with State  medical boards  on what type of kiformation 
(including timeframes)  to exchange ~th boards. 
 
c-5  Page 3 
HCFA iSafso in the process of implementing  funher  requirements  for information 
exchanges between  PROS and State~ede@  Iiceming tXXM.  Section 4205(d) of 
OBRA  1990 added  section  1154(a)(9)(B)  to the ACL TM  provision requires 
itiormation  sharing with the approptiatc  State  mcdi~  board after  tie  PRO prowdes 
the physician with notice and opportun.i~  for a hetig  and has made  a final 
(negative)  decision.  We arc also developing  regulations  @Q-13$F)  which will 
require  a PRO  to prwde  State/Fede~  licensing bodies with portions  of any PRO 
sanction  repoti  forwarded  toOIG which concerns  practitioners  that  are  subjectot the 
State/FederaJ  licensing bodysjurisdiction.  This W  implement  section  HO@) 
of the Act. 
HCFAS Solution 
In the foumh round  of PRO ccmtrac~  we are  beginning a Health  Care  @aiity 
Improvement  Mtiat&e.  Under t~  initiative,  PROS  ~  a~~e  patte~  of health 
care and patient  outcomes.  PROSwiUshare  this information  with providers  to heip 
them identi& ways to i~provcp~tie~Otutmmesmd he c@@  ofWC.  Under  this 
initiative, HCFA  is emphasizing cooperative  efforts at UIntiuous  quaiity improvement, 
rather  than contiontation  and punishmen~  We be~eve that  ~nctions  should be 
imposed  on prtiders  only as a last resort  to protect  beneficiaries  from poor quality 
care. 
~owever,  we  believe  that  the PROS  sanction  rcfe~  au~oriy  ~ necessa~  in cases 
where  hospitah  or  p@ic~a~  fafl to mpemte  with  PROS  to  CGKeCt identified  patterns 
of quality or utilization  faftioimprovetheipratterns  of care despite 
prO&Icm,  Or 
repeated  attempts  to work with PROS through  vohmtary action pians. 
The  Fourth  SOW  incjudes an kte~ted  strate~  for actions &at  should be taken  in 
such cases.  PROS will have the ch-oice ofi  -
0  imposing a PRO-directed  comective  action  plan; 
o  directly negotiating  an action  p~an with the physician if a hospital fails to 
cooperate  wth a PRO  to improve  a physicians care; 
o  referring  zhe case to the HCFA  regionai office for an investigation  of a 
hospitais  possible noncompliance  wth its Medicare  provider  agreement; 
0  referring  a case of physician utilization  problems  to the cartier  for 
prepayment  review; 
0  referring  the case to the appropriate  State medicd  board;  or 
C-6  Page 4 
0  beginning the sanction  prws 
Of the listed alternatives,  PROS VA be required  to take  the least  disruptive 
intemention  necessa~  to comect the pattern  of mntim. 
.Generai Comments 
Entire  Renofl 
OIG should review the Fourth  SOW before  issuing the final of this rcpofl. 
Pages i and3- 1st and  3rd bullets 
 
Ae  12 referrais  what OIG agreed  to exclude?  Did PROS subfit  more  than  12 cases? 
 
I%uzesi and 4- 2nd bullet 
43 PROS.  During  fical  years (FYs)  1~  and 
OIG should citify  the referen=  to 
lWI,  HCA  had  53 PRO con~c~  in place.  It should be noted  that  some 
organi=tions  have more  than one PRO  contmct. 
PaEes i and 3- Methodo!o~
 
The explanation  of the methodology  should have included  the number  of sanction 
Also, the  reasom  why sanction  actions   
actions bc~n  and  closed at the PRO  leveL 
were closed at the  PRO level should also be included. 
 
A PRO  is not nccessatily  failing to utilize the sanction  proces  simply because  it is not 
A factor  in the decremed  number  of referrals  could be that 
recommending  sanctions. 
educating practitioners/protiders  in~olve~ me  abi~@ 
PROS have been successful in 
of a PRO  to refer  a practitioneriprotidcr  for sanction  is an added  incentive tOthe
educated duling  the info~al  review process by the 
practitioner/protider  to become

PRO.  Therefore,  even if the PRO  does not refer  the  practitioner/protider  for

sanction.  the abili~  of the PRO  to refer  them  for sanction  may enable the PRO ~0

correct  many problemswithout  actually utilting  their  sanction  refemai  authori~.

. 
Paces  B - 1- Awendix  B - CME  W  lW1

Were  there  20 refcrrais  by PROS (8 rejected  and  12 excluded)? 
-. 
 
c-7  Page 5 
~C  h  sentence  is ~a~uratc.  PROS UC p~d  for  ~  ~ts  they  incur  bcgirK@  wth 
the  issuanceof a ~Ction  notice.  me  fi~  outamc  of the  case, the rcfemd  to OIG, 
does not affect thcti  ability to recover  their expenditures. 
C-8  OIG RESPONSE  TO HCFA COMMENTS 
We disagree  with  HCFA  that  the  1990 amendments  have  simplified  the  determination 
of the  unwilling  or unable  requirement.  We believe  that  the  evidence  is clear--l2 
sanction  referral  cases  in FY  1991 and  14 cases  in FY  1992.  In those  situations  when 
it is appropriate  to use  the  sanction  referral  authority,  the  PROS need  to be  able  to 
move  swiftly to protect  beneficiaries  from  harm.  The  past  record  of the  physician, 
rather  than  speculation  about  future  behavior,  should  be  sufficient  to make  that 
judgement. 
We welcome  HCFAS support  for increased  monetary  penalties,  which we called  for in 
1988.  We  strongly  agree  that  beneficiaries  health  and  well-being  should  be 
paramount  in any sanction  consideration. 
We  are  encouraged  that  FICFA  is willing  to  consider  the  option  to  mandate  referrals 
to State  medical  boards  when  PROS confirm  serious  quality-of-care  problems.  The 
fourth  scope  of work  contains  substantial  changes  for the  PROS,  including  a 
requirement  that  they  develop  written  memoranda  of agreement  with  State  medical 
boards.  We  urge  HCFA  to take  advantage  of this opportunity  to speci~  that  this 
information  sharing  take  place  at the  point  when  the  PROS have  confirmed,  after 
medical  review,  that  a physician  is responsible  for medical  mismanagement  resulting  in 
significant  adverse  effects  on the  patient.  Should  it determine  that  legislation  is 
necessary  to effect  this change,  HCFA  could  propose  such legislation. 
Based  on the  concerns  that  HCFA  and  other  parties  raise,  we have  omitted  from  the 
final  report  the  two policy options  that  would  have  eliminated  the  PROS sanction 
referral  authority  and  that  would  have  provided  that  authority  directly  to the  PROS. 
We will be watching  HCFAS implementation  of the  fourth  scope  of work with  great 
interest.  It is clear  from  our  review  of the  request  for proposals  for the  fourth  scope, 
that  it contains  substantial  changes  in the  role  of the  PROS, with  its 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  this new 
approach,  the  PROS continue  to have  a critical  responsibility  to protect  the  health  and 
well-being  of Medicare  beneficiaries.  This  responsibility  may  call for taking  action 
against  individual  physicians  who practice  in a manner  that  is harmful  to the 
beneficiary. 
We agree  with HCFA  that  the  threat  of a sanction  may enable  the  PRO  to correct 
many  problems.  In this report,  we are  dealing  with cases  that  were  actually  referred 
for sanction.  As we indicate  in the  finding  that  appears  on pages  ii and  7, Despite 
dwindling  referrals,  all the  PRO  officials we interviewed  believe  that  the  sanction 
referral  authority  is important  to achieving  their  mission  because  it gives them  greater 
leverage  with the  medical  community. 
c-9  The  HCFA  requests  clarification  on the  number  of referrals  and  exclusions.  The 
PROS referred  a total  of 12 cases  to the  OIG  for sanction  in FY  1991.  The  OIG  also 
sanctioned  a total  of 12 physicians  in that  fiscal year.  It is only coincidental  that  the 
numbers  are  the  same.  The  8 rejections  include  cases  that  were  submitted  prior  to 
that  year. 
The  HCFA  also  questions  our  reference  to 43 PROS, rather  than  53 PRO  contracts. 
While  there  are  53 PRO  contracts  in place,  some  PROS hold  more  than  one  contract. 
In fact,  3 of the  10 PROS with which we conducted  our  telephone  interviews  hold  2 
contracts  each,  and  one  holds  3 contracts.  We  chose  to count  the  organizations, 
rather  than  the  contracts. 
We also  have  modified  the  text  on page  6 to reflect  HCFAS suggested  change. 
c-lo    sgf!YlcE9 
DEPARTMENT  OF  HEALTH  AND  HUMAN 
Draft  Report  The  SazictLm 
Actixlfz
xepofi. 
. 
w  #S226 
C-II  General Ccxmnents 
 
