Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

JULY 1999 

OEI-01-97-00052 

The External Review of Hospital Quality 

The Role of Medicare Certification 
OFFICE OF INSPECTOR GENERAL 

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

protect the integrity of the Department of Health and Human Services programs as well as the 

health and welfare of beneficiaries served by them. This statutory mission is carried out through a 

nationwide program of audits, investigations, inspections, sanctions, and fraud alerts. The 

Inspector General informs the Secretary of program and management problems and recommends 

legislative, regulatory, and operational approaches to correct them. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 

Inspector General. It conducts short-term management and program evaluations (called 

inspections) that focus on issues of concern to the Department, the Congress, and the public. The 

inspection reports provide findings and recommendations on the efficiency, vulnerability, and 

effectiveness of departmental programs. 

OEI's Boston regional office prepared this report under the direction of Mark R. Yessian, Ph.D., 

Regional Inspector General. Principal OEI staff included: 

BOSTON HEADQUARTERS 

Joyce M. Greenleaf, Project Leader Jennifer Antico, Program Specialist 

Lynne G. Dugan, Senior Analyst Alan Levine, Program Specialist 

Meredith A. Vey, Program Analyst 

To obtain copies of this report, please call the Boston Regional Office at 617/565-1050. 

Reports are also available on the World Wide Web at our home page address: 

http://www.dhhs.gov/progorg/oei 
EXECUTIVE SUMMARY 

PURPOSE 

To assess the role of the Health Care Financing Administration and Medicare certification 

in the external review of hospital quality. 

BACKGROUND 

External Quality Review of Hospitals in the Medicare Program 

Hospitals routinely offer valuable services, but also are places where poor care can 

lead to unnecessary harm. The external quality review of hospitals plays an important role 

not only in protecting patients from such harm, but also in complementing the hospitals’ 

own internal quality efforts. The Federal Government relies on two types of external 

review to ensure hospitals meet the minimum requirements for participating in Medicare: 

accreditation, usually by the Joint Commission on Accreditation of Healthcare 

Organizations, and Medicare certification, by State agencies. About 20 percent of the 

6,200 hospitals that participate in Medicare are nonaccredited and certified by the States. 

This Inquiry 

This report, part of a series of four companion reports that resulted from our 

inquiry, focuses on the Medicare certification process, carried out by State agencies. Our 

inquiry draws on aggregate data, file reviews, surveys, and observations from a rich 

variety of sources, including the Health Care Financing Administration (HCFA), the Joint 

Commission, State agencies, and other stakeholders. 

We organized this report around a framework for considering the external review 

of hospital quality. This framework consists of five components: announced, on-site 

surveys of hospitals; unannounced, on-site surveys of hospitals; responses to complaints 

concerning hospitals; responses to major adverse events in hospitals; and collection and 

dissemination of standardized performance measures. 

FINDINGS 

The HCFA’s routine hospital certification surveys are a low priority. 

The backlog of surveys is growing. The proportion of nonaccredited hospitals not 

surveyed within the 3-year industry standard grew from 28 percent in 1995 to 50 percent 

Hospital Quality: The Role of Medicare 1 OEI-01-97-00052 
in 1997. For those hospitals waiting over 3 years for a survey, the average time between 

surveys is over 5 years. In fact, the total number of certification surveys conducted 

decreased from 286 surveys in 1995 to 184 surveys in 1997, a drop of 36 percent. 

The HCFA’s survey and certification budget goes first to nursing homes and 

home health agencies, which have mandated survey cycles that hospitals lack. 

Hospital certification surveys appear 10th on a list of 12 HCFA workload priorities 

for States, behind surveying both nursing homes and home health agencies. Congress 

mandates that HCFA survey nursing homes and home health agencies on a regular cycle. 

Hospitals lack such a mandate. 

The HCFA’s hospital review focuses on complaints and serious incidents. 

State survey agencies are the front-line responders to complaints and serious 

incidents at both accredited and nonaccredited hospitals. The HCFA assigns responding 

to such events a higher budget priority than routine surveys. 

The HCFA’s certification survey results fail to make meaningful distinctions 

among nonaccredited hospitals. 

Certification surveys simply result in a status of certified or not certified; no grades 

or rankings stem from the survey. Hospitals rarely fail to achieve certification. The 

HCFA decertified 7 hospital in 3 years. 

The HCFA has not sought to collect or disseminate standardized performance 

data for nonaccredited hospitals. 

While HCFA has made strides in collecting data from other provider types, such as 

home health, managed care, and nursing homes, it is not currently collecting or analyzing 

such data as part of its system of hospital review. However, the proposed revision of the 

hospital conditions of participation (issued on December 19, 1997) invite comments on 

whether HCFA should collect performance data and what that data should encompass. 

CONCLUSION 

In the domain of external quality reviews, the State agencies play major roles as 

troubleshooters: responding to complaints and serious incidents at accredited and 

nonaccredited hospitals. But given the limited pool of Federal funds available to support 

State survey and certification activities in general and the relatively low priority of routine 

hospital surveys in particular, the 1,442 nonaccredited hospitals across the country receive 

insufficient attention through external reviews. Surveys of such hospitals tend to be 

Hospital Quality: The Role of Medicare 2 OEI-01-97-00052 
triggered on the basis of a serious incident involving patient harm rather than as part of a 

routine review intended to prevent such incidents. This is the central and troubling 

conclusion of this report. In our summary report, A Call for Greater Accountability, we 

direct our recommendations to HCFA stemming from this report and our entire inquiry. 

COMMENTS 

Within the Department of Health and Human Services, we received comments 

from HCFA. We also solicited and received comments from the following external 

parties: Joint Commission on Accreditation of Healthcare Organizations, Association of 

Health Facility Survey Agencies, American Osteopathic Association, American 

Association of Retired Persons, Service Employees International Union, National Health 

Law Program, and Public Citizen’s Health Research Group. We include the detailed text 

of all of these comments and our responses to them in our summary report, The External 

Review of Hospital Quality: A Call for Greater Accountability (OEI-01-97-00050). 

Hospital Quality: The Role of Medicare 3 OEI-01-97-00052 
TABLE OF CONTENTS 

PAGE 

EXECUTIVE SUMMARY 

INTRODUCTION .......................................................... 5

FRAMEWORK FOR EXTERNAL QUALITY REVIEW OF HOSPITALS ............. 8

PROFILE OF MEDICARE CERTIFICATION ................................... 9

FINDINGS 

Surveys Are a Low Priority ............................................. 10

Focus on Complaints and Adverse Events .................................. 12

Survey Results Fail to Make Meaningful Distinctions .......................... 13

No Standardized Hospital Performance Data ................................ 13

CONCLUSION ........................................................... 15

APPENDICES 

A: Medicare Conditions of Participation .................................... 16

B: Methodology ...................................................... 17

C: Certification Survey Observation ....................................... 19

D: Endnotes ......................................................... 26

Hospital Quality: The Role of Medicare 4 OEI-01-97-00052 
INTRODUCTION 

PURPOSE 

To assess the role of the Health Care Financing Administration’s Medicare certification in 

the external review of hospital quality. 

