For Release on Delivery

Expected at 1:30 p.m.

Monday, June 26, 2000

GAO/T-HEHS-00-136

MEDICARE QUALITY OF

CARE

Oversight of Kidney

Dialysis Facilities Needs

Improvement

Statement of William J. Scanlon, Director

Health Financing and Public Health Issues

Health, Education, and Human Services Division

Testimony

Before the Special Committee on Aging, United States

Senate

United States General Accounting Office

GAO
Page 1 GAO/T-HEHS-00-136

Mr. Chairman and Members of the Special Committee:

I am pleased to be here today to discuss what is being done to assure that

the care provided to the more than 280,000 Medicare patients being treated

for End Stage Renal Disease (ESRD), also known as kidney failure, is

adequate and safe. Several times a week, the vast majority of these

patients visit a dialysis facility for life-sustaining blood cleansing

treatments. Caring for these patients is one of Medicare’s biggest costs—

with spending per patient equaling 6 to 7 times the average. These patients

are often elderly and afflicted with other conditions, such as diabetes. Safe

and competent treatment is critical, because with patients this sick, there

is little room for error.

Responsibility for overseeing the quality of ESRD care rests with the

Health Care Financing Administration (HCFA), the agency that

administers Medicare. HCFA’s oversight takes two main forms. First,

HCFA pays state agencies to conduct unannounced inspections of dialysis

facilities. These inspections, commonly called surveys, are designed to

determine whether dialysis facilities are complying with quality-of-care

standards. Second, HCFA pays organizations called ESRD networks to

conduct quality improvement activities at the nation’s 3,800 dialysis

facilities and gather data on various outcomes, such as patient mortality

rates.

You asked us to evaluate how well HCFA’s processes for monitoring the

quality of dialysis services are working. In response, we have completed a

report that is being released at this hearing. My statement today will

highlight some of the key points in that report.

In summary, the oversight of dialysis facilities has several weak links. As a

result, there is little assurance that facilities are routinely complying with

Medicare’s quality of care standards, which protect patients’ health and

safety. Our report highlights problems in three main areas. The first is the

dwindling frequency of on-site surveys. The number of facilities surveyed

has been dropping each year since 1993, even though the surveys show

that facilities are becoming increasingly likely to have one or more serious

deficiencies. The second problem is that HCFA’s enforcement approach

does not provide strong incentives for dialysis facilities to stay in

compliance with Medicare requirements. HCFA’s threat to terminate a

facility from Medicare is sufficient to bring nearly all noncompliant

facilities into compliance, but many soon slip out of compliance again. At

present, they face no penalty for this behavior. Third, state agencies and

ESRD networks often do not share information about complaints and

known quality-of-care problems at specific facilities. As a result, neither

Medicare Quality of Care: Oversight of

Kidney Dialysis Facilities Needs

Improvement
Medicare Quality of Care: Oversight of

Kidney Dialysis Facilities Needs

Improvement

Page 2 GAO/T-HEHS-00-136

has a clear picture of what the other is finding and is unable to take

advantage of that information to target or otherwise modify its own

activities. Our report recommends changes to address all three problems.

HCFA has reviewed these recommendations and agrees with them.

To stay alive, a patient with ESRD must receive either a kidney transplant

or regular kidney dialysis treatments. Such treatments use a machine to do

the kidneys’ job of removing impurities from the blood. If performed

improperly, such treatments can contaminate patients’ blood, causing

serious complications and even death.

Kidney dialysis is a big business. The number of Medicare patients

receiving kidney dialysis has increased more than 20 times since coverage

began in 1973. To accommodate this demand, more facilities have opened.

Since 1993, for example, the number of facilities has grown an average of 6

percent per year. Medicare’s payment for a dialysis treatment is a fixed

rate per treatment that has remained essentially unchanged for more than

15 years. For facilities that aim to maximize profits, such fixed payment

rates can create incentives for efficiencies but also can be an incentive for

underservice. Inspection surveys and other monitoring plans are needed to

help ensure that cost-cutting does not lead to substandard services.

HCFA has established a set of 11 quality-of-care standards, commonly

called “conditions of participation,” that dialysis facilities are required to

meet. The conditions of participation are designed to ensure that facilities

safely provide quality care. They cover such areas as the physical

environment of the facility, the adequacy of patient care plans to address

medical needs, and the qualifications of the staff that provide dialysis

services. Inspection surveys are designed to determine whether facilities

meet these standards. They are conducted by state agencies, typically

health departments, under contract with HCFA.