 
C-12  ---- -
2 
The PES supports  this rucamdtim~ 
C-13  3 
PES 
Cemmanke 
alxeady 
ta  have 
G POJ3CY mti cm 
exists 
it 
PROs  mnf  Inn  se.rf.ms  ~U&y+f-case  probkms. 
PES  Comments 
This  option wmlci provide the unifozty  af a natAonal 
6~andazd  and  activate  the  State  m~cal  Xmxda  $afet~ 
xnech.anisma. =  additloxt,  this  option  could  W  modified 
&ate  the  PROS  to  report  titividtaah  and  Laatitittixks  the

Eedexatiom  of  State  Medfcal  Bo~  ta  -t  aatiozd 
aumre~~hnce  and gzofU&q,  and XLationaLc~ieuns. 
AMhough  the  repoti  lacludes  this  policy  opti.m  ta  make 
referrals to State mdicai  bwmia,  it does  not  indicate  that  . 
the  FedezutLOn  of  State Medfcti Boards  %mZSecm~act- to 
provide  tiFUt. 
Under  the  oRtiwn  af  mandated  ~f~als  ts  State  medical 
bo=ds,  Lt  kuld  be helpfti to have  a  bxief  discussion  of  tht? 
C-14 
  4 
 
 
C-15  OIG RESPONSE  TO PHS COMMENTS 
We appreciate  PHSS positive  response  to this report.  The  PHS  is playing  an 
important  leadership  role,  particularly  in its efforts  to develop  valid  instruments  for 
assessing  the  quality  and  appropriateness  of medical  decisions,  and  by assisting  in the 
development  of tools  that  could  assist State  medical  boards  and  PROS in evaluating 
poor  performance  by physicians. 
The  PHS  finds merit  in requiring  PROS to report  serious  quality-of-care  problems  to 
State  medical  boards,  but  raises  some  important  concerns  about  the  boards  capacity 
and  focus with  respect  to review  of cases  that  involve  quality-of-care  problems.   
Despite  limited  resources,  some  States  are  beginning  to address  these  problems.  We 
have  recently  released  a report  that  examines  some  of these  initiatives,  State Medical 
Boards and Quality-of-Care  Cases:  Promising Approaches  (OEI-01-92-OO050, February 
1993). 
The  PHS  also questions  whether  the  decline  in the  number  of sanction  referrals   
occurred  because  of increased  emphasis  on educational  activities.  In this inspection, 
we did not  examine  the  relationship  between  educational  activities  and  the  number  of 
sanction  referrals.  In a previous  report,  however,  we found  that  the  educational  value 
of PRO  intementions  was uncertain  and  that  the  interventions  seldom  reflect  research 
findings  concerning  how physicians  learn  (Educating  Physicians Responsible for Poor 
 
Medical  Care:  A  Review  of the Peer Review  Organizations Efforts, 0EI-01-89-OO020, 
February  1992). 
Due  to the  concerns  that  PHS  and  other  parties  raise,  we have  omitted  from  the  final 
report  the  two policy options  that  would  have  eliminated  the  PROS sanction  referral 
authority  and  that  would  have  provided  that  authority  directly  to the  PROS. 
We  also have  added  to the  text  points  raised  implications  of referrals 
by  l?HS  cm  the 
to State  medical  boards. 
 
C-16  TO:  Bryan Mitchell 
Principal Deputy Inspector General 
FROM :  Assistant  Secretary  for 
Planning and Evaluation 
I offer  the following  comments  on the two subject  draft reports, 
which. I have  Litiea due to the interrelatedness  of their 
recommend.aitens. 
In the first report, you  reviewed  the sanction referral authority 
of peer  review  organizations  (PROS), of whic~ referral to state 
medical boards is one  element.  You recommended several policy 
options for improvement, including  a recommendation requirix2g 
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  ~ined  the  low  fre~ency  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 obsemtions  made  in these  reports  that the 
formal sanction referral  process  is not often used. 
Nevertheless, Z 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. 
o  ReD eal or substant  iallv  modifv  the  unwillinq  or  unable 
re auirement.  (Policv ontion  1. Renort  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  idenc=~y  how  the  requirement  could be meaningfully 
modified.  Z suggest  that  you  clarify  better why the recent 
legislative change -- defining a physicians failure  to 
participate  in a corrective  action plan  (CAP) as 
C-17  Page 2- Bryan  Mitcke~L 
demonstrated unwillingness  or  inability  to  conqiy  -- 1S 
inadequate.  Also, Z urge you to clarify how due process 
protections would be preserved in the event that the 
requirement was modified or repealed. 
o  Increase  the rnonetav  nenaltv  sanction substantially. 
(Policv ontion  2, Renort  on the Sanction  Referral  .luth.orit~j 
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. 
0	 Eliminate the PROS sanction  referral  authoritv.  fPolicv 
ODtion 3, ReDor~ on the Sanction Referral  Authoritv)  This 
i8 a  theoretical option only; without the tiility to impose 
sanctions  in  the face of  aberrant  or  poor  quality behavior, 
PROS would have little clout in certain circ~c~ces  to 
influence physician behavior.  I would oppose this proposal. 
0  Provide  s~nct:cn aut~.oritv directly  to the PR09.  ~Poiic7 
ontion  4, IZeport on the Sanction  Referral  Authoritv)  There 
are actually two alternatives to OIG atinistration  of the 
sanctions process.  The first is to decentralize  and  give 
the  PROS the direct authority  to  impose  sanctiors.  The 
second is to move the authority from OIG to  
HCFI.. 
Decentralization  would  be  undesirable  for the reasons cited 
On  page 10 of the Sanction Referral Authority report, with 
the additional concern that physician exclusion is too 
 
serious  an  outcome  to cede without  central  review  to the 
PROS,  who  are  merely the contractual agents of the Federal 
Government.

