Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

THE PEER REVIEW ORGANIZATIONS 

AND STATE MEDICAL BOARDS: 

A VITAL LINK 

A MANAGEMENT ADVISORY REPORT 

APRIL 1993 
OFFICE OF INSPECTOR GENERAL 

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

amended, is to protect the integrity of the Department of Health and Human Services’ (HHS) 

programs as well as the health and welfare of beneficiaries served by those programs. This 

statutory mission is carried out through a nationwide network of audits, investigations, and 

inspections conducted by three OIG operating components: the Office of Audit Services, the 

Office of Investigations, and the Office of Evaluation and Inspections. The OIG also informs 

the Secretary of HHS of program and management problems and recommends courses to 

correct them. 

OFFICE OF AUDIT SERVICES 

The 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 

assessmentsof HHS programs and operations in order to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout the Department. 

OFFICE OF INVESTIGATIONS 

The OIG’s Office of Investigations (01) conducts criminal, civil, and administrative 

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

unjust enrichment by providers. The investigative efforts of 01 lead to criminal convictions, 

administrative sanctions, or civil money penalties. The 01 also oversees State Medicaid fraud 

control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 

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 these inspection 

reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, 

and effectiveness of departmental programs. 

This report was prepared under the direction of Mark R. Yessian, Ph.D., Regional Inspector 

General, and Martha B. Kvaal, Deputy Regional Inspector General, Boston Region, Office of 

Evaluation and Inspections. Participating in this project were the following people: 

Boston Headquartem 

Russell W. Hereford, Ph.D., Project Leader Alan S. Levine 

Joyce M. Greenleaf, Lead Analyst 

To obtain a copy of this report, call the Boston Regional Office at (617) 565-1050. 
Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

THE PEER REVIEW ORGANIZATIONS 

AND STATE MEDICAL BOARDS: 

A VITAL LINK 

A MANAGEMENT ADVISORY REPORT 

APRIL 1993 OEI-Ol-92-00530 
EXECUTIVE SUMMARY 

PURPOSE 

To review the status of Peer Review Organization (PRO) efforts to provide State 

medical boards with information about physicians responsible for substandard medical 

care. 

BACKGROUND 

The PROS identify physicians responsible for serious quality-of-care problems, but they 

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

expressed concern that this lack of information sharing inhibits the boards’ 

effectiveness in protecting Medicare and Medicaid beneficiaries and other citizens of 

their States. 

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

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

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

Congress passed such legislation in 1990. 

FINDING 

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

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

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

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

the boards. 

RECOMMENDATION 

The Health Care Financing Admindration should propme kgidation manduting that 

PROSprovide case information to State medical boar& when thq have confirmx& after 

medical review, that a physician is mqxmsible for medical mimanagement resulting in 

s&nijicant adverseejJect3on the patknt. 

This approach would provide increased protection to Medicare beneficiaries and rests 

on a solid overall rationale: 

b It limits referrals to serious quality-of-care cases. 

b It is clear-cut and workable. 

b It would be fair to physicians. 

b It would provide valuable information to boards. 

i 
We received comments on the draft report from the Health Care Financing 

Administration (HCFA), Public Health Service (PHS), and Assistant Secretary for 

Planning and Evaluation (ASPE) within the Department. The American Medical 

Association (AMA), American Medical Peer Review Association (AMPRA), and 

American Association of Retired Persons (AARP) also provided comments. The full 

text of each comment appears in appendix A. 

The HCFA, ASPE, and the AMA disagree with our recommendation. The HCFA 

believes that our recommendation for legislation would not solve the problem because 

of “the confusion created by the two current amendments.” The HCFA, ASPE, and 

the AMA believe that the pending fourth scope of work, and its efforts to foster a 

more cooperative relationship between PROS and physicians, will move toward 

achieving this goal. 

The PHS, AMPRA, and AARP concur with our recommendation to HCFA. The 

PHS notes that a report from the PROS would be consistent with the requirements for 

reporting other types of peer review activity to the National Practitioner Data Bank 

(NPDB) and should provide useful information for the State medical boards. 

We have retained our recommendation as presented in the draft report. 

ii 
TABLE OF CONTENTS 

Executive Summary 

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

PROS and State Medical Boards 

A Review of Recent History 

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

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

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

Appendices 

A. Detailed Comments on the Draft Report . . . . . . . . . . . . . . . . . . . . . . . . A-l 

B. Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-l 
INTRODUCTION 

PURPOSE 

To review the status of Peer Review Organization (PRO) efforts to provide State 

medical boards with information about physicians responsible for substandard medical 

care. 