HCFA also contracts with 18 ESRD networks that work with facilities to

improve the quality of dialysis services provided to Medicare beneficiaries.

These ESRD networks collect data on key clinical indicators and provide

individual facilities with regional performance data on these indicators, so

that each facility can compare its performance with other facilities.

Because networks are staffed and governed by dialysis providers and

others with expertise in dialysis, they also provide technical support to

help facilities improve their performance on clinical indicators. The

networks also conduct quality improvement projects dealing with specific

aspects of dialysis, handle complaints regarding patient care, and assist

patients in finding dialysis providers.

Background
Medicare Quality of Care: Oversight of

Kidney Dialysis Facilities Needs

Improvement

Page 3 GAO/T-HEHS-00-136

When a dialysis facility is certified to treat Medicare patients, nearly a

decade may elapse before it receives another HCFA-funded survey. Two

factors are at work. First, the total number of HCFA-funded surveys has

declined substantially since 1993. Second, a greater portion of these

surveys must go for inspections of new facilities. The number of new

facilities entering the program has grown each year, and each new facility

must receive a survey before it can begin participating in Medicare. As a

result of these factors, while about 1 of every 2 existing facilities received

a recertification survey in 1993, only about 1 in 10 received a

recertification survey in 1999.

While the number of surveys is going down, the proportion of surveys that

find major problems is increasing. In 1993, 6 percent of facilities surveyed

were cited for not meeting a condition of participation; that figure rose to

15 percent in 1999. A condition-of-participation deficiency means that the

problems found are serious enough that, unless corrected, the facility’s

participation in Medicare will be terminated by HCFA. Because so few

facilities actually receive a recertification survey in a given year and

surveys are not performed on a random basis, it is not clear whether this

increased percentage is indicative of all facilities. Nevertheless, it is cause

for concern.

The most common types of deficiencies included lack of adequate

operational rules and patient care policies to safeguard the health and

safety of patients, the failure to meet standards governing the reuse of

dialyzers and supplies, and lack of adequate patient care plans.

Deficiencies such as these can be life-threatening. For example, improper

procedures for reusing dialyzers can expose dialysis patients to microbial

contamination and dangerous levels of the germicide used to clean the

dialyzers.

HCFA has recognized that the infrequency of on-site inspections

may be compromising patient care, and it has requested a nearly

threefold increase in the funding for dialysis facility surveys—from

$2.2 million in fiscal year 2000 to $6.3 million in 2001. Such an

increase, according to HCFA, will ensure that ESRD facilities are

surveyed at least every 3 years. However, the extent to which any

increased on-site survey efforts will be effective in improving quality

also depends on how well HCFA systems (1) get facilities to correct

deficiencies and maintain compliance with standards, and (2) make

use of available information to target its on-site survey resources. As

I will discuss, both these areas need improvement.

Most Facilities Go

Years Between

Surveys for

Compliance With

HCFA Standards
Medicare Quality of Care: Oversight of

Kidney Dialysis Facilities Needs

Improvement

Page 4 GAO/T-HEHS-00-136

HCFA relies on termination from Medicare—or, in reality, the threat of

termination—as its only tool for bringing deficient facilities into

compliance with standards. HCFA officials view this threat as an effective

method for achieving compliance. Before a facility can be terminated, it

has an opportunity, essentially a grace period, to correct its deficiencies or

develop acceptable plans of correction. Of the 481 facilities confronted

with at least one condition-of-participation deficiency since 1993, only

three have been terminated for not correcting it.1

We found that the problem was not getting facilities to comply, but

assuring that they stay compliant. If a facility slips out of compliance

again, it can avoid a penalty by once again coming into compliance during

the next grace period. Because of the infrequency of recertification

surveys, it is difficult to determine how quickly and how often facilities fall

out of compliance. It also means that a facility that becomes deficient

again could remain so for a very long time. Analysis of HCFA’s survey

database suggests that facilities do tend to have repeat deficiencies. Of

those facilities with four or more surveys, 38 percent that had deficiencies

on their most recent survey were also deficient in at least one of the same

areas on their prior survey. More than half of them had two or more repeat

deficiencies. For example, a Texas facility cycled in and out of compliance

over a 9-year period while developing numerous plans of correction. On

many occasions the deficiencies were so severe they put the health and

safety of the facility’s 227 patients in immediate jeopardy. In 1999, the

deficiencies included not providing care necessary to address patients’

medical needs, not complying with physician orders, and not following up

on adverse incidents. It took more than 4 months and two revisits from the

state before the facility came back into compliance. However, when the

state conducted another survey 4 months later, the facility was again out

of compliance. At the time of our review, state agency officials were

exploring enforcement options under state licensing authority.