The second alte.mative, having HCFA pursue  the  sanction 
actions, ZISO may noc be desirable, but the report does not

provide sufficient information to evaluate whether  the OIG 
bs  been  too  consemative  in  its  choice  of  which  cases  to 
pursue, and whether this restraint -- rejecting, for

examgle,  8  of  12  cases  referred  to it in ~  1991 -- is 
itself contributing to the dwindling nuxnberof cases 
proposed  for sanctions by the PROS.  IE  appears  from  t he 
statis  tics in Appendix B that the PROS may  be  doing  a  bet  n 
job  at  following the proper procedures for developing a 
solid  case.  No-justificatio~  or  explanation  is  provided, 
however, for the increasing rate of cases rejected  by  the 
OIG  for lack ~f medical evidence from J?Y1988 to 1991.  my  
is the OIG rejecting the medical advice of the PRO 
physicians?  The report would be substantially strengthened 
by an objective evaluation of.the cases the OIG rejected, 
and by the discussion of the second alternative. 
o	 Maintain PROS 9anction referral authoritv ag it exists nOW,

but mandate referrais to State medical boards when PROS

C-18  Page  Bryan 
confi.m serious aualit~-of-careDroblems.  (Policv ontion 5, 
Reuort  on  the  Sanct~m  Referral Autkoritv  and recommendation 
of ze~orc  The -D=-=-v- Review  Oraanizat:ans  and State .Medical 
Boards:  A Vi,talLink ~  I do not support this proFosal 
for several reasons.  I would agree  that  the  PROS and the 
State medical boards  (and hospital licensure authorities, 
etc.) shouid be in closer contact.  The most =ecent versions 
of  the  PRO Fourth Scope of Work include re~irements  that 
each  PRO develop memoranda  of agre~ent  (MOAS) with such 
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 re~irement  for unilateral action. 
I understand that the provision of the 1990 Omnibus Budget 
Reconciliation  Act re~irlng  PROS to ghare case information 
With sc~te ~Letiicalboardg hag not been iqlme~~sd  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  technical  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 OIGS 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 hmediate  danger, it does not seem fair or 
appropriate to essentially initiaLa a paral~el investigation 
by the medical society  until  there has been  confirmation of 
a  problem.  This is particularly a problem in those states 
that  require  all c~laints  made to the state medical 
society  to be made public, including reports from the PROS. 
I do not object to  publicity where the physician has 
SUCh 
had ample opportunity  to respond.  to  the  PRO  ud  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 
mandato~  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 of inade~ate  medical 
 
C-19 
..  Paqe 4 - Bryan Mitchell 
evidence  from the PROS.  me  ~ep~r~= da nat explain Why it 
would be pro~ucc~ve  or zpproDriate  to engage  the sczce 
medical  Socieeies based  on i~fo~tion  that the OIG itself 
feels  is inade~ate  to justify a sanccion. 
Finally, the firgt three tales  Of  Appega&  B  of  the  report on 
the Sanction Referral AuthoriEy  (sact=o~s  referzed  to  the OIG, 
referrals rejected by OIG,  sanctions iqoged  by the OIG) do not 
agree and should be clarified.  For FYs19E7,  1988,  1989 and 1991, 
the sum of the sanctions imposed and referrals rejected exceeds 
the sanctions referred (cases are reso~~ed 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. 
Z 
w 
. 
C-20  OIG RESPONSE  TO ASPE CO~ 
We appreciate the comments from ASPE.  We agree  that  the  additional  evidentiary 
requirement  imposed  by the  unwilling  or unable  provision  is vague.  We believe  that 
the  evidence  is clear--l2  sanction  referral  cases  in FY  1991 and  14 cases  in FY  1992. 
In those  situations  when  it is appropriate  to use the  sanction  referral  authority,  the 
PROS need  to be  able  to move  swiftly to protect  beneficiaries  from  harm.  The  past 
record  of the  physician,  rather  than  speculation  about  future  behavior,  should  be 
sufficient  to make  that  judgement.  -
We welcome  ASPES support  for increased  monetary  penalties,  which we called  for in 
1988. 
Based  on ASPES concerns  and  those  of other  parties,  we have  omitted  from  the  final 
report  the  two policy options  that  would  have  eliminated  the  PROS sanction  referral 
authority  and  that  would  have  provided  that  authority  directly  to the  PROS. 
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.  It is 
clear  that  little  information  is exchanged  at present.  The  option  described  in this 
  report  would  require  PROS to share  information  with  the  State  medical  boards  only 
after  they  have  confirmed  serious  quality-of-care  problems  through  medical  review 
involving the  physician  and  the  PRO  physicians. 
We  are  concerned  that  ASPES comments  may reflect  some  misunderstanding.  We 
wish to clari~  that  this reDort  refers  strictlv to the  role  of State  medical  boards,  not  to 
1 d 
State  medical  societies. 
We have also added  text  in appendix  B in response  to ASPES request  for clarification 
 
on the  data. 
 
C-21
   __  .he~ican  Nleciical  .%soci~tion 
Phvslcjansaealca[ea co [he nealchofknenca 
JamesS. Todd. MD  :15Nonh Staus?ulx?c  312464-5000 
ExecucweVice Resuient  Chicago,ihlOIS 60610  212464-418F4ax