BACKGROUND 

Hospital Safety 

Hospitals are an integral part of our healthcare system, offering services that 

improve, extend, and even save lives. But they are also places where inappropriate care 

can lead to unnecessary harm. This reality was clearly underscored in 1991, when a 

Harvard medical practice study revealed the results of its review of about 30,000 

randomly selected records of patients hospitalized in New York State during 1984. The 

study found that 1 percent of the hospitalizations involved adverse events caused by 

negligence.1 On the basis of its sample, the study team estimated that during that year, 

negligent care provided in New York State hospitals was responsible for 27,179 injuries, 

including 6,895 deaths and 877 instances of “permanent and total disability.” Many other 

more recent studies have reinforced the concerns raised by the Harvard study. Of 

particular note was one that focused on the care received by 1,047 hospitalized patients in 

a large teaching hospital affiliated with a medical school. It found that 17.7 percent of 

these patients received inappropriate care resulting in a serious adverse event--ranging 

from temporary disability to death.2 In the public eye, these scholarly inquiries have been 

overshadowed by media reports that describe, often in graphic detail, the harm done to 

patients because of poor hospital care.3 

Hospitals rely upon a variety of internal mechanisms, from physician credentialing, 

to peer review and benchmarking, in order to try to avoid such incidents and to improve 

the quality of care provided in their facilities. External quality review serves as a vital 

additional safeguard. It provides a more detached, independent mechanism for assessing 

the adequacy of hospital practices. Such oversight is of fundamental importance to 

patients and to the public and private entities that purchase health care services on their 

behalf. Protecting patient safety and improving the quality of patient care must be a top 

priority of external review. 

Medicare’s Interest in External Hospital Quality Review 

The Medicare program covers about 38 million elderly and disabled individuals, 

many of whom are high users of hospital care.4 In 1997, Medicare spent about $136 

Hospital Quality: The Role of Medicare 5 OEI-01-97-00052 
billion on Part A, the hospital insurance benefit.5 This figure is just over half the total 

amount the Federal government spent on all Medicare benefits.6 In the same year, 

Medicare spent over $80 billion for inpatient acute hospital care alone. 

Since Medicare’s inception, external quality review has been a part of the 

Medicare program. When Congress enacted the Medicare Act in 1965, it required 

hospitals to meet certain minimum health and safety requirements to participate in the 

program.7 Those minimum requirements, called the Medicare conditions of participation, 

were published in 1966, revised in 1986, and are now being revised again (see appendix 

A).8 Within the Medicare Act itself, however, Congress provided that hospitals 

accredited by the Joint Commission on Accreditation of Healthcare Organizations were 

deemed to be in compliance with the conditions of participation. Congress also provided 

that hospitals accredited by the American Osteopathic Association could be considered in 

compliance, but only to the extent that the Secretary deemed appropriate.9 Thus, 

accreditation by the Joint Commission or the American Osteopathic Association provides 

entree into the Medicare program. About 80 percent of the 6,200 hospitals that 

participate in Medicare are accredited by the Joint Commission. Those hospitals wishing 

to participate in Medicare without accreditation must go through a Medicare certification 

process. The Health Care Financing Administration (HCFA) relies on State survey and 

certification agencies (hereafter called State agencies) to conduct certification surveys at 

these hospitals to determine compliance with the Medicare conditions of participation. 

States currently certify 1,442 nonaccredited hospitals nationwide.10 

Regardless of the route a hospital takes to Medicare participation, Medicare bears 

a cost for the external review, either directly by funding State agencies or indirectly 

through hospital charges that include the overhead cost of periodic accreditation surveys. 

The Nature of Medicare Certification 

The Medicare certification process is a public, regulatory function. It aims to 

ensure that hospitals wishing to serve Medicare beneficiaries, but not wishing to be 

accredited, meet the conditions of participation. The 51 State agencies conduct the onsite 

certification surveys on HCFA’s behalf. The Medicare certification process is available at 

no cost to hospitals. 

This Inquiry and Report 

This report examines the role of Medicare certification in the external review of 

hospital quality. It focuses on the hospital survey work undertaken by State certification 

agencies on behalf of HCFA. In this report, we offer a framework for considering the 

external review of hospital quality and apply that framework to Medicare certification. 

Hospital Quality: The Role of Medicare 6 OEI-01-97-00052 
This report is part of a series of four companion reports that resulted from our 

inquiry. A second, The Role of Accreditation (OEI-01-97-00051), assesses the Joint 

Commission’s approach to hospital accreditation. A third, Holding the Reviewers 

Accountable (OEI-01-97-00053), describes how HCFA oversees both the Joint 

Commission and the State survey agencies. The fourth report, A Call for Greater 

Accountability (OEI-01-97-00050), provides a summary of external hospital quality 

review and presents the recommendations emerging from our inquiry. 

Our inquiry draws on a variety of sources. These include: data from HCFA’s 

Online Survey Certification and Reporting System; aggregate data from the Joint 

Commission concerning hospital survey activity; a pretested mail survey to State agencies 

in the 50 States and District of Columbia (hereafter referred to as a State); observations of 

the hospital surveys conducted by the Joint Commission and State agencies; reviews of 

accreditation manuals, policies, and hospital survey files from the Joint Commission; the 

systematic gathering of information from representatives of HCFA central and regional 

offices, State agencies, the Joint Commission, American Hospital Association, consumer 

groups, professional associations, and representatives of other organizations we 

considered to be stakeholders in hospital oversight; and reviews of laws, regulations and 

articles from newspapers, journals, newsletters, and magazines. We also interviewed 

officials from the American Osteopathic Association and reviewed their accreditation 

materials. The American Osteopathic Association accredits about 100 to 150 hospitals, 

some of which are also accredited by the Joint Commission. For purposes of this inquiry, 

however, we focused on the Joint Commission. See appendix B for more details on our 

methodology. 

We conducted this inspection in accordance with the Quality Standards for 

Inspections issued by the President’s Council on Integrity and Efficiency. 

Hospital Quality: The Role of Medicare 7 OEI-01-97-00052 
HOSPITAL REVIEW FRAMEWORK 

The following five components present a framework for considering the external quality review 

of hospitals. They are intended to complement the internal quality assurance and improvement efforts 

that hospitals undertake themselves. They are approaches that health care purchasers, such as Medicare 

and Medicaid, can rely upon to ensure that their beneficiaries receive quality services from hospitals. 

They can also be of use to beneficiaries and other consumers concerned about the quality of their hospital 

care. 

We present the components to facilitate analysis of the extent and type of external review that is 

desirable, whether carried out by accreditation bodies, certification agencies, Medicare Peer Review 

Organizations, HCFA, or others. Each component has strengths and limitations. Moreover, each can be 

used in support of a review philosophy based on continuous quality improvement, more traditional 

compliance enforcement, or some combination thereof. 