In the past, this Committee has examined a similar problem—nursing

homes that cycled in and out of compliance with quality standards. The

Congress has allowed HCFA a broad range of penalties to help encourage

nursing homes to maintain compliance with standards. For example, for

nursing homes HCFA has authority to levy monetary penalties and stop

Medicare payments to deficient nursing homes, but neither of these

1 An additional facility voluntarily withdrew from Medicare because of the threat of termination.

Enforcement Process

Gives Facilities Little

Incentive to Sustain

Compliance
Medicare Quality of Care: Oversight of

Kidney Dialysis Facilities Needs

Improvement

Page 5 GAO/T-HEHS-00-136

options can be applied to dialysis facilities. Effective options for dealing

with chronically deficient dialysis facilities do not exist.

As we have stated in our reports to you on nursing homes, monetary

penalties in particular create a strong incentive for nursing homes to

remain free of severe or repeated deficiencies. Today’s report on ESRD

suggests that the Congress may wish to consider granting HCFA the same

sanctioning authority to dialysis facilities as it has for nursing homes.

HCFA does already have authority to impose monetary penalties for

facilities failing to maintain compliance with requirements in one aspect of

quality of care, but the agency has decided not to use this authority.

Specifically, HCFA can assess financial penalties on facilities that do not

properly reprocess and reuse dialyzers, the filters that clean a patient’s

blood. Reprocessing dialyzers incorrectly can lead to such problems as

exposing a patient’s blood to dangerous levels of the germicide used to

clean the dialyzers. The Congress authorized HCFA to impose penalties on

such facilities even if they subsequently corrected their deficient

procedures, which may provide a stronger incentive than the threat of

termination to remain compliant with the quality requirements.

So far, HCFA has not exercised this authority. HCFA officials believe

doing so would be difficult, because the agency could only recoup

payments for specific services affected by the lack of compliance.

However, many of the important reuse standards relate to processes and

procedures that affect almost all patients in a facility. Our state-level

reviews showed instances in which surveyors were able to identify

specific days on which facilities were out of compliance with requirements

that affected all patients in a facility. Application of the sanction appears

feasible in these instances. As a result, our report recommends that HCFA

develop procedures to make use of this authority.

Ideally, the facilities that are most likely to be deficient will be targeted for

more frequent inspections. We looked at what is done to identify the

dialysis facilities most in need of oversight. HCFA is taking some steps to

use outcome measures to identify facilities to survey. While this approach

has merit, it also has limitations that remain to be addressed. We do see

immediate opportunities for HCFA to facilitate the sharing of information

between state regulators who conduct the inspections and ESRD networks

that gather information for individual facilities to better target surveys.

Sharing information on complaints and known quality-of-care problems

could help target inspections where they are needed most.

Efforts and

Opportunities to

Improve On-Site

Inspections
Medicare Quality of Care: Oversight of

Kidney Dialysis Facilities Needs

Improvement

Page 6 GAO/T-HEHS-00-136

The approach HCFA is developing to assist in targeting surveys involves

the use of certain patient outcome measures reported to ESRD networks,

Medicare claims processing contractors, and the Centers for Disease

Control and Prevention. In May 2000, as part of a pilot project, HCFA

created profiles of these measures for facilities in seven states. The

profiles were based on information HCFA obtained from dialysis facilities

on such indicators as the degree to which dialysis treatments remove

impurities from the blood and the degree to which patients’ anemia is

controlled.

Because the facility profile project is in the process of being tested, we did

not comprehensively evaluate it. However, a major concern is whether the

outcome indicators being used are a strong predictor of noncompliance

with Medicare standards. In the states we visited, we found cases in which

facilities had above-average scores on these indicators but were found to

have serious deficiencies during surveys or complaint investigations.