BACKGROUND 

PROS and State Medical Boards 

The PROS are organizations funded by the U.S. Department of Health and Human 

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

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

medical records against standards of established medical practice. Once they 

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

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

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

punitive approach of recommending that HHS exclude a physician from further 

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

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

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

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

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

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

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

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

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

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

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

license or license privileges.4 

A Review of Recent History 

From the beginning of the PRO program in 1984-86, we have been concerned that 

PROS seldom provide the boards with information about physicians whom they find to 

be responsible for serious quality-of-care problems. We have held that this lack of 

information sharing inhibits the boards’ effectiveness in protecting the citizens of their 

States. Boards, we have pointed out, may not even know the identity of physicians 

whom the PROS, after extensive medical review, have found responsible for 

substandard or unnecessary medical care in one or more incidents. 

1 
We first addressed this issue in a 1986 report entitled “Medical Licensure and 

Discipline: An Overview” (P-01-86-00064). We addressed it again, more forcefully, in 

a 1990 report entitled “State Medical Boards and Medical Discipline” (OEI-Ol-89-

00560). In that report and in testimony before Congress,5 we called for legislation 

mandating that the PROS share case information with the boards when the first 

sanction notice is sent to a physician. Such a notice rarely leads to an actual sanction 

referral to the Federal government, but it does reflect a PRO’s considered judgment 

about the quality of medical care rendered to a patient.6 This recommendation for a 

statutory amendment, which had considerable support, would have addressed PROS’ 

concerns about how the sharing of case information could violate confidentiality 

requirements under existing law.7 

In 1990, Congress passed legislation calling for the PROS to share case information 

with the boards. The legislation was passed in response to concerns raised by us, the 

Federation of State Medical Boards, and others about the lack of information sharing 

between PROS and boards. 

2 
FINDING 

b The 1990 legishrion has had little if any fleck 

Upon passage of the legislation, the Health Care Financing Administration (HCFA), 

which funds and oversees the PROS, followed up by amending the PROS’ scope of 

work to require that they inform boards of physicians to whom they have sent a first 

sanction notice. Subsequently, however, HCFA rescinded this requirement in response 

to concerns that it was not in accordance with the congressional stipulation that the 

PROS must grant physicians “notice and hearing” before sending information about 

them to the boards. The New York regional office of HCFA characterized the 

legislation as follows: 

The statutory provisions added by section 4205(d) of OBRA ‘90 about PRO 

responsibility to notify licensing bodies concerning certain PRO actions are 

inherently inconsistent. These provisions do not provide clear authority for the 

disclosure of information other than sanction reports submitted to the Secretary 

pursuant to section 1156 (b)(l) of the Act.8 

The actual sharing of case information still appears to be minimal, even for the most 

serious cases. This was the clear message of a March 1992 report of the Citizen 

Advocacy Center (CAC) funded by the American Association of Retired Persons 

(AARP).9 In that report, the CAC reviewed the recent experiences of 10 States 

where the PROS and medical boards had shown an interest in more active information 

sharing. Among those States, it found that only the Ohio PRO was sending much 

information to the medical board.” 

The CAC extended its survey to all 50 States. In a November 1992 report, it 

confirmed that little information exchange is taking place nationwide. In addition to 

Ohio, CAC found that only in Mississippi, New York, and to a lesser extent Texas, are 

much data flowing from PROS to medical boards concerning physicians who might be 

candidates for disciplinary action.” 

Ohio’s endeavor illustrates the potential for such an information exchange. From May 

1990 until April 1992, the Ohio PRO has referred 75 casesto the Ohio medical board. 

Of these, the board has dismissed 13 without any active investigation and another 37 

after conducting some investigation. The remaining 25 are in various stages of review, 

with 8 of them at an advanced stage involving the initiation of a formal action against 

a physician. i2 

The table on the next page summarizes the key actions from 1986 to 1991 related to 

PROS sharing information with medical boards. 

3 
TABLE I 

KEY AClYIONS CONCERNING 

DATE 

June 

1986 

March 

1988 

October 

1988 

May

1989 

THE PRO-STATE MEDICAL BOARD LINKAGE 

ACI-ION 

An OIG report, “Medical Licensure and Discipline: An Overview,” concludes that 

PROS are an unproductive source of casesfor boards; recommends that PRO 

regulations be amended “to require more extensive and timely information” to boards. 

The HCFA issues draft regulation stating that PROS “may without a request, and must, 

upon a request, disclose” to boards “confidential information relating to a specific case 

(or) a possible pattern of substandard care.” 

The HCFA, in third scope of work, calls for PROS to “consider” sharing confidential 

case information with boards when serious quality-of-care problems are found under 

the quality intervention plan. This serves to operationalize the regulation first issued 

in draft in March 1988. 