We omitted a sixth component: the retrospective review of medical records to determine 

appropriateness of care. Formerly a role of the Medicare Peer Review Organizations, such medical record 

review is no longer carried out on such a large scale. However, some medical record review does occur as 

part of the components described below. 

1. Announced, On-Site Surveys of Hospitals 

These involve some combination of observations of facility and equipment; reviews of medical 

credentials, and other records and documents; and interviews. They result in a pass/fail or some kind of 

score intended to distinguish level of performance. They can also involve follow-up to correct or improve. 

2. Unannounced, On-Site Surveys of Hospitals 

The approach is basically the same as above except that the hospital has not had time to prepare. 

The intent is to gain a clear assessment of the facility as it typically functions and to trigger any necessary 

follow-up. 

3. Response to Complaints Concerning Hospitals 

These involve complaints of a particular instance of care or more encompassing matters 

concerning a hospital’s performance. The response to complaints can range from a minimal distant 

review to a thorough on-site review. The process can trigger corrective actions and system improvements. 

4. Response to Major Adverse Events in Hospitals 

These involve cases where substantial patient harm resulted from what may be poor performance 

on the part of the hospital and/or its practitioners. Here, too, the response can range from minimal to 

thorough and can trigger corrective actions and system improvements. 

5. Collection and Dissemination of Standardized Performance Measures 

The aim here is to establish the standardized use of measures in ways that enable purchasers, 

consumers, accrediting bodies, and others to compare hospital performance. The comparisons can focus 

on a hospital’s own performance over time and/or on how its performance compares to other hospitals. 

The data can be drawn from surveys of patients or providers, billing claims, and the hospitals’ own 

records. 

Hospital Quality: The Role of Medicare 8 OEI-01-97-00052 
PROFILE OF CERTIFICATION 

The table below summarizes our assessment of Medicare’s approach to certifying 

nonaccredited hospitals, based on the framework we presented on the previous page. The 

report generally follows this profile in its evaluation of Medicare certification. 

State agencies carry out certification surveys under the same guidelines from 

HCFA. However, their implementation is likely to vary from State to State. We observed 

one routine, announced certification survey, and include our observations in appendix C. 

Element Description Degree of Emphasis 

Routine, Announced, 

On-Site Surveys 

State agencies conduct surveys, on behalf of 

HCFA, to assess compliance with Medicare 

conditions of participation. Can involve 

follow-up. 

Minor. Low spending priority. No 

mandate requiring certification 

surveys at regular time intervals. 

Random, 

Unannounced, OnSite Surveys 

Not Conducted. None 

Responses to 

Complaints 

State agencies conduct focused, unannounced 

surveys in both accredited and nonaccredited 

hospitals on any condition of participation 

involved in a complaint. Survey can be 

expanded to include all conditions if the State 

agency finds conditions out of compliance. For 

accredited hospitals with conditions found out 

of compliance, HCFA can remove deemed 

status. Can involve follow-up. 

Major. Core of HCFA’s oversight. 

High spending priority. 

Responses to Serious 

Incidents 

Same as complaints. Same as complaints; HCFA makes 

no distinction. 

Standardized 

Performance Data 

Not Collected. 12/19/97 Federal Register Notice 

solicited comments on whether 

HCFA should collect performance 

data. 

Hospital Quality: The Role of Medicare 9 OEI-01-97-00052 
FINDINGS 

The HCFA’s routine hospital certification surveys are a low 

priority. 

The backlog of surveys is growing. 

In 1995, 28 percent of nonaccredited hospitals nationwide had not been surveyed 

within the 3-year industry standard.11 By 1996, that backlog grew to 37 percent. By 

1997, 50 percent of the 1,361 

nonaccredited hospitals in the 

50 States and the District of 

Columbia had not had a survey 

in at least 3 years (see Figure 

1).12 

Source: HCFA’s OSCAR System. 

Figure 1 

The average elapsed 

time between surveys is 

currently just over 3 years. 

Just a few years ago, States 

were doing much better, with 

elapsed times averaging 1 and 

2 years.13 The increasing time 

between surveys coincides 

with the dramatic rise in home 

health agencies--which State 

agencies must also survey. 

The average elapsed 

time is growing for all but a 

handful of States. For those 

hospitals waiting over 3 years 

for a survey, the average time 

between certification surveys is over 5 years. Nationwide, 1 in 5 States had at least 1 

hospital go as long as 8 years without a survey. Indeed, the total number of certification 

surveys conducted has dropped 36 percent in 2 years: from 286 surveys in 1995 to 184 

surveys in 1997.14 

The situation is worse in States with the most nonaccredited hospitals. Four States 

account for 27 percent of the nonaccredited hospitals in the country: Texas, Kansas, 

Hospital Quality: The Role of Medicare 10 OEI-01-97-00052 
California, and Louisiana. Each of those States has over 50 nonaccredited hospitals. The 

average elapsed time between surveys in Texas is 4.4 years; in Kansas, 4.6 years; in 

California, 4.5 years; and Louisiana, 3.8 years. Between October 1, 1996 and September 

30, 1997, Texas conducted just 4 routine certification surveys; Kansas conducted 8; 

California, 13; and Louisiana, 3.15 

Of course, nonaccredited hospitals are also subject to State licensure laws, another 

form of external hospital oversight. Indeed, every State except Ohio requires hospitals to 

be licensed. But what that licensure translates to in terms of on-site surveys at 

nonaccredited hospitals varies considerably across the States. Surveying nonaccredited 

hospitals on-site is a costly undertaking for States.16 Indeed, 25 States reported trying to 

piggyback their State licensure surveys onto Medicare certification surveys whenever 

possible--making licensure surveys unlikely without a certification survey. The number of 

recent licensure surveys among the four States with the most nonaccredited hospitals 

ranged from surveying all (California) to surveying none (Texas); with Kansas and 

Louisiana surveying 30 and 40 percent respectively.17 

The HCFA’s survey and certification budget goes first to nursing 

homes and home health agencies. 

Hospital certification surveys appear 10th on a list of 12 HCFA workload priorities 

for States, behind surveying nursing homes, Intermediate Care Facilities for the Mentally 

Retarded, home health agencies, and all types of complaint investigations and allegations 

of patient dumping.18 By statute, HCFA must survey nursing homes and home health 

agencies at regular time intervals, an activity that uses up most of the survey budget.19 

Hospitals, however, lack such a mandate, making hospital surveys significantly more 

vulnerable to budget cutting. In fact, the portion of HCFA’s 1997 survey budget 

dedicated to hospital certification surveys appears to have dropped by about half from that 

of 1996.20 

For Fiscal Year 1999, HCFA funded States to survey 10 percent of the 1,415 

nonaccredited hospitals, or a total of 140 hospitals.21 With this level of funding, States 

could survey hospitals every 10 years. By contrast, HCFA funds surveys for 62 percent of 

home health agencies per year.22 That means for 1999, HCFA will fund surveys for over 

6,000 of the 10,119 home health agencies.23 At that level of funding, States could survey 

home health agencies about every 18 months. One director of a State Health Department 

captured some of the frustration surrounding hospital survey funding in a 1997 letter to 

the Secretary of Health and Human Services where she writes: 

At a time when the health care system is changing more rapidly than ever before 

and pressure for cost reduction creates the potential for reduced quality, our 

budget in the Health Department has been cut in half. An example of the impact of 

this cut is the incredible reduction in funds for hospital survey activity...This 

Hospital Quality: The Role of Medicare 11 OEI-01-97-00052 
potentially means that Medicare beneficiaries may be deprived of access to a 

hospital where they can receive quality health care services. Most of the Medicare 

allocation...supports...[regulating] nursing homes. 

