Report to Congressional Requesters

United States Government Accountability Office

GAO 

MEDICARE AND 

MEDICAID 

PARTICIPATING 

FACILITIES 

CMS Needs to 

Reexamine Its 

Approach for Funding 

State Oversight of 

Health Care Facilities 

February 2009 

GAO-09-64 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

February 2009

MEDICARE AND MEDICAID PARTICIPATING 

FACILITIES 

CMS Needs to Reexamine Its Approach for Funding

State Oversight of Health Care Facilities Highlights of GAO-09-64, a report to 

congressional requesters 

Americans receive care from tens 

of thousands of health care

facilities participating in Medicare

and Medicaid. To ensure the quality

of care, CMS contracts with states 

to conduct periodic surveys and 

complaint investigations. Federal 

spending on such activities totaled 

about $444 million in fiscal year

2007; states are expected to

contribute their own funds both 

through the Medicaid program and

apart from that program. GAO 

evaluated survey funding, state 

workloads, and federal oversight of 

states’ use of funds since fiscal year 

2000 to determine if federal funding 

had kept pace with the changing

workload. GAO analyzed (1) 

federal funding trends from fiscal 

years 2000 through 2007 and CMS’s 

methodology for determining 

states’ allocations and spending,

(2) CMS data on the number of 

participating facilities and 

completed state surveys, and (3) 

CMS oversight of state spending.

GAO interviewed state officials and

collected data from 28 states. 

What GAO Recommends

GAO recommends that CMS 

consider several actions to address

survey funding weaknesses, such 

as state funding inequities, limited 

data on the impact of funding on

facility oversight, and limited

oversight of state spending. GAO 

also recommends that CMS broadly 

reexamine its current approach to

funding and conducting surveys.

CMS and state officials disagreed

with elements of GAO’s workload

analysis but CMS concurred with 9

of GAO’s 10 recommendations and

partially concurred with the other. 

Federal funding for state surveys increased from fiscal years 2000 through 

2002 but was nearly flat from fiscal years 2002 through 2007. In inflationadjusted terms, funding fell 9 percent from fiscal years 2002 through 2007. 

CMS has made incremental adjustments to improve its management of state 

allocations. It shifted federal funding from support contracts to surveys, 

increasing state allocations about 1 percent in fiscal years 2006 and 2007. For 

some facilities without statutory survey frequencies, CMS increased the time 

between surveys from 6 years to 10 years—a schedule that may further 

increase the chance of undetected quality problems. CMS also developed a 

budget analysis tool to help address the mismatch between federal allocations

and states’ current survey workloads, but use of the tool has been limited. 

 

Most states, including those that spent more than their initial federal 

allocations, did not complete CMS’s survey workload priorities in fiscal years

2006 and 2007, though the required survey workload—the workload that 

states would have to complete to meet statutory and CMS survey frequency

requirements—decreased about 4 percent nationwide from fiscal years 2000 

to 2007. A decrease in the number of the most time-consuming and frequently

surveyed facilities, such as nursing homes, offset the increase in other 

facilities. CMS lacked consistent and reliable data to measure workload 

changes in other areas such as complaint investigations. States reported that 

workforce instability due to noncompetitive surveyor salaries and hiring 

freezes hindered their workload completion but CMS has little influence over 

state hiring. Among seven states that completed their nursing home surveys, 

CMS found that 25 percent or more of some of their surveys missed serious 

deficiencies. According to CMS, the performance of one of these states raised 

concerns about the state’s management of survey activities. 

There is little oversight of state non-Medicaid contributions intended in part to 

reflect the benefit states derive from participating in federally sponsored 

oversight of facilities. State contribution rates have not been reviewed in 

recent years. CMS officials told GAO that the agency does not collect 

information on state expenditures to help ensure that states are contributing 

funds consistent with those rates, noting limits on their authority to require 

submission of such data. CMS believes, however, that federal funding may not 

be sufficient and that state spending above the initial Medicare allocation 

represents state funds in addition to the non-Medicaid share. 

The evidence is mixed on whether federal funding has kept pace with the 

changing workload. The required survey workload decreased nationwide but 

most states told GAO that survey frequencies of 6 to 10 years for many 

facilities could adversely affect beneficiaries. Moreover, distinguishing the 

impact of funding, staffing, and management on state workloads is difficult. 

GAO believes that these and other weaknesses in CMS’s current funding 

approach will continue to frustrate the agency’s efforts to support and oversee 

state survey activities. 

To view the full product, including the scope 

and methodology, click on GAO-09-64. 