October  Z2,  1992 
Bryan B. Mitchell

Princi@D eputyi nspectGoern
exai

  DepartmeonftH eaitahn
 dHumanSemites

Officoef InspectGoern erai

330Independence  Avenue.  S.W. 
Cohen~uikiing,I?oom5554 
WashiqgonD.C 20201

  Dear Mr. Mitchell: 
Thankyou  for prnvIciingtheAmericanMedicalAssoc~atton(AMA)wuhtheoppmmmtyto rewew 
andcornmen~on the Office of InspectorGenends(OIG) chit  mspecuon report enmled The 
&ixxmonReferraiAuthorityof PeerRev]ewOrgamxmons.The AMAhasrewewedthe poiicy 
opttonssetfortihn theOIGSd tafrte porantd
 offers the following  comments.  taking  into account 
the OIGS recentM  management  advisory  report ermtled The Peer Rewew  Orgamzattons  and 
State Medical  Boards: A Vital tit 
TheAMA supports keeping the unwilling or unable clause inthePRO statutBey.i nciuditnhge

specifriecc pirertnheanttth
 eSecretaorftyh eDepartmeonftH ealtahn
 dHumanSemites 
demonstrate a physicians i@iiity  or unwillingness to compiy with pmgxarnobligations before 
being sanctioned.  Congress  expressed its beiitelfiltawtouidbeinappropriate  to exclude  a 
. 
physxcxanor other  providedrm  participationin the Medicare  program  unicss  the physician  or 
provider  was cieariy  unwilling  or unable  to compiy  with  rhe ~rogram  obligations. 
The AMA opposes  any legislative  or regulatory  change that wouid  ailow  PROS to impose  punitive 
monetary  fines m excess  of the acmai Or es~ated  cosrs of the medicdly  unnecessary  or 
inappropriate  semlces  pmvlded. ~cmrdin@y,  tie  AMA  strongiy  opposes  any etfort  to increase 
 
the monetq  penalty  beyond its cument statutory  limits. 
With respect  to the o~er  po@  opjons  proposed  by the OIG. he  A-MAfavo~  the position  that 
 
PROS should  maintain  the sancdon  referrai authority  as it cumentiy  exists.  h  addition.  as 
indicated  in my ietter  dated Oct,okr  14 to yOU. the AMAConceptua,ilSyUppOHS the OIGSposition 
@t  PROS should  refer to state medical  boards any serious quaiity-of-c~  problems  hat  have  been 
. 
confhmed  by the PRO followingSpeciaity-spectixpchysicianreviewandcompletionof due 
process  tights  at the PRO  levei.  This poiicy  option.  which is consistent  with Sections  C.9.7  and 
C.9.8 in tie  PRO Foufi  SCOpe ofWork.would allow state medicai  bards  10 take  action  in 
response  to the pmvisxon  of cam Of allegedly  questiomblequality  that may  not meet the threshold 
requred  for a sanction  refed  under the  PROprogram. 
AS YOU know,  the AMA  is WOmg  10 cicvdopCmmuctive  and innovative  a~proac~es10 enhance 
professional  Self-m-tiarion.  The AMA  is working to establish  closer  RiatioIQx  benveen  state 
hrds  and state memcaiassociatiFoonrse.x amplet.heA MA isactivepiUyW g  with  the
Federauon  of State .NIedicai Boards  m  arrangement  whereby  voiumeer  physicians  from state 
c-22  medicaalssociaticoontsidperforpmartofthexnvestigtainvdereviefwuncdonosnbehaloff.and 
under the supervision  of. tie  state boards. Such an arrangement  should permit the boards to 
process a greaternumberof cam@aims. 
At present.  state medical associar.ions that conduct peer rcwiew can tak  oniy iimited  action  against 
physicianThse. u.itimatesancuo~nt statmeedicdassociatciaonn@sy  ismvocafioonf 
membershipin the association.  which. of course. has limited  effect on physicians who are not 
members of the association. Everypmcdcing@ysicianhas a ticense.however.and medicai 
associationscan broadenthe scope and increasethe reievanceof their peer review activitiesby 
assisting in the invetigafiom of state boards. h  nun the actionsof the state boaxdscan be 
impmved if PROSrefer seriousquaiity-of-care@Xems. contkned by spec~-spectic  nwiewers 
at the PRO levei. 10 the state baud  for review. 
h  closing, the AMA favors the OIGS policy option of having PROS maintain  their current   
sanction refermi  aurhority  and. consistent  with &.  PRO Founh Smpc mfWOX  refer to state 
medicai boards any setiousqualky~f-cam pmbiemsconfixmedby the PRO folIowing  speciaity
specific  physician  review and completion  of due process rights  at the PRO leveL 
Thank  you again  for pmwciing the AMA  with the opporumity  to rmnew and comment  on your 
draft  insptxmon  repoK.  We look fonvard  to a continuingdiaiogue. 
Sincerdy, 
n  / 
&__]~fl. 
, 
~ 
/-
,. 
Jqes  S. Todd.MD 
- 
 
- 
C-23 
- -  OIG RESPONSE  TO COMMENTS FROM ITIE AMA 
We  appreciate  the  AMAs  comments.  We  acknowledge  their  opposition  to changes  in 
the  unwilling  or unable  clause  and  to increased  monetary  penalties  for medically 
unnecessary  or inappropriate  services. 
Based  on the  concerns  raised  by the  AMA  and  other  parties,  we have  omitted  from 
the  final report  the  two policy options  that  would  have  eliminated  the  PROS sanction 
referral  authority  and  that  would  have  provided  that  authority  directly  to the  PROS. 
We believe  a full range  of quality  assurance  approaches  are  required.  One  approach 
that  would  complement  the  efforts  of the  AMA  and  State  medical  societies  is earlier 
information  sharing  between  PROS and  State  medical  boards.  This  exchange  could 
take  place  when  the  PRO  physicians  have  confirmed,  after  medical  review,  that  a 
physician  has been  responsible  for medical  mismanagement  resulting  in significant 
adverse  effects  on the  patient. 
 
. 
 
C-24
  A1iF?d 
MEDICA%L:.  
AMEEIC~N REWEAIA SS~CIATION
.~0F rsI:i!re~I;V.E .    Stijte41)  .  T/asn\ngro!n).,C.20002 .  292)371-5610.  FAX.(202)S71-6954 
November  10, 1992 
Bryan B. MitcheU 
Principai  Depurv Inspector  General 
Depanment  of Heaith  & Human  Services 
Office of the hspector  General 
Wa@yoU  DC  20201 
Dear  Mr. MitcheU: 
Thank you for sending mea  draft copy of the  repo~  The Sanction Referrai 
Authoti~  of  Peer  Re~iew  Orgtitiom. 
AMPIU  appreciates  the
oppornmi~  m  coxnrnent. 
ti  remarks  focus  on  the  rep~fis  five pdic;
options.  . 
For several years now, the unwMng  or I,UIMe stand~d  - at the  AIJ  level  -
has  been  a  difficuit  test  to  xnee~  Absent  di.redo~  Ws  vtied  wide~y in

their  interpretation.  finding  some  physiti~  able  became  they  possessed  a

medical  degree  and  ]ther  willing  even  thou@  they  retied  interaction  at the

PRO  levei.