In addition to contending with low Federal priority, half the States report having 

fewer hospital survey staff now than they did 5 years ago. States do, however, have some 

flexibility in deciding which hospitals to survey with their limited resources. Most States 

identified two factors as playing major roles in those decisions: complaints received about 

hospital care (identified by 41 of 50 States) and time elapsed since the last certification 

survey (identified by 35 of 50 States). (For a summary of our observations from one 

Medicare certification survey conducted by one State agency, see appendix C.) 

The HCFA’s hospital review focuses on complaints and 

serious incidents. 

The HCFA spends most of its hospital survey budget investigating complaints and 

serious incidents at either accredited or nonaccredited hospitals. These activities fall third 

on HCFA’s list of survey budget priorities.24 Thus, HCFA and the States devote far more 

resources to responding to complaints than conducting announced surveys of 

nonaccredited hospitals, which fall 10th on that list. In fact, according to data reported by 

HCFA, State agencies conducted several thousand complaint surveys over the past few 

years: 2,166 in 1996, 2,079 in 1997, and 1,577 in 1998. This level of attention reflects 

the expectations of stakeholders who largely view government--State and Federal--as 

public protectors: in their words, “It falls on the government to be the bad guy, or 

policeman” and “it’s a traditional government function [to respond to such events].”25 

The focus on responding to complaints and serious incidents has grown in recent 

years: 38 of the 51 States (75 percent) we surveyed reported that the number of hospital 

complaints they receive has increased over the last few years. Of course, some of this 

increase could be due to the anti-dumping laws passed in 1986, which spawned 

complaints.26 Plus, errors in hospitals appear to be garnering the media’s, and therefore 

HCFA’s and the States’, attention.27 The HCFA regional offices also receive complaints 

and refer them on to the States. The States, in turn, look to HCFA for guidance on which 

complaints to investigate, especially when the hospitals in question are accredited. 

Unlike certification surveys, which are announced in advance, most responses to 

complaints and incidents are unannounced. The responses tend to be intensive, focusing 

on a specific service area or incident--at least at the start--because Federal law requires the 

scope of that response to be limited to the particular condition in question.28 But, if the 

surveyors find a hospital to be out of compliance with a condition during that narrow 

investigation, they can expand the scope of their response to encompass all the conditions 

of participation.29 Responses to complaints and incidents also tend to last longer than the 

Hospital Quality: The Role of Medicare Certification 12 OEI-01-97-00052 
few days it takes to conduct a certification survey. For example, we observed parts of one 

response that lasted 2 weeks. 

The HCFA’s certification survey results fail to make 

meaningful distinctions among nonaccredited hospitals. 

Certification surveys simply result in a status of certified or not certified. They 

neither rank nor grade hospitals. Surveyors can find three levels of deficiencies: 

condition-level, standard-level, and requirement-level. One hospital could have 

deficiencies in one, two, or all three levels. Condition-level deficiencies are the most 

serious. Hospitals with standard- and/or requirement-level deficiencies can maintain their 

Medicare certification. In fact, HCFA does not require such hospitals to make 

corrections. Only condition-level deficiencies can terminate a hospital’s certification 

status. And that rarely happens. The HCFA reports that it terminated 7 hospitals over the 

past 3 years: 2 in 1996, 3 in 1997, and 2 in 1998. 

The path to termination is not direct, however, as the survey process gives 

hospitals opportunities to correct their condition-level deficiencies. Medicare surveyors 

use termination notices to prompt hospitals to make corrections. The HCFA uses a 

termination notice as a temporary certification status; hospitals either correct their 

deficiencies and receive full certification or are terminated. When Medicare surveyors find 

a hospital to be out of compliance with the conditions to such an extent that patients are in 

jeopardy, they use the 23-day termination notice. For hospitals with condition-level 

deficiencies but no finding of patients in jeopardy, surveyors use a 90-day termination 

notice. The HCFA does not track the number of hospitals that receive termination 

notices. 

The HCFA has not sought to collect or disseminate 

standardized performance data for nonaccredited hospitals. 

The HCFA is not currently collecting or analyzing standard hospital performance 

data or quality measures as part of its system of reviewing hospitals. The proposed 

revisions to the hospital conditions of participation (issued on December 19, 1997) invite 

comments on both whether HCFA should collect standardized performance data and what 

that data might encompass. But while the proposed conditions note an intent to collect 

such data, they fall short of requiring it because “we do not believe it is reasonable to 

establish any related requirements at this time, in view of the lack of any current consensus 

or science that could establish a reliable and valid set of measures.”30 Stakeholders with 

whom we spoke endorsed the concept of HCFA establishing and collecting standardized 

performance data, identifying it as an “appropriate role” and a “route toward nationally 

comparable data.” 

Hospital Quality: The Role of Medicare Certification 13 OEI-01-97-00052 
The HCFA has been more involved in standardized performance data in other 

provider settings than it has in hospital settings. For example, it led in developing the 

home health data set, which will support performance measurement, for home health 

agencies.31 Furthermore, it recently developed the a set of quality standards for managed 

care organizations.32 It has also called for the managed care organizations that enroll 

Medicare beneficiaries to report certain standardized data in the form of indicators.33 

Indeed, it was involved in developing the indicators for the Medicare population.34 

Additionally, HCFA was involved in the development of the Quality Assurance Reform 

Initiative, a guide for State Medicaid agencies as they develop methods and standards for 

monitoring the quality of care provided to Medicaid managed care enrollees. 

To date, however, no single system of performance data for hospitals has emerged 

as the industry standard. Hundreds of such systems exist, though, and hospitals all over 

the country have implemented them according to their own needs. The proposed 

conditions do call for hospitals to have their own system of performance measurement in 

place. Their approaches must encompass a “continuous effort to improve...performance, 

incorporating to the greatest extent possible an approach that focuses on the hospital’s 

performance in improving patient outcomes and satisfaction...[and] would require that 

each hospital develop, maintain, and evaluate an effective data-driven quality assessment 

and performance improvement program.”35 Indeed, many hospitals have already invested 

in a variety of such systems. 