Missouri PRO indicates that 55 percent of the 38 PROS responding to a national 

survey regarded their relationship with the board to be good or excellent, but that 

about two-thirds of the PROS still had not reported any physicians to boards during 

the past 12 months. 

December The AARP convenes workshop to identity ways of achieving closer ties between PROS 

1989 and boards. The workshop included representatives of PROS and boards from 10 

States. Participants stressed need for clearer legislative or regulatory direction on what 

information can be shared. 

August An OIG report, “State Medical Boards and Medical Discipline,” finds that PROS still 

1990 refer few casesto boards. In 8 sample States, only 1 of 188 disciplinary actions taken 

by the boards is found to originate from a PRO referral. OIG recommends legislation 

mandating that PROS share case information with boards when the first sanction notice 

is sent to a physician. 

December Congress, in Omnibus Budget Reconciliation Act, requires that PROS notify boards of 

1990 physicians whom they have found responsible for serious quality-of-care problems. 

Congress stipulates, however, that notification is not to occur until after “notice and 

hearing” are granted to the physicians involved. 

February The HCFA adds a provision to an early draft of the fourth scope of work stipulating 

1991 that once the PRO issues a first sanction notice to a physician, it must notify the board 

of its findings and decisions. 

November The HCFA, in response to concerns expressed that the above-noted provision does not 

1991 reflect the intent of the 1990 legislation, removed the provision from that early draft 

fourth scope of work. 

March The Citizen Advocacy Center, sponsored by the AARP, releases a report providing 

1992 results of a survey of the 10 States that had participated in the December 1989 AARP 

conference on PRO-board relationships. The report concludes that, except in Ohio, 

very little information is being exchanged. 

November The CAC publishes findings from a nationwide survey. The report concludes that, in 

1992 addition to Ohio, only in Mississippi, New York, and to a lesser extent Texas, is much 

data flowing from the PRO to the board. 

4 
RECOMMENDATION 

Ihe Heal& Care Financing Adminhution shoukipmpme legislation mandating that 

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

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

significant adverse#ects on the patient. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

problems occurred. 

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

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

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

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

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

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

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

overall rationale as indicated below. 

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

physician consultants have determined that a physician is responsible for care 

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

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

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

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

5 
It ir clearcut in intent and work-able. Making a judgment on whether a physician is 

responsible for medical mismanagement resulting in patient harm is clearly a part of 

the PROS’ responsibilities. Under our recommendation, the PRO would automatically 

inform the board once it confirmed and documented patient mismanagement resulting 

in significant adverse effects on the patient.16 

It wouiZ be fair to the physicians. The PROS’ determinations in these casesare made 

only after PRO physicians have reviewed the relevant case information and after the 

physicians under review have been granted an opportunity to explain the medical care 

being questioned. If a State medical board then decides to pursue the case, the 

physician is, of course, entitled to the full range of due process and appeal rights 

granted under State law. 

It woz&provide valuable infomation to the boards. From the boards’ perspective, the 

PRO referrals would facilitate reviews of quality-of-care casesbecause they are based 

on prior medical judgments of physician reviewers. Even when such casesdid not 

result in a disciplinary action, they would provide information that boards could 

incorporate in a computer data base to develop a profile of at-risk physicians. Such 

information could provide valuable markers on the kind of preventive efforts boards 

could take to avert the need for disciplinary action. 

6 
COMMENTS ON THE DRAFT REPORT 

We received comments on the draft report from the Health Care Financing 

Administration (HCFA), Public Health Service (PHS), and Assistant Secretary for 

Planning and Evaluation (ASPE) within the Department. The American Medical 

Association (AMA), American Medical Peer Review Association (AMPRA), and 

American Association of Retired Persons (AARP) also provided comments. The full 

text of each comment appears in appendix A. 

Health Care Financing Administration 

The HCFA disagrees with our recommendation for three reasons. First, it believes 

that our proposal for legislation would not solve the problem because of “the 

confusion created by the two current amendments.” Second, it does not believe that 

every initial violation or proposed action against a physician should be reported to 

State medical boards. Third, it is concerned that such a requirement could damage 

the cooperative relationship between PROS and physicians that HCFA is seeking to 

foster under the fourth scope of work. 

With regard to the first point, if the language we propose is insuficient, we offer to work 

with HCFA to draft legislative language that would alleviate the problem. 

With regard to the second point, we agree that actions brought against a physician that 

are resolved on the basis of evidence presented to the PRO should not be reported to the 

State medical board. We recommend that PROS share case information with medical 

boards only for those cases that are judged to have significant adverse impacts on patients. 