:.d,.,~  :  - . .  :U  PA  f4c(3 
-1-.-..-,,  !  ., , 
... ..  -. 
,,7  , 
.--=.  ,  ,.,  ,  ,,.
....p&.-
.-
_.,  z  !. ,I::r.1 
-:,
-----c:--
. 
. 
.,- ,. , 
,#.-
-- .-
In  essence,  the  ianWage  passed  in  OBM  1990  shpiy  citied  the  law

,.:-,-- -;.-:=  ---n<:;  -----:.,  relating  to  PRO  sactiom  by  provitig  that  in  dete

=.Grz  ,.- xmining  whether  a

., ---- ,. ,  practitioner  or person  is untitig  or unable,  tie  Semew  shall  consider  the
___  ~---- .
z--- ..  practitioners  or  pemons  Wilfingess  or  lack  of  abfi~,  duxing the  period 
=,  .-..  . . 
:.,  .A,  ,,  before  the PRO subtiT,s  its report  and  reco~endatiom,  to enter  into  and 
.:, 
T,  ..  ..Z.  - .\ i  successfully complete  a correaive  action  pl~  It fi  imponat  to note  that 
..:*,. +,-,..  ,,.

development  of  a  course  of  corrective  action  is  no[  mmdato~  in  every 
:=c:~~=  -_=  -,:,,,,  c 
J-
- 7,!----- -;  instance.  Indeed, the stamto~  change contined  iII OBRA 90 is prefaced  by 
.. .,r --- *.]f.. 
the  ciause,  if appropriate. 
MPW  was supportive  of this provision  and
worked  with the Office  of Inspector  General  and the Dep~ment  of Heaith 
to assis~ in immediate  com.muti=tion  to AIJs,  px=atitionem/protiders  and 
. ....  peer  review orgatitions. 
r-. 
-,,  .,., 
C-25
 November  10, 1992 
Page Two 
Regarding your secondpoficovptio~~~  ~Orn~e~ded in1990andstill
. 
maintaintshatthePRO statute shouid be amended to increase ciyii monetary 
penalties fkomthe cost of the setice  in question to up to $10,000.  Present 
statue  enables PROS to fine or exciude providers/practitioners  for failure  to 
coxnpiy with their  Medicare  obligations.  me  law stipulatesthat  such  civil 
monetary  penalties  shouid  notbe anamount in excessof theactuaior 
estimated  cost of the medicdy  improper  or unnecessaq  services so provided. 
Ofte~  the cost of actual senice  in question  is minuscule and not an effective 
remedy  to  affect  future  physician  behavior.  Indee&  thousands  of 
atitrative  dollars are spent by PROS in kk@@  and vekfi~ng  2 sefice 
thatwas improper  or unnecessary. 
AMPW  believes that  PROS  shouid  have  the  flexibility  to recommend  hizher 
pcnaities  than  the  cost  of the  semice  in  questim  and-likewise,  the  Inspe-aor 
Cenerai  shouid  be  empowered  with  the  authority  to  fipose  a fine  of up  to 
$10,000.  This position  is aiso  endorsed  by the  Administrative  Conference  of 
the  United  States.  A  higher  threshold  is needed  to gmer  the  attention  of 
facilities/practitioners  and  to provide  a  meaningful  alternative  to  exclusion 
tiom  the  Medicare  program 
AMPRA opposes  elimination  of the PROS  sanction  referral  authoritv.  The 
PROS need sanction authority to:  protect  beneficiaries  anti  as  leve;age  tO 
motivate  providers  to take  actiom 
MRA  also opposes  providing sanction  authority  directly to the PROS.  The 
govemxnent  as  the  sponsor  of  Medicare  s~ou Id  no? abdicaze  their 
responsibility  to  make  End  decisions  on  sanction  cases.  Giving sanction 
authority  directiy to PROS wouid  also  COnfiict witi  the  more  educational  role 
of PROS. 
AMPRA supports  that  the  existing  provisions  relating  to  the  exchange  of 
itionnation  between  peer review organizations (PRC)S)  and State medical 
Iicensing  boards  be amended  to require  information  exchange eariier in the 
nwiew  process  and  to  remove  administratively  burdensome  procedural 
barriers  to  such  information  exchange.  Absent  these changes,  AMPM 
recommends  repeai  of the  entire  provisiom 
Once agai~  OBIU  90 included provisions relating  to the exchange of cemin 
types of information  between  peer  review  organizations  (PROS)  and  medical 
licensing  boards.  Changes  in  these  provisions  are  needed,  inciuding  severai 
technical  corrections.  H.R.  1555, a technical  corrections  bilI passed  by the 
House  of Representatives  at  the  end  of  1991, includes  a provision  correcting 
C-26  November  10, 1992 
Page ?hree 
severai  drafting  errors  in OBIU  1990.  However,  the  biii did not aiter  the 
requirement  that  PROS  notify State  licensing  boards  oniy once  they  have 
submitted  a form.ai sanctions  rem~e~~~o~  10 tie  ~me~  and ody  after 
notice and a hearhg. 
AMPRA  continues  to believe that PROS should no@  stite  licemtig  boards 
about  problematic  care  earlier  in  tie  pro~-i.eq  tier  a  fit  noti~  of 
proposed  sanction  is senq  the practitioner  or person  involved K offered iuz 
opportunity  to discuss the  matter with the PRO, M@ the PRO  ~  that 
a problem  exists.  In additio~  we believe that the provision  requhg  a PRO 
to hold a heaxing before  noti&ing the State  iicensing  board is unnecessarily 
burdensome  and  not  needed  to  &ord  ade~~  due  process  to  affected 
practitione~  and providers.  AMPRA su~rts  a peer  discussion - not a kgai 
proceedin~ 
AMPRA  wiii contiue  to urge the COngrCSSto rno@  the PRO  statute  in a 
manner  consistent  with  these  views.  Howkver, if  such  changes  are  not 
feasible,  then MM  recommends  repcai  of tile  entire  provisio~ 
Thank  youfor the opportunity  to comment on the draft reporL  We recognize, 
of course, that  the muitiple  steps in  tile  PRO  djud~tion  prom  designed 
to assure  due  process  to  di  invoive~  are  time-consumin g and may require 
considerable  effort  on  the  part  of  physi~  patients  and  others.  We 
welcome  suggestio~  for  _  he  p~CCSS more  efiticnt  and  Is 
 
burdensome.  U you have any questions please  contact me. 
Sincereiy, 
Liiiz@ 
Executive  Vice President 
C-27  OIG RESPONSE  TO  AMPRA  COMMEIVIS 
We  appreciate  AMpMs  positive  response  to  this  report.  We wish to acknowledge 
the  organizations  efforts  over  the  years.  The AMPRA  has worked  with the 
Department,  the Congress, and the provider community to develop and improve 
methods for addressing quality-of-care problems. 
In response  to the concerns raised  by AMPRA  and other  parties, we  have  omitted 
from the fkal  report the  two policy options  that  would  have  eliminated  the  PROS 
sanction  referral  authority  and  that  would  have  provided  that  authority  directly  to the 
PROS. 
 
