Department of Health and Human Services


OFFICE OF 

INSPECTOR GENERAL 

CMS OVERSIGHT OF 


SHORT-TERM ACUTE CARE 


NONACCREDITED HOSPITALS


Daniel R. Levinson


Inspector General 


August 2005


OEI-01-04-00020

Office of Inspector General 
 http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The OIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors 

in carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout the department. 

Office of Evaluation and Inspections 

The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management 

and program evaluations (called inspections) that focus on issues of concern to the 

department, the Congress, and the public. The findings and recommendations contained 

in the inspections reports generate rapid, accurate, and up-to-date information on the 

efficiency, vulnerability, and effectiveness of departmental programs. The OEI also 

oversees State Medicaid fraud control units, which investigate and prosecute fraud and 

patient abuse in the Medicaid program. 

Office of Investigations 

The OIG's Office of Investigations (OI) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 

and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 

convictions, administrative sanctions, or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. The OCIG imposes program exclusions and 

civil monetary penalties on health care providers and litigates those actions within the 

department. The OCIG also represents OIG in the global settlement of cases arising 

under the Civil False Claims Act, develops and monitors corporate integrity agreements, 

develops compliance program guidances, renders advisory opinions on OIG sanctions to 

the health care community, and issues fraud alerts and other industry guidance. 
Δ EXECUTIVE SUMMAR Y 

OBJECTIVE 

To assess the extent to which the frequency of short-term acute care 

nonaccredited hospital surveys has changed since the 1999 Office of 

Inspector General (OIG) reports on hospital oversight. 

BACKGROUND 

This report serves as a followup to a series of reports released by OIG in 

1999 on the external review of quality oversight in hospitals. One of 

those reports found that a large and growing number of short-term 

acute care nonaccredited hospitals had not been surveyed within 

3 years. In its response, the Centers for Medicare & Medicaid Services 

(CMS) committed to surveying all nonaccredited hospitals with the 

same frequency as accredited hospitals, every 3 years, and to obtaining 

the funds necessary to establish a more frequent survey cycle. 

To receive Medicare reimbursement, hospitals must demonstrate to 

CMS their initial and ongoing ability to meet a set of minimum quality 

and safety standards, referred to as conditions of participation. 

Hospitals can do this in two ways: by paying for accreditation or by 

receiving certification from the State survey and certification agencies 

at no charge. While about 83 percent of hospitals choose accreditation, 

about 17 percent of the nation’s 4,020 hospitals are nonaccredited. CMS 

oversees nonaccredited hospitals through routine certification surveys 

and complaint (allegation) surveys conducted by the States. In this 

report, we focused on short-term acute care nonaccredited hospitals, 

which constitute 72 percent of all nonaccredited hospitals. 

We based our assessment of survey and complaint data on two sources 

of data: the Online Survey Certification and Reporting System data and 

CMS’s State Survey and Certification Budget Call Letters. The Budget 

Call Letters establish the priority for survey activities for all types of 

facilities for the States. The States use the information to prepare their 

yearly budgets. 

 OE I-01-04-00 020 

FINDINGS 

In 2003, States surveyed 79 percent of short-term acute care 

nonaccredited hospitals within 3 years compared to 50 percent in 

1997. The percent of short-term acute care nonaccredited hospitals 

surveyed within 3 years grew from 49 percent in 2001 to 62 percent in 

2002 and 79 percent in 2003. 