This referral would take place after a physician has interacted with PRO physicians and 

after PRO physicians have determined that this is a serious quality-of-care problem that 

requires attention, but before a formal sanction recommendation to the OIG. The boards 

already receive information on malpractice claims and hospital adverse actions against 

physicians. It clearly makes sense for the boards to receive information from the PROS 

when they confirm serious quality-of-care problems after medical review. 

With regard to the third point, we recognize that the fourth scope of work contains 

substantial changes in the role of the PROS. We have included revisions in our endnotes 

to reflect the final request for proposals that HCFA issued for this contract. The fourth 

scope will focus on pattern analysis and information sharing as a way of improving overall 

patient outcomes and the quality of care. We applaud broad-based efforts to improve the 

quality of care for Medicare beneficiaries and for the population at large. 

Notwithstanding HCFA ‘s new approach, the PROS continue to have a critical 

responsibility to protect the health of Medicare beneficiaries. This responsibility may call 

for taking action against individual physicians who have significant deficiencies in their 

medical knowledge and/or practice skill& and it may mean that the PROneeds to share 

information about these practitioners with the medical board. 

7 
Public Health Service 

The PHS concurs with our recommendation to HCFA. The PHS notes that a report 

from the PROS would be consistent with the requirements for reporting other types of 

peer review activity to the National Practitioner Data Bank (NPDB) and should 

provide useful information for the State medical boards. 

We appreciate the PHS’ positive response. We also wish to note that the types of cases we 

recommend be reported to State medical boards--cases that result in significant adverse 

effects on a patient--are more serious than many of the malpractice actions required to be 

filed with the NPDB. 

Assistant Secretary for Planning and Evaluation 

The ASPE does not support our recommendation. It believes that memoranda of 

agreement between PROS and State medical boards, required under the fourth scope 

of work, will address the problem. The ASPE also questions whether our 

recommendation would lead to exchange of information at a stage that is too early in 

the process. 

We believe that it is important to have in place memoranda of agreement between PROS 

and State medical boards regarding the exchange of information. Unless they require the 

exchange of meaningful and useful information, such memoranda, in and of themselves, 

may do little to address physicians with quality-of-care problems. Without the legislative 

change we recommend, the information exchanged may have no more impact than it does 

at present. 

We disagree with ASPE that our recommendation would lead to exchange of information 

too early in the process. Information on these cases will be shared with the State medical 

boards only after they have been confirmed through medical review involving the physician 

and the PRO physicians. 

We also are concerned that ASPE’s comments may reflect some misunderstanding. We 

wish to clanjcL that this report refers strictly to the role of State medical boards, not to 

State medical societies. 

American Medical Association 

The American Medical Association supports, in principle, efforts to improve the 

sharing of case information between PROS and State medical boards. The AMA, 

however, disagrees with our recommendation. It believes that existing law and the 

pending fourth scope of work are adequate to achieve this goal. 

We disagree that existing law is adequate to improve this information exchange. The I990 

legislation has had little effect, and the actual sharing of case information continues to be 

minimal. We are concerned that the PROS, during the fourth scope of work with its focus 

8 
on improving the mainstream of care through pattern analysis, may neglect to address 

serious quality-of-care problems that require disciplinary action against individual 

physicians. 

American Medical Peer Review Association 

The American Medical Peer Review Association supports our recommendation and a 

“a legislative ‘fix’ to OBRA 90 that would correct the drafting errors and render the 

language implementable.” 

We welcome AMPRA ‘s support and find it significant that the organization representing 

the PROS regards the mandated referral to State boards of serious quality-of-care cases to 

be consistent with their mission. Such a mandate need not preclude PROS from stressing 

the educational objectives called for under the fourth scope of work. 

American Association of Retired Persons 

The American Association of Retired Persons supports our recommendation. It 

suggeststhat we call for HCFA to either pursue the legislative amendment we identify, 

or use its rulemaking authority to achieve the desired result. 

We appreciate the AARP’s positive response. In its response to our recommendation, 

HCFA cites “confusion created by the existing OBRA 90 amendments,” indicating that 

regulatory redress of this provision will not solve the problem. Legislative change would 

make it absolutely clear that the type of information exchange we call for is required. 