 
 
 
 
 
 
 
C-28  Af!!! 
Bringzng  iajtimcs o~-cxpcrtcnct  ani  lcaarcrsnip lo serve niigcncrarions. 
October  23, 1992 
Bxyan B. Mitcheil 
Principal  Deputv  Inspector  General 
Office of Inspector  Generai 
Department  of Heaith  and Human  Sexvices 
330 Independence  Avenue, S.W. 
Washington,  D.C. 20201 
Re:  Comments on draft  Peer  Review 
Organization  reports 
Dear  Mr. .Mitcheil: 
Horace  Deets  has  asked me to respond  to your letters  of September  3 and  15, 1992. 
The Office of Inspector  General  -- in its two draft  repom  The Sanction Refemd 
Authority  of Peer  Review Organizations  and The Peer  Review Organizations  and State 
Medical Boards:  A Vital Link - has pexformed  an important  service for Medicare 
beneficiaries  in assessing the cument  status  of P~OS  sanction  activity  and the  degree  of 
data  exchange  bemeen  PROS and rnedicai licensure  boards  (MLBs). 
Because  the  two reports  have arxived in tandem  and  deai Mth complementary  issues, we 
are  responding  in one letter. 
In view of WPS  longstanding  positions  on PRO  sanctions  and pRO-MLB  reiations. we 
are distressed, although  not  sux-pfised.  by  the  OIGS  findings.  1hmu@investigation. 
statisticaalnaiysis,and review of a Citizens Advocacy Center  PRO-MLB  survey, the 
findingsconfirm that  1) the  PRO  sanction  authority  has  atrophied,  and  2)  the PRO-MLB 
data  exchange,  with one or two notabie exceptionsh,asfailed to develop  -- this despite 
legis~ative efforts  in 1990 to address  problems  concerning  both thuse areas. 
As the reports  indicate,  the PRO  program  -- moving into the fourth  contractual  scope of 
work -- is in the  process of undergoing a shift in focus and methodology  towards an 
educational,  continuous  quaiity improvement  (CQ1) modei of interaction  with doctors 
and hospitak.  .WP  has engaged  in an extensive  dialogue with lKFA  with respect  to 
this evoiution.  Whiie supportive  of the increased  use of profig  and feedback 
mechanisms  to improve  the quality of care, we remain  convinced that  PROS must have 
an ongoing ability to identi~  and act upon serious  threats  to patient  care  arising from 
incompetent  performance.  PROS abiiity to reso~  to sanction  proceedings,  as weil as 
their  ability to interact  with licensure  boards  in appropriate  cases, remain  essentiai 
eiements  of PllOs  mission to heip  protect  patients.  Brvan B. Mitchell 
O&ober  23, 1992 
Page 2 
PRO-MLB  Interaction 
 
Accordingly, we weicome vour current  recommendation  that  PROS be mandated  to 
provide case information tostate  medical  boards when they have co-ed,  after 
 
medical  review, that  a physician is responsible  for medical  mismanagement  resulting in 
significant adverse  effects on the  patient. 
We would suggest that  the  proposal  clearlv 
indicate  that it is in addition  to the information  exchange  contemplated  by the  1990 
 
recommendation,  and not a substitute.  The goai is to ensure  that  PROS inform licensure 
boards  not only about  the most serious  probiem  cases 
-- those potentially  sanctionable
under  the statuto~  definitions  of the PRO  law -- but also about  those  other  prob~em 
 
performance  cases that. whiie vexy setious,  are addressed  soieiv through  comective action 
initiated  accordtig  to PROS contractual  scope of work.   
Although  your draft  recommendation  is for additional  legislative  action, we suggest that 
the data  shining  recommendation  be stated  in the aitemative,  i.e., HCFA shouid either 
pursue  an amendment  or use its ndemaking  authority  to achieve  the desired  result, 
whichever  path  appears  to be the most  expeditious. 
A  reported  in the draft,  there  have been  some impressive  instances  of voiuntarv  . 
exchange along the  lines of the proposai,  in Ohio, particularity, where  the PRO  has used 
 
1Under Section  1156 of thePRO law, sanctions may be pursued  based upon  a physicians  or providers 
failure in a substantial  number of cass  subsuntiallv  to compiy with quaii~  of care obligations. or a 
-.
physician or protider  grossly and flagrantly violating such obligation  in one or more ins~anos. 
C-30  Bm. an B. Mitchell
October  23, 1992 
Page 3 
its current  discretionary  authotity  under  etisting regulations  to share  matefiai  concerning 
ail Ievel three  quality problem  cases (the most serious  cases).2 
The OIGS  recommendation  for a new data  exchange mandate  does involve addressing 
some impediments.  Not the least  of these  is the major  transformation  of the  third scope 
of works Quaiity Intemention  Pkm (QIP), which, by elimination  of the cument three 
levels of quality  problems,  necessitates  development  of a new formula for PRO-MU 
information  exchange.  As of the  release  of the October  1 fourth scope of work 
documen~ the precise  elements  of the new QUaiityIleview  Process, inchxiing the 
contents of a new Physician ileview  &sessrnent  I?orm (PW  and the weighing 
system for idenl~g  problems andinstizutC~onrgrectiaectiopnlaxM(CAPS),remained 
underdevelopmenti.ntheongoingprocesosffleshinogutthefourtshcopeofwork. 
&UU? intendtsoseeka quaii4 trveviewsdv stemthatcouldfacilittahteekindofPRO-MLB
exchange contemplated  by the OIGS re~ort  and recommendation. 
The  PRO Sanction  Referral  Authoritv 
The  motibund  nature  of the  PRO  sanction referral  authority  is strikingly documented  in 
your latest  statistical  findings. 
Two of the  three  explanations  -- the PROS cumulative  experience with the 
unhappy 
sanctions process  and the increasing  emphasis  on  educational  approaches  to quality  of 
care  problems  - appear  well  on  target.  A  for the  third,  the  statutoxy  unwiiling  or 
unable  requirement,  we beiieve  the  1990 le@iative  M3, ~ properiy  constmed  and 
aggressively  implemented,  would,  infact? be a significant  ixnprovexnent.  This  is not to say 
that outright  deletion  of the  requirement  wouid not have  been  a better  legislative 
z Under the PRO  data disclosure regulations,  42 CF.IZ4.76.138 (a)(I)(ii)  a PRO may provide 
confidential information  to a state  licensure body without a requ=t. 
3The language of OBRA-90, which represented  a compromise,  was intended  to remove the most 
objectionable  features of the unwilling or unable requirement.  The 1990 amendment defined  the 
unwiiIing or unable standard  in terms of a physicians failure to enter into and satisfactorily compietca 
correctiveactionpian (CM).  The PRO,  however, was left with discretion  in ea~  case as to whether to 
offera ~.  me  resuit, as we read the revised section, is that a pROs judgement  that a sanctionable 
offense was such as to necessitate an immediate sanction recommendation  wouid enable the Secretary to 
consider the unwiiling or unable requirement  mnstmctiveiy  met  and thereby  move  to implement  the 
recommendation  without  fear of subsequent  attack  at the administrative  hearing  levei. 
In the early  drafts of  the foumh  scqe  of wor&  HCF/Lin our view,  fafled to accurately  reflect  this 
compromise approach  by appearing to ignore PROS case-bv-case authority  to decline to offer a CAP.  The 
July and now October  redrafts have been retied  to embody the  1$390statutory  sanctions  language. 
C-31  Bxyan B. Mitcheii 
October  23, 1992 
Page 4 
outcome;  the Administrative  Comerence of the. United  States urged this course  in 1989, 
and AARP  supported  it. 
The  overail issue of PROS use of their  sanction authority,  however, remains  a criticai 
one.  Your  draft  reportxnaiceas major  contribution  towarb  our  ~derstanding  of the 
background  of the  problem.  The  repo~  makes  a further  cont~bution  in its discussion  of 
a number  of possible  comectie  options ranging horn  ourn@t  e~ation  of the PRO 
sanction  authority  to mtiten~ce  of the status quo, supplemented  by kcreased  referrais 
to medicai  boards. 
To begin with the  negative:  our current  view is that  neither  elimination  of PROS 
referral  authority  nor  provision  of  c@ct  sanction  autmo  them  would  be in the 
public interest.  On the one hand,  we agree with the  PROS  that the etitence  of the 
authority,  however  sparingly used, is, in the words of your drafg  important  to achieving 
their mission because  it gives them  ieverage  wth the  medical  community.  On the other 
hand, we beiieve  it would be unwise tO vest  p~ate  peer  re~ew  orga~tions  with  what 
we perceive  to  be  a  govemme~tai  (either  federai  or sate)  ~c~on,  nmeiy  the  power  to 
actually impose  financiai penaities  or  actually  remove  p~c~tionem  horn  practice.   
k  our view the  answer  10 the sanctions  dile~a  reqfies  a combination  of approaches. 
AARP  is on record  as favoring eiixnination of the un~il~g  or unable requirement 
(although,  again,  the  1990 compromise  amentient,  K properiy  implemented,  couid go 
far towards  resoiving that  particular  problem).  ne  ~socialion  h=  also stated  its 
SUppOrtfor a substantial  increase  in the avaiiable monetay  pen~ty.  ~  noted,  these  two 
recommendations  have been  pending  for years  and  have  not  been  enacted.  There~ore. 
we believtehereisa ricefdor  a new  focus.  nerefore,  we  endorse  your  fifth 
recommendation  - to require  PROS to send information  to medicai licesure  boards  - as a 
workable  approach. 
 