CMS OV E R S I G H T O F S H O R T - T E RM ACUTE CARE N ONAC CREDI T E D H O S P I TA LS i 
EXE CUTIVE S U MMAR Y 

However, the national annual survey rate is too low to sustain this 

progress. The national annual survey rate reflects the number of 

short-term acute care nonaccredited hospitals surveyed each year 

divided by the total number of such hospitals in all 50 States in each 

fiscal year. To ensure that all short-term acute care nonaccredited 

hospitals are surveyed once every 3 years, at least 33 percent of 

hospitals should be surveyed each year over a 3-year period, assuming 

that the number of hospitals does not change and no hospital is 

surveyed more than once. In 2001, States surveyed 25 percent of shortterm acute care nonaccredited hospitals nationally. The national 

annual survey rate grew to 28 percent in 2002. However, States 

surveyed only 21 percent of such hospitals in 2003. Several factors 

contributed to these declines in surveys for nonaccredited hospitals: 

Conversions to critical access hospitals necessitated additional surveys by State 

agencies. The number of nonaccredited hospitals decreased from 

1,361 to 640 between 1997 and 2003. During this period, many 

nonaccredited hospitals converted to critical access hospitals. 

Between 2000 and 2003, the number of critical access hospitals 

increased from 318 to 855. These conversions add more surveys to 

States’ already full workload. 

Other surveys take priority over nonaccredited hospital surveys. Other 

survey priorities can limit the attention and resources that States can 

spend on surveys of nonaccredited hospitals. Complaint surveys, 

which are limited to investigating the conditions of participation in 

question, require an onsite survey at both accredited and 

nonaccredited hospitals. These surveys grew 79 percent, from 2,079 to 

3,721 between 1997 and 2003. In addition, completing surveys at 

facilities with legislatively mandated survey cycles, such as nursing 

homes and home health agencies, is a higher priority than performing 

surveys at nonaccredited hospitals. 

Budget Call Letter Language. CMS committed to establishing a more 

frequent survey cycle for nonaccredited hospitals so that they would 

be surveyed with the same frequency as that established by the Joint 

Commission on Accreditation of Healthcare Organizations for 

accredited hospitals. Rather than establishing a 3-year survey cycle 

for nonaccredited hospitals, the CMS Budget Call Letter calls for 

States to survey 33 percent of their nonaccredited hospitals annually. 

Though on the surface it might appear that this language is 

equivalent to a 3-year survey cycle, this is not the case. By repeatedly 

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EXE CUTIVE S U MMAR Y 

surveying some hospitals and not surveying others, which may be 

necessary to ensure safety and quality, States can consistently meet 

the 33 percent annual survey rate for their nonaccredited hospitals, 

but not survey all nonaccredited hospitals within 3 years. 

SUMMARY 

Certification and complaint surveys remain the principal way that CMS 

and State agencies can ascertain whether nonaccredited hospitals meet 

Federal health, safety, and program standards. While the percent of 

short-term acute care nonaccredited hospitals surveyed within 3 years 

has increased, the national annual survey rate has dropped and is now 

too low to sustain this progress. To ensure that all short-term acute 

care nonaccredited hospitals are surveyed once every 3 years, at least 33 

percent of hospitals should be surveyed each year over a 3-year period, 

assuming that the number of hospitals does not change and no hospital 

is surveyed more than once. 

AGENCY COMMENTS 

CMS agreed that recent survey rates make sustained improvement in 

the percent of short-term acute care nonaccredited hospitals surveyed 

within 3 years uncertain. It further noted that it has additional survey 

responsibilities and that resources are limited. 

CMS identified adjustments it will make in response to our report. 

First, it will lower the priority of its earlier commitment to survey 

nonaccredited hospitals once every 3 years. It will also create a new, 

higher priority goal of surveying nonaccredited hospitals an average of 

every 4.5 years. Further, it will require States to target certain 

hospitals that are more likely to have systemic quality problems for 

more frequent surveys. Finally, it will add a performance standard for 

States to ensure that the top priority survey frequencies are met. For 

CMS’s complete comments, see page 11 of this report. 

OIG RESPONSE 

We are pleased that CMS agrees with our summary that although the 

percentage of short-term acute care nonaccredited hospitals surveyed 

within 3 years has improved, recent national annual survey rates raise 

concern that the improvement may not be sustainable. However, CMS 

also proposes changes to the survey commitment it made in response to 

OIG’s previous report (that it survey nonaccredited hospitals every 

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EXE CUTIVE S U MMAR Y 

3 years, which is the same frequency as that of the Joint Commission on 

Accreditation of Healthcare Organizations). 