Hospital Quality: The Role of Medicare Certification 14 OEI-01-97-00052 
CONCLUSION 

In the domain of external quality reviews, the State agencies play major roles as 

troubleshooters: responding to complaints and serious incidents at accredited and 

nonaccredited hospitals. But given the limited pool of Federal funds available to support 

State survey and certification activities in general and the relatively low priority of routine 

hospital surveys in particular, the roughly 1,415 nonaccredited hospitals across the 

country receive insufficient attention through external reviews. Surveys of such hospitals 

tend to be triggered on the basis of a serious incident involving patient harm rather than as 

part of a routine review intended to prevent such incidents. This is the central and 

troubling conclusion of this report. In our summary report, A Call for Greater 

Accountability, we direct our recommendations to HCFA stemming from this report and 

our entire inquiry. 

Hospital Quality: The Role of Medicare Certification 15 OEI-01-97-00052 
APPENDIX A 

Medicare Conditions of Participation 

The Medicare conditions of participation (COP) were first published in 1966 and revised in 1986 (42 

C.F.R. 482.1-482.66). On December 19, 1997, HCFA published a proposed COP for hospitals ( 62 Fed. Reg. 

66,726). On July 2, 1999, it published an interim final rule concerning patients’ rights. Below are the components 

of the existing COP for non-specialty hospitals from 1986, followed by the components of the new proposed COP. 

Existing COP 

Subpart A- General Provisions 

Provision of emergency services by 

nonparticipating hospitals 

Subpart B- Administration 

Compliance with Federal, State, and local laws 

Governing Body 

Subpart C- Basic Hospital Functions 

Quality assurance

Medical staff

Nursing services

Medical record services

Pharmaceutical services

Radiologic services

Laboratory services

Food and dietetic services

Utilization review

Physical environment

Infection control

Subpart D- Optional Hospital Services 

Surgical services 

Anesthesia services 

Nuclear medicine services 

Outpatient services 

Emergency services 

Rehabilitation services 

Respiratory care services 

Proposed COP 

Subpart A- General Provisions 

Patient Rights (issued as an interim final rule July 2, 1999) 

Subpart B- Patient Care Activities 

Patient Admissions, assessment, and plan of care

Patient care

Quality assessment and performance improvement

Diagnostic and therapeutic services or 

rehabilitation services 

Pharmaceutical services 

Nutritional services 

Surgical and anesthesia services 

Emergency services 

Discharge Planning 

Subpart C- Organizational Environment 

Administration of organizational environment

Infection control

Human resources

Physical environment

Life safety from fire

Blood and blood products transfusions

Potentially infectious blood and blood products

Utilization review

Hospital Quality: The Role of Medicare Certification 16 OEI-01-97-00052 
APPENDIX B 

Methodology 

We collected information presented in this report from the following sources: 

The HCFA 

We obtained dates of certification surveys from HCFA’s Online Survey 

Certification and Reporting System (OSCAR). The HCFA authorizes States to update 

and maintain this database with survey information. We extracted survey data pertaining 

to the frequency of certification surveys. We subsequently verified the accuracy of our 

extraction by comparing it to on-line OSCAR system information to ensure the dates we 

used corresponded to routine certification surveys, rather than complaint investigations or 

other types of surveys. We are satisfied that our information is as accurate as HCFA’s 

OSCAR system. 

Additionally, we selected 4 States (California, Kansas, Minnesota, and Texas) that 

contain over 50 nonaccredited hospitals and represented different areas of the United 

States. We then examined the OSCAR data for those States in greater detail. We verified 

the status of the nonaccredited hospitals in those States which had not been surveyed in 

over 5 years using the American Hospital Association’s 1997 Hospital Guide. 

We also interviewed staff and managers at each HCFA regional office and the 

central office. We reviewed a variety of HCFA documents, including budget call letters, 

reinvention materials, and reports to Congress, among others. 

The State Survey and Certification Agencies 

In August 1997, we mailed a pretested survey to the hospital certification agencies 

in the 50 States and the District of Columbia. The response rate for this survey was 100 

percent. The State survey addressed four areas of hospital quality oversight: private 

accreditation of hospitals, Medicare certification of hospitals, HCFA oversight of State 

certification agencies, and State licensure of hospitals. We interviewed State officials on 

the telephone or in person as well. 

Accrediting Organizations 

We interviewed officials from both the Joint Commission on Accreditation of 

Healthcare Organizations and the American Osteopathic Association. We also reviewed 

documents from both organizations, including mission statements, accreditation manuals, 

Hospital Quality: The Role of Medicare Certification 17 OEI-01-97-00052 
APPENDIX B 

policies, and hospital survey files. We requested and received aggregate data from the 

Joint Commission reflecting its recent hospital survey activity. All Joint Commission data 

are presented as reported by the Joint Commission, unless otherwise noted. For purposes 

of this inquiry, we focused our analysis on the Joint Commission. 

Survey Observations 

Based on schedules of upcoming triennial surveys, we identified nine hospitals in 

which to observe triennial Joint Commission surveys. Of those, we were able to observe 

seven. In two cases, the hospitals declined the Joint Commission’s request that we be 

allowed to observe. The 7 hospitals varied in size from 80 to 775 beds, represented both 

teaching and community hospitals, and were located in different areas of the country (both 

rural and urban). We also observed one random unannounced Joint Commission survey. 

Although we observed different teams of surveyors, the survey agenda, lines of inquiry, 

and tone were consistent across the surveys, which were conducted in accordance with 

Joint Commission policy, based on review of survey manuals and interviews with 

representatives of the Joint Commission. Finally, we observed a certification survey and 

parts of two complaint investigations performed by State surveyors under HCFA’s 

auspices. 

Stakeholder Interviews 

We interviewed representatives of organizations we considered to be stakeholders 

in hospital oversight. These stakeholder organizations included a union, professional 

organizations, hospital associations, and consumer groups. 

Other Documents 

In addition to the documents referenced above, we reviewed statutory and 

regulatory language and a variety of articles from newspapers, journals, magazines, and 

newsletters. 

Hospital Quality: The Role of Medicare Certification 18 OEI-01-97-00052 
APPENDIX C 

Certification Survey

During the course of our inquiry, one Office of Inspector General (OIG) analyst 

observed one Medicare certification survey. What follows is a summary of the 

observations from that survey. 

Background 

The survey was of a 34-bed nonaccredited county hospital located in a rural area. 

The hospital had recently undergone major renovations but still used parts of the older 

buildings, which were at least 50 years old. Staff could pass from the renovated parts of 

the building to the older parts, and construction was still underway. Plastic strips hung in 

doorways to minimize the dust from the ongoing renovations. The pharmacy and 

operating rooms were housed in the older building, which was plagued by roof leaks and a 

finicky cooling system, leaving the area humid and musty. Warehouse style buildings in 

the back of the hospital housed the medical records and some administrative offices. 

The hospital came under new management 2 years prior to the observed survey. 

During the time of the survey, the hospital had an average daily census of 13, an increase 

over prior years. Most of the surgeries performed at this hospital were hernia repairs, 

cholecystectomies, or gynecological procedures. Since the renovations, the hospital 

experienced an increase in deliveries. 