It is important,  once  and for ail, to establish  a good wor~g  relationship  between  PROS 
and licensure  boards.  The PRO  pro~am  is c]eariy at a crossroads  as it prepares  to enter 
a new worid of pattern  anaiysis, outcomes  research,  education~  feedback  and  CQI  . 
activities.  But as we have  said  in the  past  and  continue  to beiieve,  there  are  some 
doctors  and some  institutions  whose poor  petio~ance  wam~~  ciose oversight and/or 
interruption.  K PROS new roie  is to funher  emphasize  the educator  over the sanctioner. 
then  it is imperative  that  more  information  regarding  such poor  pe~o~ance  be directed 
to  the entity that  can act as disciplinarian  -- the medical  licensure  board.  Xntheir  recast 
roie, PROS abiiity, authority,  and willingness to share  info~ation  with boards  in 
appropriate  cases and on a timeiy basis will be essentiai  to the overail fulfillment  of their 
patient  protection  mission.  At the  same  time we beiieve  a ve~  important  additional 
element  is the need  for cioser cooperation  and coordination  be~een  HCFA  and OIG in 
C-32  Bman B. LMitcheli 
O&ober  23, 1992 
Page 5 
giving guidance  to the PROS, facilitating  their sanctions efforts,  and  enabling the 
Secretary  to iqiement  his statutory  responsibilities.  We tnxst that  such coordination  wiiI 
accompany  any approach  that is adopted. 
Conclusion 
We appreciate  the  opportunity  to respond  to your  two  draft  reports  on aspects  of the
operatioonf the  PRO program.  Once again, the Office of Inspector  Generai  has focused 
on significant  issues of concerm to the Medicare  population  and  contributed  thoughtful 
recommendations.  If you have any questions  or we can be of funher  assistance,  piease 
contact  Cheryi Matheis  of our  Federal  Affairs Depamnent  (202/434-3770). 
Sincerely, 
+= 
w 
John Rother 
Director 
Division of Legislation  and Public Policy 
c-33  OIG RESPONSE  TO COMMENTS FROM AARP 
We  appreciate  the AARPs  positive  response  to  the  draft  report.  We agree that the 
ability of the PROS to resort  to sanction proceedings  remains  an  essential  element  of 
their mission. 
With  respect  to AARPs  comment  about  the  1990 legislative  change  in the  unwilling  or 
unable  standard,  we note  that  experience  since  that  date  leaves  little  reason  to believe 
that  the  problem  has eased.  In FY  1991, PROS  referred  12 cases  for  sanction,  and in 
FY  1992 they  referred  14 cases.  The  PROS themselves  also  cite  the  unwilling  or 
. 
unable  provision  as a continuing  obstacle  to their  use  of the  sanction  referral  authority. 
Based  on the  concerns  raised  by the  AARP  and  other  parties,  we have  omitted  from 
the  final  report  the  two policy options  that  would  have  eliminated  the  PROS sanction 
referral  authority  and  that  would  have  provided  that  authority  directly  to the  PROS. 
 
We  agree  that  a good  working  relationship  between  PROS and  medical  boards  is 
important.  Enhanced  information  sharing  between  the  two will not  eliminate  the  need 
for the  PROS to be  involved  in sanction  activities.  The  PROS ability  to sanction 
physicians  who violate  their  Medicare  obligations  needs  to be  maintained  even  as they 
move  toward  an increasing  emphasis  on education. 
 
 
 