9 
APPENDIX A 

DETAILED COMMENTS ON THE DRAFT REPORT 

In this appendix we present the full comments on the draft report. The comments 

presented in this appendix are from: 

Page 

The Health Care Financing Administration ............................. A-2 

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

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

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

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

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

A -1 
Hearth Care 

DEPARTMENT OF HEALTH & HUMAN SERVICES Finananq Admfnlstratlon 

Memorandum 

sub,ecrOffice of Inspector General (OIG) Draft Management Advisory Report: “The Peer 

Review Organizations (PRO) and State Medicai Boards: A Vital Link.!’ OEI-01-92-00530 

To Bryan B. Mitchell 

Principal Deputy Inspector General 

We have reviewed the subject draft management advisory report which concerns 

the status of PRO efforts to provide State medical boards with information about 

physicians responsible for substandard medical care. The Omnibus Budget 

Reconciliation Act of 1990 (OBRA 90) mandates that PROS share information with 

State medicai boards. 

OIG found that the 1990 legislation mandating this information sharing has had 

little, if any, effect on improving the reiease of information from PROS to State medical 

boards. OIG believes that PROS share little information with the boards because the 

boards are uncertain about the meaning of the “notice and hearing” provision included in 

OBRA 90. 

In response to the passage of OBRA 90, the Health Care Financing Administration 

(HCFA) amended the PROS’ scope of work to require that they inform State .Medical 

boards about physicians to whom they have sent a first sanction notice. However. 

HCFA later rescinded the requirement in response to concerns that the procedure was 

not in accordance with the Congressionai stipuiation that PROS must grant physicians 

“notice and hearing” before sending information about them to the boards. 

OIG recommends that HCFA propose legislation mandating that PROS provide 

case information to State medicai boards when they have confirmed, after medicai 

review, that a physician is responsible for medical mismanagement resulting in significant 

adverse effects on the patient. HCFA does not concur with the recommendation. We 

beiieve the proposed legisiation would not correct the confusion created by the existing 

OBRA 90 amendments related to this issue. Our specific comments are attached for 

your consideration. 

Thank you for the opportunity to review and comment on this draft management 

advisory report. Please advise us whether you agree with our position on the report’s 

recommendation ar your earliest convenience. 

Attachment 

A-2 
Comments of the Heaith Care Financing Administration (HCF.4) 

on the Office of Insuector General fOIG‘I Draft Management 

Advisors Reuort: “The Peer Review Organizations And State 

,vedicai Boards: ,A Vital Link.” OET-01-92-00530 

OIG Recommendation 

HCFA should propose legisiation mandating that peer review organizations (PROS) 

provide case information to State medical boards when they have confirmed. after 

medical review, that a physician is responsible for medicai mismanagement resulting in 

significant adverse effects on the patient. 

HCFA Response 

HCFA does not concur with the recommendation. Although we do agree that the 

provision in the Omnibus Budget Reconciliation Act of 1990 (OBRA 90) relating to this 

issue has had little impact we do not beiieve OIG’s recommendation would solve this 

problem. 

The proposed legislation does not address, and would not correct, the confusion created 

by the two current amendments. .Any proposed correction should, at a minimum, 

remove the phrase “after notice and hearing” from section 1154(a)(9)(B) of the Social 

Security Act (the Act), and clearly state that the PRO is required to report to State 

medical boards oniy when it makes a recommendation to OIG for sanctions. 

We do not believe that an expansion of the reporting requirement to require PROS to 

report every initiai violation or even every proposed action against a physician should be 

considered. .Many violations are not actionable by themselves, and many actions brought 

against physicians on the basis of evidence initially available to the PRO are resolved 

LIpon presentation of additiona evidence in the informal discussion or reconsideration bb 

the PRO. In these cases. since the physician was found in compliance with the 

provisions of section 1154 of the Act. there is no basis for any report to the State 

medical board. and any earlier report would have to be corrected. Therefore. we do not 

believe that PROS shouid report physicians to State medicai boards until PROS are 

referring a recommended sanction to OIG. 

HCFA supports an approach which encourages PROS and State medical boards to work 

cooperativeiy and share information in a way that heips each of them carry out their 

compiementary functions. The proposed legisiative change could damage the 

cooperative relationship benveen PROS and physicians that HCFA is attempting to 

foster under its new Health Care Quality Improvement Initiative. 

PRO disclosure of confidentiai information to State medical boards is currently 

regulated in the Code of Federal Regulations (CFR). A PRO must disclose information 

lIpon request from State or Federai licensing boards, and a PRO may provide such 

information at its own discretion without a formal request according to 

A-3 
Page 2 

12 CFR 476.138(a)(l and 2). HCFA is currently considering ways to encourage 

information sharing between the PROS and medical boards under this reguiation. 

In this regard, the PRO confidentiality regulations are currently being revised. We wiii 

consider including the requirement of mandatory disclosures to the licensing boards 

without a request and clarification on what information may be disclosed to whom and 

under what circumstances. 