We acknowledge that CMS faces resource limitations. However, we 

remain concerned that its adjustments could result in some 

nonaccredited hospitals operating without a survey for considerable 

lengths of time. Because CMS proposes an average of 4.5 years between 

surveys, by definition the gap between surveys at some nonaccredited 

hospitals will exceed that length of time, and some could exceed it by a 

considerable number of years. 

At the same time, we appreciate the role that targeting some hospitals 

for more frequent surveys can serve in protecting Medicare 

beneficiaries. Furthermore, we also appreciate CMS’s addition of 

performance standards for States. 

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Δ T ABLE OF CONTENTS 

E X E C U T I V E S U M M A R Y ................................................... i

I N T R O D U C T I O N ............................................................. 1 

F I N D I N G S ..................................................................... 5

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

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

S U M M A R Y ..................................................................... 9 

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

A P P E N D I X E S ................................................................ 15 

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

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

ACKN OW LEDGMENTS .................................................... 18 

E N D N O T E S .................................................................. 19
Δ INTRODU C TION 

OBJECTIVE 

To assess the extent to which the frequency of short-term acute care 

nonaccredited hospital surveys has changed since the 1999 Office of 

Inspector General (OIG) reports on hospital oversight. 

BACKGROUND 

In 1999, OIG released a series of reports on the external review of 

quality oversight in hospitals. This report serves as a followup to one of 

the reports in that series entitled “The External Review of Hospital 

Quality: The Role of Medicare Certification,” OEI-01-97-00052. Since 

that series, increasing attention has been paid to the importance of 

assuring safety and quality in hospital care. In 1999, the Institute of 

Medicine released the report, “To Err is Human,” in which it estimated 

that as many as 98,000 patients die each year from medical errors that 

occur in hospitals. A study released in 2003 found that medical injuries 

that occurred during hospitalization pose a significant threat to length 

of stay and increased medical expenses and mortality for patients.1 In 

addition, a 2002 survey of hospital risk managers reports that 

preventable harm is not consistently and thoroughly disclosed to 

patients.2 

Medicare Certification and Hospital Accreditation 

For hospitals to receive Medicare reimbursement, they must 

demonstrate to the Centers for Medicare & Medicaid Services (CMS) 

their initial and ongoing ability to meet a set of minimum quality and 

safety standards, referred to as the conditions of participation.3 

Hospitals can choose one of two ways to do this. They can either pay for 

accreditation by the Joint Commission on Accreditation of Healthcare 

Organizations (hereafter referred to as Joint Commission) or the 

American Osteopathic Association, or they can receive certification from 

the State survey and certification agencies at no charge.4 Accrediting 

organizations survey hospitals every 3 years. 

While about 83 percent of the nation’s 4,020 acute care hospitals choose 

accreditation, the remaining 17 percent are certified rather than 

accredited. These hospitals are commonly referred to as nonaccredited 

hospitals. Nonaccredited hospitals play an important role in the health 

care system by providing care in areas that are often rural and remote.5 

Nonaccredited hospitals demonstrate their compliance with conditions 

of participation to CMS by receiving Medicare certification through 

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INTROD UCT ION 

surveys that State agencies conduct under CMS funding and guidelines. 

CMS does not charge hospitals for these surveys.6 

Medicare Certification and Complaint Surveys 

Certification and complaint surveys are CMS’s and the State agencies’ 

main tools to ascertain whether nonaccredited hospitals meet Federal 

health, safety, and program standards. Because private accreditation 

organizations do not oversee nonaccredited hospitals, CMS relies on 

information from State surveys to determine that these hospitals are 

qualified to serve Medicare patients. State agencies conduct these 

surveys on behalf of CMS according to procedures outlined in CMS’s 

State Operations Manual.7 

State agencies use complaint (allegation) surveys as another mechanism 

to oversee hospitals. State agencies are responsible for investigating 

complaints at both accredited and nonaccredited hospitals. Complaints 

may originate from a variety of sources including in person, by phone, in 

writing, or from newspaper or magazine articles. Though certification 

surveys are always announced, complaint surveys are unannounced. 