For more information, contact John Dicken at 

(202) 512-7114 or dickenj@gao.gov. 
Contents 

Letter 1

Background 4

Results in Brief 13 

CMS Took Modest Steps to Address Recent Funding Trends and 

Manage Survey Funding Allocations 16 

Almost All States Were Unable to Complete Their Survey 

Workload, and Pinpointing the Cause Is Difficult 25 

CMS Oversight of States’ Use of Funds Is Limited 36 

Conclusions 42

Recommendations for Executive Action 45 

Agency and AHFSA Comments and Our Evaluation 46 

Appendix I Scope and Methodology 52 

Appendix II CMS Survey Frequency Changes for Facilities 

Surveyed by States, Fiscal Years 2000 through 

2008 57 

Appendix III Federal Funding for Survey Activities in Actual 

and Inflation-Adjusted Dollars, Fiscal Years 2000 

through 2007 59 

Appendix IV Number of and Percentage Change in Facilities 

Subject to State Standard and Validation Surveys, 

2000 to 2007 60 

Appendix V Change in States’ Required Survey Workload 

from Fiscal Year 2000 to Fiscal Year 2007 61 

Appendix VI Comments from the Centers for Medicare & 

Medicaid Services 64 

Page i GAO-09-64 Funding for State Survey Activities
Appendix VII Comments from the Association of Health 

Facility Survey Agencies 78 

Appendix VIII GAO Contact and Staff Acknowledgments 81 

Related GAO Products 82 

Tables 

Table 1: Facility Types Whose State Survey Frequencies Are 

Established by Statute and CMS 6 

Table 2: Funding Source for Survey Activities by Type of Facility 9 

Table 3: Changes in Medicare Support Contract Funding and 

Funding for State Surveys 19 

Table 4: Facilities with Survey Frequencies Established by CMS 

That Have Not Been Surveyed in 6 Years or More, as of 

September 30, 2007 22 

Table 5: Number of States That Completed Required Surveys by 

Tier as Reported by CMS, Fiscal Year 2006 27 

Table 6: Range of Medicare, Medicaid, and Non-Medicaid State 

Contribution Rates (as a percentage) for Nursing Home 

Survey Activities for 21 States, as of January 2008 39 

Table 7: CMS Survey Frequency Changes for Facilities Surveyed by 

States, Fiscal Years 2000 through 2008 57 

Table 8: Federal Funding for Survey Activities (in millions), Actual 

Dollars, Fiscal Years 2000 through 2007 59 

Table 9: Federal Funding for Survey Activities (in millions), 

Inflation-Adjusted to Fiscal Year 2000 Dollars, Fiscal Years 

2000 through 2007 59 

Table 10: Percentage Change in Number of Facilities Subject to 

State Surveys, Number of Surveys Each State Is Expected 

to Conduct, and Required Survey Workload after Factoring 

in National Survey Hours, Fiscal Years 2000 and 2007 61 

Page ii GAO-09-64 Funding for State Survey Activities
Figures 

Figure 1: Federal Medicare and Medicaid Funding for Survey 

Activities in Actual and Inflation-Adjusted Fiscal Year 

2000 Dollars, Fiscal Years 2000 through 2007 17 

Figure 2: Average Survey Frequencies for End-Stage Renal Disease 

Facilities by CMS Workload Prioritization Tiers, Fiscal 

Years 2005 and 2006 20 

Figure 3: Budget Analysis Tool, Including Component Parts 24 

Figure 4: Formula to Estimate Required Survey Workload as 

Applied to Nursing Homes and Ambulatory Surgical 

Centers as of Fiscal Year 2007 28 

Figure 5: Decline in Required Survey Workload (the Completion of 

Surveys within the Time frames for which CMS Holds 

States Accountable), Based on the Number of Facilities 

and Average Survey Hours, December 2000 to December 

2007 29

Figure 6: Federal and State Funding for State Survey Activities in 

Fiscal Year 2007 41 

Abbreviations 

AHFSA Association of Health Facility Survey Agencies 

CMS Centers for Medicare & Medicaid Services 

HHS Department of Health and Human Services 

OIG Office of Inspector General 

OSCAR On-Line Survey, Certification, and Reporting system 

PDQ Providing Data Quickly 

QIS Quality Indicator Survey 

RN registered nurse 

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Page iii GAO-09-64 Funding for State Survey Activities
United States Government Accountability Office

Washington, DC 20548 

 