Three experienced nurse surveyors and one surveyor in training (also a nurse) 

surveyed this hospital. One served as team leader. All of the surveyors had clinical 

nursing experience. At least one surveyor had been at the hospital previously. Before 

arriving at the hospital, they reviewed the State’s historical files of compliance and 

complaints for this hospital. Thus they were familiar with the hospital’s history of 

compliance problems. They were also aware of the hospital’s recent problems involving 

physicians on the hospital staff. For example, one physician on staff was imprisoned for 

narcotics abuses and another lost his medical license due to a pattern of unnecessary 

surgeries, high complication rates, and poor care. 

The State survey agency notified the hospital of the survey 3 weeks in advance. 

Hospital Quality: The Role of Medicare Certification 19 OEI-01-97-00052 
APPENDIX C 

Summary Observations 

The survey began around 11:30 in the morning on the first day and went until noon 

on the third day, lasting about 19 hours total. The surveyors continued surveying until 

5:30 or 6:00 PM on the first 2 days. The survey began with an opening conference that 

included the surveyors and the hospital’s leadership. After general introductions and 

reviewing a loose agenda, the hospital presented an overview of its recent improvements. 

Then the surveyors began their document reviews, which covered hospital logs, minutes, 

bylaws, and medical records, among others. By early afternoon, the surveyors split up to 

begin their sessions, with the trainee always assigned to follow a senior surveyor. 

The surveyors relied on interviews, document reviews, and observations. Once or 

twice a day, the surveyors would compare notes and share concerns so others could 

pursue them in different areas of the hospital. The surveyors selected the files they would 

review themselves, based on staff rosters; surgical, admission, and emergency logs; and 

other documents. They also pushed alarm bells and observed responses. They tested the 

hospital staff’s knowledge by asking them to demonstrate certain tasks, such as turning on 

pieces of equipment, testing a defibrillator, changing oxygen tanks, and sterilizing a scope. 

Through the information gleaned from the above, the surveyors identified a range 

of concerns. Among them were the following: 

< Staff were untrained in certain hospital equipment. For example, when surveyors 

asked for a demonstration of the hospital’s new negative pressure room, no one 

knew how to turn it on. 

< The hospital’s emergency call systems were inadequate. For example, the 

surveyors pulled call bells in the emergency room and procedures room. No one 

answered the calls. 

< Medical record documentation was problematic. In particular, patient consent 

forms failed to spell out risks in lay terms and included broad consent for “any 

other necessary procedure.” Physician signatures were also missing from records. 

Legibility was a problem, too. 

< The nursing department appeared to have inadequate staff. Also, the nursing 

department failed to use individualized care plans, follow-through on incident 

reports, or identify patients’ educational needs. 

Hospital Quality: The Role of Medicare Certification 20 OEI-01-97-00052 
APPENDIX C 

< The hospital lacked a policy for transferring high-risk obstetrical patients, had a 

high c-section rate, and lacked documentation for fetal distress. For example, the 

hospital delivered an infant at 27-weeks gestation even though it lacked neonatal 

capacity. Furthermore, three of six obstetrical records the surveyors reviewed 

documented some sort of adverse outcome. 

< The hospital lacked a performance appraisal system for its medical staff and its 

reappointment process excluded peer review data. Furthermore, physicians 

covering the emergency room lacked privileges for common emergency 

procedures, such as placing chest tubes and performing tracheotomies. 

< The appropriateness of care in three or four records was questionable. The 

surveyors copied those records and forwarded them to a peer review organization 

for review. 

During the exit conference (the last session of the survey), the surveyors discussed 

their findings, but couched their comments as preliminary. After all, they had collected a 

variety of documents to review and analyze off-site. Findings from those documents could 

alter their on-site findings. The hospital would not know the final survey outcome until 

that process occurred (see page 23 for a final summary of the survey’s findings). 

Sessions observed by the OIG included, in part or in whole, pharmacy, medical 

staff, nursing, discharge planning, operating and recovery rooms, procedure room, 

emergency room, dietary, and the building and grounds tour. Highlights of some of the 

observed sessions follow. 

Medical Staff Session 

This session lasted 3 hours on the first day and continued for 1 hour on the second 

day. Before beginning the session, the surveyor read the bylaws. During the session, she 

interviewed the administrative staffperson in charge of credentialing and reviewed 

credential files. She selected the files herself, and by the end of the second day, had 

reviewed the credentials of each of the six staff physicians, among others. In questioning 

the staff and reviewing the files, the surveyor was especially interested in how the medical 

staff took responsibility for quality, how the hospital delineated privileges, and evidence of 

a reappraisal and peer review system. No one from the medical staff participated in this 

session. 

Hospital Quality: The Role of Medicare Certification 21 OEI-01-97-00052 
APPENDIX C 

The surveyor interview covered the following topics: appointment and 

reappointment process, language skills of foreign medical graduates, reliance on the 

American Medical Association’s physician profile database, conscious sedation, 

emergency room coverage and procedures, the on-call system, pending litigation, licensure 

limitations, prerequisites for active staff, availability of surgical services, use of podiatrists 

and psychologists, autopsies, organ donation, physician experience and competence with 

certain procedures, unexpected surgical outcomes such as perforations, role of chart 

review, and medical staff involvement in appraisal process. 

As this session unfolded over the 2 days, the surveyor asked for more and more 

files, and then operating room logs and other documents to confirm the range of 

procedures the hospital provided fell within the privileges granted. By the end of the 

session, the surveyor identified some areas of concern. For example, she expressed 

concerns about privileges because physicians responsible for covering the emergency room 

lacked privileges for common emergency room procedures such as chest tubes. The 

surveyor offered examples of similar problems at other hospitals that lead to unnecessary 

deaths. She also questioned whether medical staff were involved in the evaluation of 

patient care and physician appraisal. Other concerns related to the staff’s failure to follow 

its own bylaws, the lack of written guidelines for certain high-risk patients, and illegibility 

of medical records. 

Pharmacy Session 

One surveyor conducted the pharmacy review, which lasted about 1 hour. The 

hospital’s pharmacy, located in the old part of the hospital, had one full-time pharmacist 

and one part-time technician. The pharmacist’s background was in retail pharmacy and he 

was new to practicing in a hospital. 

The surveyor reviewed the pharmacist’s license and other documents. She was 

particularly interested in documentation of proper narcotics tracking, logs tracking afterhours access to the pharmacy, and protocols for any performance improvement projects. 

In addition to reviewing the papers, she asked for copies to take with her. While in the 

pharmacy she also inspected the hood and scanned the storage shelves, where she noted 

narcotics that were labeled without strength identified. 

The surveyor’s questions covered the following areas: formulary development, 

mechanism for drug recalls, restocking and security of crash carts, computerization, drug 

utilization review, hospital strategic planning, performance improvement projects, drug 

errors, and reliance on and competency of the pharmacy technician. Because of the 

Hospital Quality: The Role of Medicare Certification 22 OEI-01-97-00052 
APPENDIX C 

obvious humidity problem in the small pharmacy, the surveyor asked questions about the 

impact of the dampness on the efficacy and storage of the drugs. 