Complaint surveys do not substitute for a standard survey. These 

surveys cover only conditions of participation related to the complaint, 

although surveyors may expand the scope if they find other unmet 

conditions during their focused investigation.8 

CMS State Survey and Certification Budget Call Letter 

Each year CMS establishes the priority for survey and certification 

activities for all types of facilities in its Budget Call Letter to the State 

survey agencies. The States use that information to prepare their 

yearly budget requests for survey and certification activities. Starting 

with the 2001 Budget Call Letter, CMS increased the guidelines for the 

percent of all nonaccredited hospitals that it expects States to survey 

annually to 33 percent, up from 15 percent in 1997 and 11 percent in 

2000. 

Prior Work 

In 1999, OIG released a series of reports that identified strengths and 

limitations in CMS’s oversight of both accredited and nonaccredited 

hospitals. One of these reports, which focused on short-term acute care 

nonaccredited hospital certification, found that CMS and State agencies 

placed a low priority on the large and growing backlog of nonaccredited 

hospitals that had not been surveyed within 3 years. Although the 

Joint Commission had established a period of 3 years between surveys 

as the industry standard for accredited hospitals, CMS did not hold 

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INTROD UCT ION

nonaccredited hospitals to that standard. In 1997, 50 percent of shortterm acute care nonaccredited hospitals had not been surveyed within 

3 years. At the time, CMS funded hospital survey activity at a level 

that would allow for surveying nonaccredited hospitals once every 

10 years. In contrast, the funding for home health agencies allowed for 

surveying facilities once every 18 months. The reports found that most 

of CMS’s hospital survey budget was dedicated to investigations of 

complaints and serious incidents, which CMS considered a priority. The 

reports also found that CMS did little to hold the State agencies 

accountable for their performance in overseeing hospitals. 

Based on this assessment, OIG recommended that CMS determine the 

appropriate minimum cycle for conducting certification surveys of 

nonaccredited hospitals. In a written response to the report, CMS 

committed to surveying all nonaccredited hospitals as frequently as 

accredited hospitals (every 3 years) as well as to obtaining the funds 

necessary to establish a more frequent survey cycle. 

METHODOLOGY 

We based our analysis of certification and complaint surveys for 

nonaccredited hospitals on two sources of data: the Online Survey 

Certification and Reporting System (OSCAR) data and CMS’s State 

Survey and Certification Budget Call Letters. 

OSCAR Data. We analyzed OSCAR data, which compiles the results of 

certification as well as complaint surveys for nonaccredited hospitals. 

Our survey analysis is based on data downloaded in July 2004. The 

OSCAR system, at any given time, only contains survey information for 

each hospital’s four most recently conducted certification surveys. Data 

are not retained for surveys conducted before the most recent four 

surveys for each hospital. Because of this limitation, the data in the 

OSCAR system available for this follow-up report lack the historical 

survey data used for the original study. Therefore, we used the OSCAR 

data pulled for the original inspection for years 1995, 1996, and 1997. 

As with the previous inspection, this analysis looked only at short-term 

acute care hospitals, which represent 72 percent of nonaccredited 

hospitals. We did not include long-term care, rehabilitation, psychiatric 

or childrens’ hospitals in our analysis so that we could make more 

accurate comparisons to our previous work. Furthermore, we did no 

analysis on the survey frequency of these other types of nonaccredited 

hospitals. States are responsible for surveying all nonaccredited 

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INTROD UCT ION

hospitals in the Budget Call Letter, and we recognize this as a 

limitation of our analysis. 

Our analysis of hospital complaints is based on OSCAR data 

downloaded in February 2004. These data reflect complaints for all 

hospitals. Though not all complaints are entered into the OSCAR 

system, the system does contain all complaints that require States to 

conduct onsite surveys. For more detail on our OSCAR analysis, see 

Appendix A. 