As a requirement of the Fourth Scope of Work (SOW), HCFA is requiring PROS to do 

the following: 

0 Meet with the State medical board, as well as other relevant licensing 

agencies. near the beginning of their fourth round contracts. to discuss the 

type of information that wouid be useful to the board and the PRO; 

0 Establish a memorandum of agreement with the board within the 

first 60 days of the contract to exchange agreed upon information within 

specific timeframes; and 

0 Implement a process for the ongoing, routine exchange of the agreed upon 

information in conformance with confidentiality and disclosure requirements 

in the statute and regulations. 

Additional Comments 

Regarding the OBRA 90 amendmenf we note that whiie the requirements of 

section 1154(a)(9)(B) of the Act are on hold. a provision included in our proposed 

regulation, HSQ-135-F, is consistent with section 4205(d) of OBRA 90. This part added 

a new paragraph (D) to section 1160(b)(l) of the Act requiring PROS to provide notice 

to the State medical board when the PRO submits a physician sanction recommendation 

to OIG. The provision that wii1 be implemented in HSQ-135-F requires a PRO to 

provide relevant portions of any PRO sanction report forwarded to OIG to StatelFederai 

licensing bodies or national accreditation bodies if the report concerns practitioners or 

facilities that are subject to the licensing or accreditation bodies’ jurisdiction. 

Page 1 - Background. 1st paragranh. last sentence 

IS the number “12” the number of cases that OIG agreed to effectuate the recommended 

exclusion(s)? Did PROS recommend sanction in more than 12 cases? 

A-4 
Page 3 

Paee 3 - 1st paraerauh. 2d sentence 

HCFA rescinded the requirement because the statute was not clear in its intent. 

Pace 4 - December 1990 Box 

There is also a provision for notification when sanction recommendations are sent to 

OIG. 

Page 4 - Februarv 1991 Box 

The Fourth SOW requires PROS to develop memorandums of agreement with State 

licensing boards regarding information to be exchanged. Also, it requires PRO 

notification to boards when sanction recommendations are made to OIG. 

Paee 5 - 3rd DaragraDh. last sentence 

Same comment as page 1 - Background. 

Page A-l. 6 

The following language should be included after the word “violating,” “in a gross and 

flagrant manner or substantially in a substantial number of cases.” 

Page A-2. 15 

The next PRO contracts wiil include a significantly different approach to quality review. 

The focus of the quaiity review will be on: (a) description of the quality concern, 

(b) outcomes, (c) causality, (d) source: and (e) type of deficiency. We recently 

established a Quaiity Review Task Force composed of representatives from the 

4merican Medical Association, American Hospital Association, several PROS, and 

HCFA’s central and regional office staffs. The task force is to develop consistent and 

uniform methods of documenting the quality review process/findings for implementing 

the SOW requirements. 

A-5 
DEPARTMENT OF HEALTH 8r HUMAN SERVICES Public Health Service 

Memorandum 

Date ’ OCT I 3 1992 

From Assistant Secretary for Health 

Sublecr Office of Inspector General (OIG) Draft Report "The Peer 

Review Organizations and State Medical Boards: A Vital Link" 

To Acting Inspector General, OS 

Attached are the Public Health Services (PHS) comments on the 

subject report. Although the report contains no 

recommendations for PHS, we offer general comments and a 

series of technical for your consideration. 

Attachment 

A-6 
PUBLIC HEALTH SERVICE (PHS) COMMENTS ON THE OFFICE OF INSPECTOR 

GENERAL I OIG) DRAFT REPORT "THE PEER REVIEW ORGANIZATIONS AND 

STATE MEDICAL BOARDS: A VITAL LINE," OEI-01-92-00530 

General Comments 

The single recommendation in this report is not directed to PHS. 

However, we have reviewed its contents and concur with the 

recommendation that "the Health Care Financing Administration 

(HCFA) should propose legislation mandating that Peer Review 

Organizations (PRO) provide case information to State medical 

boards when they have confirmed, after medical review, that a 

physician is responsible for medical mismanagement resulting in 

significant adverse effects on the patient." Requiring that a 

report be filed with the State medical board after a medical 

review is consistent with requirements for reporting other types 

of peer review activity to the National Practitioner Data Bank 

(NPDB). Such reports from the PROS, along with NPDB reports, 

should provide State medical boards with additional useful 

information for conducting their proceedings. 

Technical Comments 

Following are several suggested modifications to the text of this 

draft report. 

1. The first paragraph of the Background section in the 

Executive Summary states that the lack of PRO information 

reaching State medical boards inhibits the boards' 

effectiveness in protecting Medicare and Medicaid 

beneficiaries and other citizens in their States. We would 

suggest that the report state that the lack of sharing of 

PRO information probably inhibits the effectiveness of the 

boards. 