The surveyor focused, however, on narcotics and adverse drug reactions and how 

the hospital tracked them. Apparently the nursing department viewed it as a pharmacy 

responsibility and the pharmacist viewed it as nursing. The surveyor was concerned about 

the lack of accountability and spent a lot of time educating the pharmacist about what he 

needed to track and why, referencing requirements of the Drug Enforcement 

Administration. 

Nursing 

This session lasted about 2 hours and involved the director of nursing and one 

surveyor. The director of nursing was new. In fact, she was the 15th director of nursing 

the hospital hired in 7 years. The surveyor reviewed documentation of the hospital’s nurse 

staffing plan, among other documents. Low staffing and acuity emerged as major 

concerns. Among the topics the surveyor questioned the director of nursing about were: 

reliance on contract nurses, orientation and training of new nurses, determining baseline 

competency, role of charge nurses, nurse roles in tracking and reporting adverse drug 

reactions, anatomical gifts, contingency plans, incident reporting (falls, needle sticks, and 

employee injuries), use of telephone and verbal orders, and infection control. 

Statement of Deficiencies Stemming from the Certification Survey 

Within a few weeks of the on-site portion of the survey, the State agency sent the 

final statement of deficiencies to the hospital. The statement included deficiencies at each 

of the three levels (condition, standard, and element) as noted below: 

Condition of Participation: Governing Body (42 CFR 482.12) 

Two elements under this condition were unmet, concerning the accountability of 

the medical staff and its appointment process. 

Condition of Participation: Quality Assurance (42 CFR 482.21) 

One standard under this condition was unmet, concerning implementation of the 

quality assurance plan. Two elements under this condition were also unmet, both 

concerning clinical plans: one because the hospital lacked evidence that it 

Hospital Quality: The Role of Medicare Certification 23 OEI-01-97-00052 
APPENDIX C 

evaluated drug errors and one because it lacked evidence that it evaluated a recent 

increase in c-sections. 

Condition of Participation: Medical Staff (42 CFR 482.22) 

This condition was unmet based on the medical staff’s failure to operate under its 

bylaws and develop or implement a system of accountability. Two standards and 

four elements were also out of compliance under this condition. One unmet 

standard concerned the accountability and organization of the medical staff; the 

other, the medical staff’s failure to abide by its bylaws. The unmet elements 

included the failure of the medical staff to conduct periodic appraisals of its 

members and to delineate clinical privileges, among others. 

Condition of Participation: Nursing Services (42 CFR 482.23) 

Two elements under this condition were unmet. One concerned the lack of 

individualized nursing care plans for each patient. The other concerned the 

problems with the reporting of medication errors. 

Condition of Participation: Medical Record Services (42 CFR 482.24) 

Two elements under this condition were unmet. One concerned illegibility and one 

concerned delinquent medical records. 

Condition of Participation: Pharmaceutical Services (42 CFR 482.25) 

One element, concerning the security of drugs, was unmet. 

Condition of Participation: Physical Environment (42 CFR 482.41) 

One standard was unmet. This element encompassed several concerns related to 

patient safety and well-being: the lack of working alarm systems, lack of staff 

knowledge of and response to alarm systems, lack of staff knowledge on certain 

patient care equipment, lack of safe emergency exits, and lack of mechanism to 

monitor temperature and humidity in the pharmacy, among others. 

Hospital Quality: The Role of Medicare Certification 24 OEI-01-97-00052 
APPENDIX C 

Condition of Participation: Surgical Services (42 CFR 482.51) 

Two elements were unmet. One concerned the hospital’s failure to delineate 

surgical privileges in accordance with competency. The other concerned the lack 

of a properly executed informed consent form. 

Condition of Participation: Emergency Services (42 CFR 482.55) 

One element was unmet. It concerned the medical staff’s failure to abide by 

policies and procedures governing care provided in the emergency department and 

the nursing staff’s failure to adhere to established triage policy. 

Based on the above findings, the State survey team conducted two more surveys at 

this hospital, both within 2 months of the original survey observed by the OIG. As of the 

last follow-up survey, the hospital had corrected its deficiencies to the satisfaction of the 

survey team. 

Hospital Quality: The Role of Medicare Certification 25 OEI-01-97-00052 
APPENDIX D 

Endnotes

1. Troyen A. Brennan et al, “Incidence of Adverse Events and Negligence in Hospitalized 

Patients,” The New England Journal of Medicine 324 (February 7, 1991) 6: 370-376. 

2. The 17.7 percent refers to adverse events considered by the authors to be serious. The authors 

defined adverse events as “situations in which an inappropriate decision was made when, at the 

time, an appropriate alternative could have been chosen” and serious as ranging from “temporary 

disability to death.” See Lori B. Andrews et al, “An Alternative Strategy for Studying Adverse 

Events in Medical Care,” The Lancet 349 (February 1, 1997)309-313. 

See also Lucian L. Leape, “Error in Medicine,” Journal of the American Medical 

Association 272 (December 21, 1994) 23: 1851-1857; David C. Classes et al, “Adverse Drug 

Events in Hospitalized Patients,” Journal of the American Medical Association 277 (January 

22/29, 1997) 4: 301-306; Mark R. Chassin et al, “The Urgent Need to Improve Health Care 

Quality: Institute of Medicine National Roundtable on Health Care Quality,” Journal of the 

American Medical Association 280 (September 16, 1998) 11: 1000-1005; David W. Bates et 

al,“Effect of Computerized Physician Order Entry and a Team Intervention on Prevention of 

Serious Medication Errors,” Journal of the American Medical Association 280 (October 21, 

1998) 1311-1316; Robert A. Raschke et al, “A Computer Alert System to prevent Injury from 

Adverse Drug Events: Development and Evaluation in a Community Teaching Hospital,” Journal 

of the American Medical Association 280 (October 21, 1998) 1317-1320; and David C. Classen, 

“Clinical Decision Support Systems to Improve Clinical Practice and Quality of Care,” Journal of 

the American Medical Association 280 (October 21, 1998) 1360-1361. 

3. One example is a November 1998 New York Times article under the headline: “Death in 

Surgery Reveals Troubled Practice and Lax Hospital.” The article described a “botched” 

operation on a young woman by a surgeon who was on probation by the State medical board and 

who used unauthorized medical equipment brought in to the operating room by a medical supply 

salesman. Such incidents happen, even in the best of hospitals, but they underscore the point that 

hospitals can be dangerous places and that oversight systems can be lax. See also “Overdoses 

Still Weigh heavily at Dana Farber,” The Boston Globe (26 December 1995); “Florida Doctor 

Sanctioned in New Amputation,” The Boston Globe (19 July 1995); “Two Surgeons Surrender 

Licenses After Mistakenly Removing Kidney,” The Boston Globe (6 June 1996); “How Can We 

Save the Next Victim?” New York Times Magazine (15 June 1997); “Another Hospital Death 

Probed,” The Boston Globe (26 July 1997); “Patient Dies After Drinking Poison Left on 

Nightstand,” San Diego Union-Tribune (6 March 1998); ”Man Arrested for Posing as Doctor for 

4 years,” posted at the CNN interactive webpage (16 May 1998); “Deadly Restraint: Patients 

Suffer in a System Without Oversight,” The Hartford Courant (13 October 1998). 