Budget Call Letters. We reviewed the Budget Call Letters from 1999 

through 2004. 

We conducted this inspection in accordance with the “Quality Standards 

for Inspections” issued by the President’s Council on Integrity and 

Efficiency. 

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ΔF I NDING S 

 FINDINGS

In 2003, States surveyed 79 percent of 

short-term acute care nonaccredited 

hospitals within 3 years compared with 

50 percent in 1997 

Our previous report showed that 

the percentage of short-term acute 

care nonaccredited hospitals States 

surveyed within 3 years fell from 

72 to 50 percent between 1995 and 

1997. In response to our original report, CMS committed to surveying 

all nonaccredited hospitals every 3 years, the same frequency as that 

established by the Joint Commission for accredited hospitals. In 2001, 

States surveyed 49 percent of short-term acute care nonaccredited 

hospitals within 3 years. This number grew to 62 percent in 2002, and 

79 percent in 2003. Like our previous report, this analysis includes 

only short-term acute care nonaccredited hospitals, which represent 

72 percent of nonaccredited hospitals. 

The remaining 21 percent of short-term acute care nonaccredited 

hospitals that had not been surveyed within 3 years in 2003 lacked 

routine oversight to ensure that they meet Federal health and safety 

standards. Furthermore, 12 percent (80 hospitals) had not received a 

State survey within 5 years. Of the 44 States with short-term acute 

care nonaccredited hospitals in 2003, 29 States had at least 1 hospital 

that had not been surveyed in 3 years and 1 State had as many as 

21 hospitals not surveyed within a 3-year timeframe. 

However, the national annual survey rate is too The national annual survey 

rate reflects the number of 

short-term acute care 

nonaccredited hospitals surveyed each year divided by the total number 

of such hospitals in all 50 States in each fiscal year. To ensure that all 

short-term acute care nonaccredited hospitals are surveyed once every 

3 years, at least 33 percent of hospitals should be surveyed each year 

over a 3-year period, assuming that the number of hospitals does not 

change and no hospital is surveyed more than once. In 2001, States 

surveyed 25 percent of short-term acute care nonaccredited hospitals 

nationally. The national annual survey rate grew to 28 percent in 2002. 

However, States surveyed only 21 percent of such hospitals in 2003. 

(See Table 1 on the following page.) Unless the national annual survey 

rate for short-term acute care nonaccredited hospitals increases, States 

will be unable to maintain a survey frequency that ensures that these 

hospitals are surveyed once every 3 years. 

low to sustain this progress 

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F I NDING S 

Table 1. National Annual Survey Data: 2000-2003 

Short-Term Acute Care Nonaccredited Hospitals 

2000 2001 2002 2003 

National annual survey rates for 

short-term acute care 

nonaccredited hospitals 

19% 25% 28% 21% 

National annual number of shortterm acute care nonaccredited 

hospital surveys 

196 231 212 134 

National number of short-term 

acute care nonaccredited 

hospitals 

1,044 908 766 640

Source: OIG analysis of OSCAR data and Budget Call Letters, 2004.

Several factors contributed to these declines in surveys for short-term 

acute care nonaccredited hospitals: 

Conversions to critical access hospitals necessitated additional 

surveys by State agencies. The number of nonaccredited hospitals 

decreased from 1,361 to 640 between 1997 and 2003. During this 

period, many nonaccredited hospitals converted to critical access 

hospitals. Participating States can grant critical access hospital 

status to certain limited service rural hospitals that participate in 

the Rural Hospital Flexibility Program, which the Balanced Budget 

Act of 1997 established to promote health care delivery in rural 

areas. (See Appendix B for more detailed information.) Incentives 

exist for eligible nonaccredited hospitals to convert: cost-based 

reimbursement from Medicare, rather than prospective payment; 

partnerships with acute care hospitals for support and expansion of 

services; and capital improvement costs included when determining 

Medicare reimbursement.9 Between calendar years (CY) 

2000 and 2003, the number of critical access hospitals increased 

from 318 to 855.10 Likewise, the number of States with such 

hospitals rose from 35 to 45 between CY 2000 and CY 2003. 

