July 21, 1999

/s/

June Gibbs Brown

Inspector General

Legislative Recommendation to Improve Hospital Reporting to the National Practitioner Data

Bank, OEI-12-99-00250

Claude Earl Fox, M.D., M.P.H.

Administrator 

Health Resources and Services Administration

ISSUE 

There are indications that hospitals may not be complying with the reporting requirements of 

the National Practitioner Data Bank (Data Bank). We are therefore recommending that the 

Health Resources and Services Administration (HRSA) initiate a legislative proposal (A-19) to 

provide for a civil money penalty of up to $10,000 for each instance of a hospital’s failure to 

report an applicable adverse action to the Data Bank. 

CURRENT LAW 

Section 423 of the Health Care Quality Improvement Act (42 U.S.C. 11133) requires that each 

hospital or health care entity which takes a professional review action that adversely affects the 

clinical privileges of a physician or dentist for a period of longer than 30 days report to the 

appropriate State board of medical examiners the name of the physician or dentist involved and 

a description of the acts or omissions or other reasons for the action. Each board of medical 

examiners is required to report this information to the Data Bank. 

Section 411(b) provides that in the case of a hospital or health care entity that is found to have 

committed a pattern of non-reporting be given notice of noncompliance, an opportunity to 

correct the noncompliance, and a hearing before the Secretary. Subsequently, if the Secretary 

determines that the entity has failed to comply, its name will be published in the Federal 

Register and it will lose its immunity protections for a period of 3 years; such immunity 

provides liability protections for professional review activities. 

EVIDENCE OF THE PROBLEM 

Hospitals Reporting to the Data Bank 

In February 1995, we issued a report entitled “Hospital Reporting to the National Practitioner 

Data Bank,” OEI-O1-94-00050. This study, which was done at the request of HRSA, found 
that for the period September 1, 1990, when the Data Bank became operational, to December 

Page 2 - Claude Earl Fox, M.D., M.P.H. 

1993 about 75 percent of all hospitals in the United States had never reported an adverse 

action. More current data indicates that for the period September 1990 through September 

30, 1998 about 67 percent of hospitals have never reported an adverse action. 

Prior to the opening of the Data Bank, in a planning document submitted to the Office of 

Management and Budget, the Public Health Service estimated there would be 5,000 hospital 

adverse action reports a year. In a separate analysis, the American Medical Association 

estimated that there would be 10,000 such reports annually. In actual fact, a total of only 

7,453 reports have been received over the 8-year operational history of the Data Bank, i.e. less 

than 1,000 per year. 

A national conference of major medical and health organizations sponsored by HRSA in 

October 1996 reached a consensus that the number of reports in the Data Bank is unreasonably 

low compared with what would be expected if hospitals pursued disciplinary actions 

aggressively and reported all such actions. The attendees included representatives from the 

American Medical Association, American Hospital Association, Joint Commission on 

Accreditation of Healthcare Organizations, Health Care Financing Administration, patient 

advocacy organizations, Federation of State Medical Boards, Office of Inspector General, and 

a major university teaching hospital. 

An October 1994 study of 144 rural hospitals in the Pacific Northwest funded by HRSA and 

performed by the University of Washington School of Medicine, found that 20 percent of 

hospitals reported an increase in activities that could obviate the need to submit an adverse 

report to the Data Bank. For example, imposing disciplinary periods of shorter than 31 days 

had increased in 5 percent of the hospitals. Other hospitals (12 percent) reported an increase 

in requiring continued medical education instead of restricting clinical privileges. 

Hospitals Reporting to States 

According to the Federation of State Medical Boards, almost all States have mandatory 

reporting laws relating to the reporting of adverse actions to State medical boards. California 

for example, requires a health care facility to report to the State medical board any denial, 

termination or relocation of privileges for a cumulative period of 30 days or more for any 12-

month period. Colorado and a number of other States have no time threshold for reporting, 

that is, all adverse actions must be reported. Fourteen States have a civil or money penalty 

associated with failure to report to State medical boards. California, for example, can impose a 

fine of up to $10,000 against the facility and a fine of up to $5,000 against an individual for 

failure to report. 

The Citizen Advocacy Center (CAC), which is a national association of public members of 

State licensing boards, released a HRSA funded study in March 1997 that found indications of 

non-compliance with State mandatory reporting laws. The Center quotes the President of the 
Page 3 - Claude Earl Fox, M.D., M.P.H. 

California Medical Board as stating the following in the January 1995 issue of the board’s 

newsletter: 

The issue of 805 (peer review) reporting is one of the most important and most 

misunderstood Medical Practice Act requirements. Over the past year, we have noted 

a deterioration in the cooperation required between hospitals and the Board in 

protecting consumer/patient safety. We have experienced incomplete reports and, on 

some occasions, excuses for not reporting at all. 

Based on its survey, the center offered four possible reasons for under-reporting to State 

boards: (1) a cultural aversion to reporting a colleague (“snitching”); (2) deficiencies in 

reporting laws ; (3) lax enforcement; and (4) lack of knowledge on the part of hospitals about 

their duty to report. 

Because of concerns involving under-reporting, the CAC, in cooperation with the 

Administrators of Medicine (directors of State medical boards), drafted a model State 

reporting law. The model law calls for a financial penalty of $1,000 per day for the period of 

non-compliance, up to a maximum fine of $250,000 for each incident of failure to report. 

A recently completed HRSA-funded study by the University of Washington Medical School 

concerning hospital reporting and State peer review protections statutes found that “...Data 

also revealed that more adverse actions are reported to the Data Bank in States which impose 

significant penalties upon hospitals for failure to report certain peer review actions to State 

licensing board (sic). This raises significant concern that hospitals are not fully reporting 

adverse peer review actions to appropriate governmental agencies and stronger laws are 

needed...” 

According to this study, after adjusting for differences in hospital characteristics, hospitals in 

States with strong penalties were 40 percent more likely to have reported an adverse action 

over the 5 years of the study than hospitals in States with no penalties. 

OIG RECOMMENDATION 

To more fully encourage hospitals to follow the intent of Section 423 of the Health Care 

Quality Improvement Act (Act), we recommend that HRSA propose legislation that would 

establish a civil money penalty of up to $10,000 for each instance of a hospital’s failure to 

report to the Data Bank in accordance with the requirements of Section 423. This penalty is 

consistent with the current civil money penalty sanction that can be imposed for failure to 

report a malpractice settlement or judgement. Section 421 of the Act provides that any entity 

that fails to report a malpractice payment “...shall be subject to a civil money penalty of not 

more than $10,000. for each payment involved...” 
Page 4 - Claude Earl Fox, M.D., M.P.H. 

Under our recommendation, the Department would continue to have the discretion to remove 

a hospital’s peer review immunity protection under the Act. 

The HRSA concurred with the recommendation and indicated that their legislative proposal 

would cover reporting by all health care entities (including managed care organizations). The 

HRSA also indicated that they are considering increasing the Civil Money Penalty to more than 

the $10,000 recommended by the Office of Inspector General. A copy of the full HRSA 

response is attached. 

Could you please submit within 60 days from the date of this memorandum report your plans 

to implement the recommendation. If you have any questions or comments, please call me or 

George Grob, Deputy Inspector General for Evaluation and Inspections, or have your staff 

contact Elise Stein at (202) 619-2686. 

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