2. The report states on page 1, paragraph 3, that "The 

violations they (State medical boards) identify sometimes 

involve quality-of-care problems, but more often they 

concern drug and alcohol abuse, sexual misconduct, and 

criminal behavior." It may be more appropriate to revise 

this sentence as follows: "The actions they (boards) take 

against physicians are more likely to be based on drug and 

alcohol abuse, sexual misconduct, and criminal behavior 

since evidence of a legal nature is required and can be 

obtained and used in such cases." State practice 

legislation requires legal evidence. Proving incompetence 

legally is very difficult and thus boards are often less 

able to take action against an "incompetent" practitioner. Nevertheless, PROS should send appropriate information to 

the State boards. 

A-7 
2 

3. The same concept as discussed in number 2 above appears on 

page 3, paragraph 4. Rather than repeating the same wording 

regarding the boards, we would suggest that the report 

include a paragraph near the beginning that identifies legal 

requirements facing State medical boards versus the 

decision-making of the PROS. Emphasis should be placed on 

the PROS providing appropriate material to the boards. 

4. On page 5, paragraph 4, the report states that HCFA would 

need to specify what information PROS should send to the 

boards which " . ..couid include.. .information on the type of 

quality-ofkare problems involved and even the Ioeations at 

which the problems occurred." We suggest that the report 

recommend that PROS be required to provide this information. 

A-8 
27 

-- 

-- 

5

: . DEPARTMENTOFHEALTH &HUMANSERVICES Oftkeot meS~aemrv :

5

-> -

d & 

'+a+'*VW3 Wasfmgton. DC. 20201 

TO: Bryan Mitchell 

Pri ncipai Deputlr Inspector General 

FROM: Assistant Secretary for 

Planning and Evaiuation 

SUBJECT: OIG Draft Management Advisory Reports: "The Sanction 

Referral Authority of Peer Review Organizationsfl (OEI01-92-00250) and "The Peer Review Organizations and 

State Medical Boards: A Vital Link" (OEI-01-92-00530) COMPENTS 

I offer the following comments on the two subject draft reports, 

which I have linked due to the interreiatedness of their 

recommendations. 

In the first report, you reviewed the sanction referral authority of peer review organizations (PROS), of which referral to state 

medical boards is one element. You recommended several policy options for imDrovement, including a recommendation requiring that state medical boards be informed whenever a serious quality 

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

lesser standard than is currently in place. In the second 

report, you specifically examined the low frequency with which 

PROS referred cases involving physicians cited for poor quality 

of care to state medical boards. You reiterated the 

recommendation concerning PRO-medical board contact contained in 

the first report. 

I agree with the observations made in these reports that the 

formal sanction referral process is not often used. 

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

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

believe it will play an important role in the primarily educational efforts of the PROS under the Fourth Scope of Work 

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

options and recommendations of your reports. 

0 ReDeal or substantiallv modifv the unwillino or unable 

reouirement. (Policv oution 1. Reoort on the Sanction 

Referral Authoritv) I agree that the additional evidentiary 

hurdle for sanction of demonstrating. that a physician is 

either unwilling or unable to comply with a corrective 

action plan is, at present, vague. The report is written 

from the perspective of complete repeal, however, and does 

not idenrify how the requirement could be meaningfully 

modified. I suggest that you clarify better why the recent 

legislative change defining a physician's failure to 

participate in a car---WmPtive action plan (CAP) as 

A-9 
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-- -- 

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Page 2 - aryan Yitchell 

d~ongtra~ed unwillingness cr inability to compiy is 

inadequate. Also, I urge you to clarify how due process 

protections wouid be prese,?red in the event that the 

requirement was modified or rapeaied. 

Increase the monetarr cenait-7 sanction substantiailv. 

(Poficv ootion 2, Reoort on the Sanction Referrai Authorit-:' 

I agree that this is an important policy opticn, and believe 

that it would be a desirable alternative for the PROS, where 

patient safety would not be compromised. 

Eliminate the PROS' sanction referral authoritv. 'Police 

ootion 3, Report on the Sanction Referral Authorit-;) This 

is a theoretical option only: without the ability to impose 

sanctions in the face of aberrant or poor quality behavior, 

PROS woul2 have little clout in certain circumstances to 

influence physician behavior. I would oppose this proposai. 