These conversions add more surveys to States’ already full workload. 

In the fiscal year (FY) 2001 Budget Call Letter, CMS calls for States 

to survey 33 percent of approved critical access hospitals annually, 

the same survey frequency as nonaccredited hospitals. CMS 

considers critical access hospitals the same priority level as 

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F I NDING S 

nonaccredited hospitals. However, CMS also requires an initial 

survey for each hospital that chooses to convert to a critical access 

hospital. In addition, CMS expects them to be resurveyed 1 year 

after their conversion survey. 

Other surveys take priority over nonaccredited hospital surveys. 

Between FY 1997 and FY 2003, the number of hospital complaints that 

required an onsite survey at any hospital, accredited or nonaccredited, 

grew 79 percent, from 2,079 to 3,721. Responding to complaints and 

adverse events remains as high a priority among State survey and 

certification activities as it was in 1997. In CMS’s FY 2003 Budget 

Call Letter, complaint surveys are given the highest priority after 

surveys of facilities with legislatively mandated survey cycles. This 

places complaint surveys at a higher priority than surveys of 

nonaccredited hospitals. 

CMS also expects States to allocate resources to surveying facilities 

with legislatively mandated survey cycles before surveying 

nonaccredited hospitals. These mandated priorities for Medicare 

include annual certifications of nursing homes, certifications of home 

health agencies within 3 years, and validation surveys of accredited 

hospitals.11 For Medicaid, they include annual certifications of nursing 

homes and annual certifications of intermediate care facilities for 

people with mental retardation. Nursing home surveys represent the 

largest and most predictable part of the States’ survey workload. In 

1998, States conducted 12,555 nursing home certification surveys. In 

2001, this grew to just over 15,000 nursing home surveys, a 20 percent 

increase.12 

Budget Call Letter Language. CMS committed to establishing a 

more frequent survey cycle for nonaccredited hospitals so that they 

would be surveyed with the same frequency that the Joint Commission 

accredits hospitals. Hospitals accredited by the Joint Commission are 

surveyed on a 3-year cycle, but CMS did not establish a 3-year survey 

cycle for nonaccredited hospitals. Rather, the CMS Budget Call Letter 

since 2001 has called for States to annually survey 33 percent of all 

nonaccredited hospitals, up from the previous rates of 15 percent in 

1997 and 11 percent in 2000.13 Though on the surface it might appear 

that this language is equivalent to a 3-year survey cycle, this is not the 

case. By repeatedly surveying some hospitals and not surveying 

others, it may be possible for States to consistently meet the 33 percent 

annual survey rate for their nonaccredited hospitals but at the same 

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F I NDING S 

time not survey all nonaccredited hospitals within 3 years. 

Resurveying the same nonaccredited hospitals may be appropriate in 

some cases to ensure safety and quality. However, the annual survey 

percentage called for in the Budget Call Letter does not account for 

such additional surveys in the annual 33 percent determination. 

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Δ SUMMAR Y 

SUMMARY 

Certification and complaint surveys remain the principal way that CMS 

and State agencies can ascertain whether nonaccredited hospitals meet 

Federal health, safety, and program standards. While the percent of 

short-term acute care nonaccredited hospitals surveyed within 3 years 

has increased, the national annual survey rate has dropped and is now 

too low to sustain this progress. To ensure that all short-term acute care 

nonaccredited hospitals are surveyed once every 3 years, at least 33 

percent of hospitals should be surveyed each year over a 3-year period, 

assuming that the number of hospitals does not change and no hospital is 

surveyed more than once. 

AGENCY COMMENTS 

CMS agreed that recent survey rates make sustained improvement in the 

percent of short-term acute care nonaccredited hospitals surveyed within 

3 years uncertain. It further noted that it has additional survey 

responsibilities and that resources are limited. 