These deficiencies included such things as lack of knowledge of basic

medical and dialysis practices like anemia management, infection control,

and water purity. Accordingly, we recommended that HCFA complete an

evaluation of the pilot project results before it encourages states to use

outcome data as a key factor in selecting facilities for on-site inspections.

More immediately, sharing ESRD networks information on complaints and

known quality-of-care problems at specific facilities with state agencies

could strengthen the oversight process. HCFA has not consistently

encouraged this coordination, and in some cases, through conflicting

policy interpretations, has actually impeded it.

By sharing information and knowledge, ESRD networks and state agencies

can create a more complete picture of ESRD facilities. The networks and

agencies have different information about facilities. ESRD networks have

information on the clinical aspects of the care in facilities and also may be

more aware of recent staffing and management changes, patient

complaints, and the results of quality improvement initiatives. In contrast,

state survey agencies may have more detailed information about facilities’

systems, such as those for infection control and reprocessing dialyzers.

HCFA’s current policy allows networks to share facility-specific

information with state survey agencies to aid in the certification process.

However, HCFA regional offices that oversee network and survey agency

activities have not applied this policy consistently. As a result, the level of

coordination and information sharing varies dramatically across regions,

and in most cases little has taken place. Most HCFA regional offices

restrict networks from sharing facility-specific information and support
Medicare Quality of Care: Oversight of

Kidney Dialysis Facilities Needs

Improvement

Page 7 GAO/T-HEHS-00-136

ESRD networks when they deny requests by state survey agencies for such

information, saying that federal confidentiality restrictions prohibit this

sort of exchange. In contrast, with the knowledge of its HCFA regional

office, the ESRD network in Texas began providing facility-specific

information to the Texas Department of Health after the state passed a

licensure law for dialysis facilities in 1996. More recently, early this year,

some HCFA regional offices have begun efforts to facilitate the

communication and exchange of information, including facility-specific

performance information, between ESRD networks and state agencies.

Because we see increased communication as a way to help identify which

facilities are most likely to need attention, we recommended that HCFA

encourage better and more consistent cooperation and information

sharing between ESRD networks and state survey agencies.

In commenting on our report, HCFA officials agreed with our

recommendations and indicated that steps were being taken to implement

them. For example, HCFA stated that they would develop the necessary

regulations and procedures to implement sanctions for facilities that do

not meet quality standards for dialyzer re-use. HCFA also stated that steps

were under way to clearly delineate responsibilities of state survey

agencies and ESRD networks that would encourage cooperative

information sharing to help identify poor-performing facilities.

This concludes my statement. I will be happy to answer any questions you

may have.

For future contacts regarding this testimony, please contact Janet Heinrich

at (202) 512-7119 or Frank Pasquier at (206) 287-4861. Individuals who

made key contributions to this testimony included Margaret Buddeke,

Timothy Bushfield, Stanley Stenersen, and Mark Ulanowicz.

GAO Contacts and

Acknowledgment
Page 8 GAO/T-HEHS-00-136

Medicare Quality of Care: Oversight of Kidney Dialysis Facilities Needs

Improvement (GAO/HEHS-00-114, June 23, 2000).

Nursing Homes: Additional Steps Needed to Strengthen Enforcement of

Quality Standards (GAO/HEHS-99-46, Mar. 18, 1999).

Nursing Homes: Stronger Complaint and Enforcement Practices Needed to

Better Ensure Adequate Care (GAO/T-HEHS-99-89).

Medicare Dialysis Patients: Widely Varying Lab Test Rates Suggest Need

for Greater HCFA Scrutiny (GAO/HEHS-97-202, Sept. 26, 1997).

Medicare: Data Limitations Impede Measuring Quality of Care in Medicare

ESRD Program (GAO/HEHS-97-137R, July 11, 1997).

Medicare: Enrollment Growth and Payment Practices for Kidney Dialysis

Services (GA0/HEHS-96-33, Nov. 22, 1995).

(201070)

Related GAO Products
Orders by Internet

For information on how to access GAO reports on the Internet, send

an e-mail message with “info” in the body to:

Info@www.gao.gov

or visit GAO’s World Wide Web home page at:

http://www.gao.gov

Contact one:

Web site: http://www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

1-800-424-5454 (automated answering system)

Ordering Information

To Report Fraud,

Waste, and Abuse in

Federal Programs