Provide sanction authcritv direcfiv to the PROS. lPolicv 

ootion 4, Reoort on the Sanction Referral Authorirv) The 

are artylal ““LL”weI lv two ---_ alternatives _-- ---~_~ to OIG administration of the

sanctions process. The first is to decentralize and , giv .e 

The the PROS the direct authority to ixIpose sanctiors. 

second is to move the authority from OIG to HCFE.. .s ci .te Decentralization 

the 

would be undesirable for the reason , wi .th 

on page 10 of Sanction Referral Authority report 00 the additional concern that physician exclusion is t the serious an outcome to cede without central review 

the 

to 

F'eder *ai PROS, who are merely the contractual agents of 

Government. 

The seccnd alternative, having HCFA pursue the sanction ~- z--- -a­ . - but tne report aoes IIUL actions, also may not be desi: rable, ' " 

provide sufficient information to evaluate 

of 

whether the OIG 

has been too conservative in its choice which cases to 

pursue, and whether this restraint rejecting, for is example, 8 of 12 cases referred to it in FY 1991 

itself contributing to the dwindling number of cases 

proposed for sanctions by the PROS. It appears from the 

statistics in Appendix B that the PROS may be doing a bet',=r 

job at following the proper procedures for developing a 

solid case. No justification or explanation is provided, 

however, for the increasincr rate of cases rejected by the 

OIG for lack of medical evidence from FY 1988 to 1991. Why 

is the OIG rejecting the medical advice of the PRO 

physicians? The reoort would be substantially strengthened 

by an objective evaluation of.the cases the OIG rejected, 

and by the discussion of the second alternative. 

0 Maintain PROS' sanction referral authoritv as it exists now. 

but mandate r=+prrais tc State medical boards when F?Os 

A-10 
2age 3 - Zryan Yitchell 

confirrn seric~s cualitv-of-care nrcblems. (Policv ootion 5, 

Reoort on :he Saner:sn ?.eferrai Aut,L=or:zv and recomendaticn 

of reT30rf "The ?anr Review 0raanizat:ons and State Medicai 

Boards: .A Vitai Link" ! I do not support this prooosal 

for seve ral reasons. I would agree t&hat the PROS an5 the 

State medical boards (and hospital licensure authorities, 

etc.) shouid be in closer contact. The most recent -versions 

of the PRO Fourth Scope of Work include requirements that 

each PRO develop memoranda of agreement (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 requirement for unilateral action. 

I understand t,hat the provision of the 1990 Omnibus Budget Reconciliation Act reguirlng PROS to share case information 

with state n,etiical boards has not been imolemented because 

it is unclear. I understand that a technical correction to 

require the PROS to inform boards when a sanction 

recommendation is sent to the OIG has been sought but that 

it may not have been included among the OBRA technicals in 

the tax bill that will be sent to the President soon. If no 

action has been taken on the technical change, it should be 

advanced again in the next session. 

It is not clear how the OIG's proposal would differ from the 

technical correction being sought by HCFA. It would seem to 

require involvement of the state medical societies at an 

earlier stage, prior to issuance of the sanction 

recommendation to the OIG and prior to the physician having 

the full opportunity to review and respond to the concerns 

raised by a PRO. Except for clear instances where patients 

are in immediate danger, it does not seem fair or 

appropriate to essentially initiate a parallel investigation by the medical society until there has been confirmation of 

a problem. This is particularly a problem in those states 

that require all complaints made to the state medical 

society to be made public, including reports from the PROS. 

I do not object to such publicity where the physician has 

had amole opportunity to respond to the PRO and has been 

unwilling or unable to cooperate in the development and 

execution of a meaningful corrective action plan. However, 

such publicity is probably more useful as a potential 

sanction than as a context for obtaining physician cooperation for changed behavior. 

Furthermore, It is curious that the OIG is calling for 

mandatory notification of the medical board prior to the 

issuance of the sanction recommendation to OIG. As 

noted above, the OIG refused to pursue 5 of 12 cases 

referred to it in FY 1991 because cf inadequate medical 

A-11 
Page 4 - aryan Xitcheil 

evidence from the FROs. The reports do not explain why it 

would be productive or appropriate to engage the state 

medical societies based on informaticn that the OIG itself 

feels is inadequate to justify a sanction. 

Finally, the first three tables of Aqendix B of the report on 

the Sanction Referral Authority (sanctions referred to the OIG, 

referrals rejected by OIG, sanctions mosed by the OIG) do not 

agree and should be clarified. For FYs1987, 1988, i989 and 1991, 

the sum of the sanctions imposed and referrals rejected exceeds 

the sanctions referred (cases are resolved in a later year than 

they are referred?). Similarly, the totals for all years 

involved do not agree. 

If you have any questions, please call Elise Smith at 690-6870. 

A- 12