CMS identified adjustments it will make in response to our report. First, 

it will lower the priority of its earlier commitment to survey 

nonaccredited hospitals once every 3 years. It will also create a new, 

higher priority goal of surveying nonaccredited hospitals an average of 

every 4.5 years. Further, it will require States to target certain hospitals 

that are more likely to have systemic quality problems for more frequent 

surveys. Finally, it will add a performance standard for States to ensure 

that the top priority survey frequencies are met. For CMS’s complete 

comments, see page 11 of this report. 

OIG RESPONSE 

We are pleased that CMS agrees with our summary that although the 

percentage of short-term acute care nonaccredited hospitals surveyed 

within 3 years has improved, recent national annual survey rates raise 

concern that the improvement may not be sustainable. However, CMS 

also proposes changes to the survey commitment it made in response to 

the OIG’s previous report (that it survey nonaccredited hospitals every 

3 years, which is the same frequency as that of the Joint Commission). 

We acknowledge that CMS faces resource limitations. However, we 

remain concerned that its adjustments could result in some nonaccredited 

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SUMMAR Y 

hospitals operating without a survey for considerable lengths of time. 

Because CMS proposes an average of 4.5 years between surveys, by 

definition the gap between surveys at some nonaccredited hospitals will 

exceed that length of time, and some could exceed it by a considerable 

number of years. 

At the same time we appreciate the role that targeting some hospitals for 

more frequent surveys can serve in protecting Medicare beneficiaries. 

Furthermore, we also appreciate CMS’s addition of performance 

standards for States. 

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ΔA G E N C Y CO MMENT S

 AGENCY COMMENTS 

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A G E N C Y CO MMENT S

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A G E N C Y CO MMENT S

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A G E N C Y CO MMENT S

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Δ APPENDIX ~ A METHODOLOGY

OSCAR Data. We included short-term acute care nonaccredited hospitals 

participating in Medicare on the first day of each FY in our analysis. To 

further refine the list of active nonaccredited short-term acute care 

hospitals, we removed data on certain hospitals from OSCAR: those 

listed in OSCAR as leaving the program before the first day of the FY; 

those that entered the Medicare program after the first day of the 

FY accredited; those accredited by the Joint Commission; those that were 

 Table 2. Short-term Acute Care Nonaccredited Hospitals 

Dropped from Dataset 

Fiscal Year 2000 2001 2002 2003 

Original Nonaccredited 

Hospital Count 1,908 1,908 1,908 1,908 

Nonaccredited hospitals that 

left program before 1st day of 

given fiscal year 

609 779 941 1,099 

Nonaccredited hospitals that 

entered program after 1st day 

of given fiscal year 

185 151 128 96 

Joint Commission accredited 43 44 46 47 

U.S. territories 23 24 24 23 

Hospitals that did not bill 

Medicare for 2 years

 4 2 3 3 

Final Nonaccredited 

Hospital Count 1,044 908 766 640

Source: OIG analysis of OSCAR and CMS Customer Information System data, 2004. 

located in U.S. territories; and those that did not bill Medicare for 

2 consecutive years. (See Table 2 above.) 

We used FYs to determine the annual number of hospitals and the 

elapsed time since their most recent surveys. Annual nonaccredited 

hospital totals for each FY reflect hospitals listed in OSCAR as active on 

the first day of each FY. Elapsed time since each hospital’s most recent 

survey reflects the time between October 1st of the relevant FY and the 

most recent prior survey. 

We removed hospitals that were listed on the Joint Commission’s Web 

site as accredited and that went 5 or more years without a survey. 

We compared our FY lists of active hospitals against CY billing data from 

the CMS Customer Information System (HCIS). If a hospital on the 

OSCAR list had not billed Medicare in 2 years, the hospital was removed 

from the list. We checked our active nonaccredited hospital lists from 

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A P PEND IX ~ A M E THO D OLOG Y 

OSCAR for FYs 2000 through 2003 against HCIS billing data for 

CYs 1998 through 2002. 