Hospital Quality: The Role of Medicare Certification 26 OEI-01-97-00052 
APPENDIX D 

4. http://WWW.hcfa.gov/Medicare/Medicare.htm 

5. Health Care Financing Administration, 1996 Data Compendium, HCFA March 1995. 

6. Ibid. 

7. P.L. 89-97. 

8. The HCFA published its proposed hospital conditions of participation on December 17, 1997 

(62 Fed. Reg. 66,726). On July 2, 1999, it published an interim final rule on patients’ rights (64 

Fed. Reg. 36070). 

9. 42 U.S.C 1395bb. 

10. Health Care Financing Administration, OSCAR 10 Report, as of May 30, 1998. 

11. The industry standard is every 3 years, as set by hospital accrediting organizations, like the 

Joint Commission on Accreditation of Healthcare Organizations. 

12. From HCFA’s OSCAR System. Special Report Dated Oct. 1, 1997. Data is exclusive of 

Puerto Rico, Virgin Islands, and American Samoa. 

13. “Until about 1990,...the federal government contributed enough money to do inspections 

every year. After that, federal money began diminishing, and last year [1997] it was enough to 

finance inspections at only 10 percent of hospitals.” (Nancy Ruzicka, Iowa’s Bureau Chief for 

Medicare Certification and Hospital Licensing, in Tom Carney, “Hospital Reviews Judged Too 

rare,” Des Moines Register, 7 February 1998.) 

14. States conducted 286 certification surveys from October 1, 1994 to September 30, 1995 and 

184 certification surveys from October 1, 1996 to September 30, 1997. From HCFA’s OSCAR 

System. Special Report Dated Oct. 1, 1997. Data is exclusive of Puerto Rico, Virgin Islands, 

and American Somoa. 

15. Based on OIG analysis of data reported by HCFA. 

16. Those hospitals tend to be small, rural, and remote, making them often difficult to travel to 

[Institute of Medicine, Medicare: A Strategy for Quality Assurance, Volume I (Washington, 

D.C.: National Academy Press, 1990) 120]. 

17. Based on Office of Inspector General telephone survey to State Survey and Certification 

Agencies, July and August of 1998. 

Hospital Quality: The Role of Medicare Certification 27 OEI-01-97-00052 
APPENDIX D 

18. HCFA to States, FY 1999 State Survey and Certification Budget Call Program Requirements 

and Budget Guidelines. 

19. Under current law (42 U.S.C. Sec. 1396r), all skilled nursing facilities and nursing facilities 

are subject to a standard survey not later than 15 months after the previous standard survey, with 

a Statewide average interval between standard surveys of not more than 12 months. Home health 

agencies are subject to a standard survey not later than 36 months after the previous standard 

survey (42 USC Sec. 1395bbb). The frequency for surveys of HHAs within this 36 month 

interval shall be commensurate with the need to assure delivery of quality home health services. 

20. Health Care Financing Administration. The HCFA does not track actual spending by 

category. 

21. HCFA to States, FY 1999 State Survey and Certification Budget Call Program Requirements 

and Budget Guidelines. 

22. HCFA funds States to perform a standard survey of every home health agency no later than 

36 months after the previous standard survey. In addition, HCFA also funds States to conduct 

initial certification surveys for new home health agencies, and more frequent surveys for problem 

home health agencies. All told, HCFA will survey about 60-65 percent of all home health 

agencies in a given year. 

23. From HCFA’s OSCAR-10 Report dated 3/27/97. 

24. HCFA to States, FY 1999 State Survey and Certification Budget Call Program Requirements 

and Budget Guidelines. 

25. State agencies expect certification to play a greater role responding to complaints than 

accreditation: 92 percent of the States agencies responding to our survey expected that they be 

involved to a great or very great extent while 47 percent of States expected that accrediting 

organizations be involved to that extent. States held similar views concerning response to adverse 

events involving patient harm: 90 percent expected State certification agencies play a great or 

very great role and 58 percent expected accrediting bodies play a great or very great role. 

26. The Emergency Medical Treatment and Labor Act (42 U.S.C. 1395dd) prohibits hospitals 

from refusing emergency patients or women in labor medical screening and/or treatment. If a 

hospital willfully or negligently fails to meet the requirements of the act, it can be fined or its 

participation in Medicare can be suspended or terminated. 

Hospital Quality: The Role of Medicare Certification 28 OEI-01-97-00052 
APPENDIX D 

27. “Overdoses Still Weigh Heavily at Dana Farber,” The Boston Globe (26 December 1995); 

“Florida Doctor Sanctioned in New Amputation,” The Boston Globe (19 July 1995); “Two 

Surgeons Surrender Licenses After Mistakenly Removing Kidney,” The Boston Globe (6 June 

1996).; “How Can We Save the Next Victim?” The New York Times Magazine (15 June 1997); 

“Another Hospital Death Probed,” The Boston Globe (26 July 1997); “Patient Dies After 

Drinking Poison Left on Nightstand,” San Diego Union-Tribune (6 March 1998); “Man Arrested 

for Posing as Doctor for 4 years,” posted at the CNN interactive webpage (16 May 1998); 

“Deadly Restraint: Patients Suffer in a System Without Oversight,” The Hartford Courant (13 

October 1998); and “Death in Surgery Reveals Troubled Practice and Lax Hospital,” The New 

York Times (15 November 1998). 

28. 42 C.F.R., sec. 488.7. 

29. 42 C.F.R., sec. 488.7. 

30. 62 Fed. Reg. 66,729, December 19, 1997. 

31. The HCFA refers to this data set as OASIS, which stands for Outcomes and Assessment 

Information Set (62 Fed. Reg. 11,004, March 10, 1997). 

32. Referred to as the Quality Improvement System for Managed Care (QISMC). Under 

QISMC, HCFA and State agencies use a uniform set of quality standards to determine that an 

organization is eligible to enter into a Medicare or Medicaid contract. These QISMC standards, 

which were released in June 1998, are scheduled to be effective as of January 1999. 

33. The indicators referred to are those contained in the Health Plan Employee Data and 

Information Set (HEDIS), which is the National Committee for Quality Assurance’s (NCQA) set 

of performance measures for the managed care. The NCQA collects data from over 300 managed 

care plans across the country. The HCFA’s 1997 contracts with risk-based managed care 

organizations called for them to submit HEDIS 3.0 data. 

34. The HCFA participated in the latest HEDIS development task force. The latest version of 

HEDIS contains Medicare and Medicaid specific requirements. 

35. 62 Fed. Reg. 11,004, March 10, 1997. 

Hospital Quality: The Role of Medicare Certification 29 OEI-01-97-00052