c-34  APPENDIX  D 
ENDNOTES 
1.  Medicare-reimbursed  physicians  and  providers  are  required  to comply  with  their 
statutory  obligations  to  (1) provide  services  that  are  economical  and  only when,  and 
to the  extent,  medically  necessary,  (2) provide  setices  that  are  of a quality  which 
meets  professionally  recognized  standards  of health  care,  and  (3) provide  services  that 
are  supported  by evidence  of medical  necessity  and  quality  (42 U.S.C.  Sec.  1320c-5, 
section  1156 of the  Social  Security  Act). 
2.  42 U.S.C. Sec. 1320c-5. 
3.  office  of Inspector  General,  Z7ze utilization  and  Quality  Control Peer Review 
Oganization  (PRO)  Program:  Sanction Activities,  0AI-01-88-O0571,  October  1988. 
4.  These  10 PROS  held  contracts  for peer  review  in 15 States:  Alabama,  Iowa  (holds 
contract  for Nebraska),  Michigan,  New Jersey,  New York,  North  Carolina  (holds 
contract  for  South  Carolina),  Oregon,  Pennsylvania,  Rhode  Island  (holds  contract  for 
Maine),  and  Washington  (holds  contract  for Alaska  and  Idaho). 
5.  The 235 sanction  referrals  against physicians since the inception  of the  PRO 
program  involved  220 different  physicians  because  the  PROS referred  some  physicians 
more  than  once. 
6.  Based on 439,580 non-Federal  patient-care  physicians  in  1986 and 471,692 in  1989, 
the  most  recent  data  available  (American  Medical  Association,  Division  of Survey  and 
Data  Resources,  Physician Character&tics and Di+stnbution1,990), Table  A-8. 
7.  The  PROS  for the  Virgin  Islands,  American  Samoa,  and  Guam  also have  made  no 
referrals. 
8.  The 23 PROS that made no sanction referrals  in FYs  1991 and 1992 are Arizona, 
Colorado, Connecticut, Florida, Georgia, Hawaii  (also  holds  the  contract  for American 
Samoa  and  Guam),  Kansas,  Louisiana,  Massachusetts,  Minnesota,  Mississippi, 
Missouri,  Montana  (also  holds  the  contract  for Wyoming),  New Hampshire  (also  holds 
the  contract  for  Vermont),  New Mexico,  North  Dakota,  Oregon,  Pennsylvania,  Rhode 
Island  (also  holds  the  contract  for Maine),  South  Dakota,  Tennessee,  Utah  (also  holds 
the  contract  for  Nevada),  and  Virgin  Islands.  These  PROS represent  26 States  plus 
the  Virgin  Islands,  American  Samoa,  and  Guam. 
9.  Based on non-Federal,  patient-care  physicians  as  of January  1, 1989 (Physician 
Charactetitics  and Distribution,  op.  cit.). 
D-1  10.  From  FYs  1986through  1992, the  Office  of Inspector  General  has  sanctioned  142 
physicians  and  3 hospitals  (fined  2 and  excluded  1). 
11.  Office  of Inspector  General,  PRO  Technical  Information  Memorandum  No. 2, 
July,  1987.  Also  in an undated  paper,  Due  Process  in the  Peer  Review  Organization 
(PRO)  Sanctions  Activities. 
12.  Calculation  based  on the  length  of exclusion  prior  to  any appeal  actions  and 
excluding  three  exclusions  fol  an indefinite  term  and  one  permanent  exclusion. 
13.  lle  Utilization and  Quality Control Peer Review  O~anization  (PRO)  Program: 
Sanction Activities,  op.  cit. 
14.  Administrative  Conference  of the  United  States,  Recommendation  89-1, Peer 
Review  and  Sanctions  in the  Medicare  Program  (Washington,  DC:  June  1989). 
15.  A corrective  action  plan  (CAP)  is the  PROs  suggested  method  for correcting  the 
violations  the  physician  or hospital  has  made.  The  CAP  can  include  coursework, 
refresher  residencies,  and  reading  assignments,  among  others. 
16.  The Utilization and Quality Control Peer Review  Organization Program:  Sanction 
Activities,  op. cit. 
17.  Health  Care  Financing  Administration,  Directed  Change  Order  (DCO)  91-4, 
Implementation  of a New Statutory  Requirement  Mandating  the  Use  of Corrective 
Action  Plans  Prior  to Recommending  a Sanction  Action. 
18.  The  PRO  is required  to have  at least  two meetings  with  the  physician  before 
referring  a sanction  based  on a substantial  violation.  One  meeting  is required  before 
 
referring  a sanction  based  on a gross and  flagrant  violation. 
19.  For  example,  the  PROS failed  to send  the  requisite  number  of written  notices  to 
the physician  or hospital  or failed  to offer  the  requisite  opportunities  for meetings  with 
the PRO. 
20.  The  OIG  rejected  two referrals  because  the  physicians  died. 
21.  Of the  61 sanctions  appealed  to an ALJ  from  FY  1986 through  FY  1991, 12 were 
 
overturned.  The  OIG  appealed  2 of those  sanctions  overturned  by the  ALJ  and  won. 
22.  In a 1988 study, we found  that  the  PROS considered  their  quality  assurance 
activities  to be  more  important  than  utilization  review  and  to have  received  more 
focus  during  their  second  contract  period  (Office  of Inspector  General,  Z?ie Utilization 
and Quality Control Peer Review  (PRO)  Organization Program:  Quality Review 
Activities,  0AI-01-88-O0570,  August  1988). 
23.  Directed  Change  Order  (DCO)  91-4, op. cit. 
D-2
 24.  Health  Care  Financing  Administration,  Request  for  Proposal,  Fourth  Scope  of 
Work,  (October  1, 1992), p. C-1. 
25.  G. R. Wilensky,  Medicares  PROS Change  Their  Focus,  Broaden  Their  Mission, 
Journal of the American  Medical Association  266, No. 20 (November  1991), p. 2810. 
26.  Health  Care  Financing  Administration,  Results of the Peer Review  O~anization 
Review for the Z%irdScope of Work  (based  on  reports  submitted  through  4/30/91  and 
reviews  completed  through  3/3 1/91), July 25, 1991. 
27.  Sanction  notices  are  written  letters  from  the  PRO  to the  physician  or hospital 
responsible  for the  violation  and  indicate  the  start  of the  sanction  process.  Notices 
must  cite  the  Medicare  obligations  violated,  describe  how the  obligation  was violated, 
cite  the  PROS sanction  referral  authority,  suggest  a corrective  action  plan  (at  the 
PROS discretion),  invite  submission  of additional  information,  and  review  information 
on which  the  PRO  based  its decision. 
28.  See l%e Utilization and Quality Control Peer Review  organization  (PRO)  Program: 
Sanction Activities,  op.  cit., and  State Medical  Boards and Medical  Discipline  (OEI-Ol-
89-00560, August  1990). 
29.	 In our  1988 report,  771eUtilization  and  QuaIity Control  peer  Review Oqanization 
(PRO)  l?ogram:  Sanction Activities,  as part  of a series of recommendations  to 
strengthen  the PROS  sanction  referral  function,  we  called  for  congressional  action  to 
eliminate  the unwilling  or unable  provision  as  a basis  for a sanction  referral.  In  1989 
the  Administrative  Conference  of the  United  States  made  the  same  recommendation. 
30. In our  1988 report  we also  called  for the  development  of legislation  to strengthen 
monetary  penalties  to make  them  an effective  sanction.  We  recommended  that  a 
penalty  of up  to  $10,000 per  violation  be  imposed  for substandard,  unnecessary,  or 
uneconomical  care. 
31.  State  medical  boards  often  are  criticized  as being  ineffective  quality  assurance 
bodies.  However,  data  from  the  Federation  of State  Medical  Boards  show that  in 
calendar  year  1991 they  imposed  2,804 prejudicial  actions  against  physicians,  959 of 
which  involved  a 10SSof license  or license  privileges,  and  1,110 a restriction  of license 
or license  privileges. 
32.  Office  of Inspector  General,  Tile peer  Review Organizations and State Medical 
Boards:  A  Vital Link,  OEI-01-92-00530,  April 1993. 
33.From  May  1990 until  April  1992, the  Ohio  pRO  referred  75 cases  to the  Ohio 
medical  board.  The  board  dismissed  13 of these  without  any active  investigation  and 
another  37 after  conducting  some  investigation.  The  remaining  25 are  in various 
stages  of review,  with 8 at an  advanced  stage  involving the  initiation  of a formal  action 
against  a physician.  For  more  information,  see our  companion  report  Peer Review 
Organizations and  State Medical  Boards:  A  Wal  Link. 
D-3