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Δ APPENDIX ~ B 

Critical Access Hospitals 

States can designate critical access hospitals (CAH) as those limitedservice hospitals participating in a program developed to strengthen rural 

health providers. A hospital can convert to CAH status if the State in 

which it is located has a Medicare Rural Flexibility Program approved by 

CMS. Under this program, a hospital that meets the State CAH 

eligibility requirements can convert to CAH status through a State survey 

or through accreditation. 

CMS requires CAHs to meet a more limited set of conditions of 

participation compared to those of hospitals. Upon converting to CAHs, 

facilities also receive different provider numbers to reflect the CAH 

designation. CMS requires an initial survey for each hospital that 

chooses to convert to a CAH. A 1-year follow-up survey will occur to 

ensure continued compliance with the conditions of participation. After 

this followup, the CAH will be on the same survey cycle as other 

nonaccredited hospitals, 33 percent annually. 

Hospitals that do convert to CAH status receive cost-based 

reimbursement, as well as other financial incentives. The CAHs are 

required to enter into agreements with a larger hospital. The program 

was intended to strengthen rural health care by encouraging the 

development of stronger networks for the provision of health care in rural 

areas. 

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Δ ACKNOWLEDGME N TS 

This report was prepared under the direction of Joyce M. Greenleaf, 

Regional Inspector General for Evaluation and Inspections. Other 

principal Office of Evaluation and Inspections staff who contributed 

include: 

Danielle Fletcher, Team Leader 

Steve Keenan, Lead Analyst 

Bambi Straw, Program Specialist 

Tricia Davis, Director, Medicare and Medicaid Branch 

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Δ END NOTES 

1 Zhan, Chunliu and Miller, Marlene. Excess Length of Stay, Charges, 

and Mortality Attributable to Medical Injuries During Hospitalization. 

Journal of the American Medical Association. 2003; 290:1867-1874. 

2 Lamb, RM, Studdert, D, Bohmer, R., Berwick, D, and Brennan, T. 

Hospital Disclosure Practices: Results of a National Survey. Health 

Affairs. 2003; 22: 73-83. 

3 Hospital Conditions of Participation: 42 CFR §§ 482.11-482.13; 

42 CFR §§ 482.21-482.45; 42 CFR §§ 482.51-482.57. These cover basic 

hospital functions, including staffing and clinical services, as well as 

administrative concerns, such as compliance with Federal, State, and 

local laws. 

4 Pursuant to the Social Security Act, hospitals are deemed to be in 

compliance with the conditions of participation with either the Joint 

Commission or American Osteopathy Association accreditation. 

(42 USC § 1395bb). 

5 Institute of Medicine. Medicare: A Strategy for Quality Assurance, 

Volume I. Washington, D.C.: National Academy Press, 1990. 

6 Hospital Conditions of Participation: 42 CFR §§ 482.11-482.13; 

42 CFR §§ 482.21-482.45; 42 CFR §§ 482.51-482.57. 

7 Centers for Medicare & Medicaid Services. State Operations Manual 

(CMS-Pub. 7). 

8 Ibid. 

9 Rural Assistance Center: 

www.raconline.org/info_guides/hospital/cahfaq.php. 

10 This total includes both nonaccredited critical access hospitals and 

accredited critical access hospitals listed in HCIS that billed Medicare 

in CYs 2000 and 2003. 

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11 CMS FY 2004 State Survey and Certification Budget Call Program 

Requirements and Budget Guidelines. 

12 Department of Health and Human Services, Office of Inspector 

General, Office of Evaluation and Inspections. Nursing Home 

Deficiency Trends and Survey and Certification Process Consistency. 

OEI-02-01-00600. March 2003. 

13 The Budget Call Letters do not specify a dollar amount to accomplish 

this task, nor do States account for the funds by survey type. 

Therefore, it is difficult to assess if States received sufficient funds to 

meet this guideline. 

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