February 13, 2009 

The Honorable Herb Kohl 

Chairman 

Special Committee on Aging 

United States Senate 

The Honorable Charles E. Grassley 

Ranking Member 

Committee on Finance 

United States Senate 

In 2007, millions of Americans received care from tens of thousands of 

health care facilities—including nursing homes, hospitals, dialysis 

facilities, and home health agencies—that participate in the Medicare or 

Medicaid programs.1

 To ensure that these facilities provide high-quality 

care in a safe environment, the Centers for Medicare & Medicaid Services

(CMS) contracts with state survey agencies to conduct periodic 

inspections known as surveys and complaint investigations and to initiate 

enforcement actions against facilities that fail to comply with federal 

standards.2

 Federal Medicare and Medicaid expenditures on such survey 

activities totaled about $444 million in fiscal year 2007.3

We have reported concerns about state survey activities and CMS 

oversight for the past 10 years.4

 In 1998 and 1999, we found significant 

weaknesses in federal and state survey activities designed to detect and 

correct quality problems in nursing homes, such as the failure to promptly 

investigate complaints of alleged serious care problems or to conduct on-

 1

Medicare is the federal health care program for elderly and certain disabled individuals. 

Medicaid is a joint federal-state health care financing program for certain categories of lowincome individuals. 

2

CMS is an agency within the Department of Health and Human Services (HHS). 

Throughout this report, we refer to state survey agencies, including the District of 

Columbia agency, as “states.” 

3

States also contribute a state share of Medicaid funds and non-Medicaid funds in support 

of survey activities. State non-Medicaid contributions are to reflect the benefit states derive 

from health care facilities meeting federal quality standards as well as the cost of assessing 

compliance with state licensing requirements. 

4

See a list of related GAO products at the end of this report. 

Page 1 GAO-09-64 Funding for State Survey Activities
 

site revisits to verify that nursing homes corrected serious deficiencies.5

CMS responded by establishing a set of initiatives, known as the Nursing 

Home Oversight Improvement Program, intended to address many of 

those weaknesses. For fiscal year 1999, the budget for survey activities 

was significantly increased to support the associated workload growth. 

While nursing homes make up about 25 percent of facilities that 

participate in Medicare and Medicaid, they accounted for about threefourths of federal spending on survey activities in fiscal year 2007. In

December 2005, we reported CMS’s concern that funding for survey 

activities had not kept pace with the growth in survey workloads due to 

the increase since 2000 in the number of facilities that participate in 

Medicare and Medicaid and CMS initiatives to improve nursing home 

oversight.6

You asked us to undertake a broad evaluation of the funding of survey 

activities since fiscal year 2000. Specifically, we examined (1) the trends in

federal funding for survey activities and how CMS has managed the 

allocation of these funds, (2) the extent to which states have completed 

their survey workload and the factors that affected workload completion, 

and (3) the effectiveness of CMS’s oversight of states’ use of funds for 

survey activities. 

To examine federal funding trends and CMS’s allocation of federal funds 

since 2000, we analyzed or reviewed (1) the President’s budget request; 

(2) federal funding for survey activities from fiscal years 2000 through 

2008; (3) data on actual state survey expenditures; and (4) documentation 

on the process CMS uses to allocate funds to states (known as the budget

allocation process), including the budget analysis tool developed in 2005 

to help determine state funding allocations.7

 We did not, however, evaluate 

the effectiveness of the tool. We also discussed the management of the 

budget allocation process with CMS central office and regional office staff 

and obtained the perspective of survey agency officials from 28 states, 

 5

GAO, California Nursing Homes: Care Problems Persist Despite Federal and State 

Oversight, GAO/HEHS-98-20 (Washington, D.C.: July 27, 1998) and Nursing Homes:

Complaint Investigation Processes Often Inadequate to Protect Residents,

GAO/HEHS-99-80 (Washington, D.C.: Mar. 22, 1999). 

6

GAO, Nursing Homes: Despite Increased Oversight, Challenges Remain in Ensuring 

High-Quality Care and Resident Safety, GAO-06-117 (Washington, D.C.: Dec. 28, 2005). 

7

We used the gross domestic product price index to adjust for inflation during this time 

period. 

Page 2 GAO-09-64 Funding for State Survey Activities
 

which we selected based on five factors, including state spending trends 

and ability to complete survey workloads. Our data collection focused on 

information covering fiscal years 2000 through 2007; except where 

otherwise reported, 2007 was the year with the most recently available 

data. 

To examine states’ completion of survey workload and factors affecting 

states’ ability to complete their survey workload, we analyzed data from 

CMS’s annual state performance reviews for fiscal years 2006 and 2007 and 

used CMS’s On-Line Survey, Certification, and Reporting (OSCAR) system

for fiscal years 2000 and 2007.8

 We used OSCAR data to measure states’ 

required survey workload—the workload that states would have to 

complete to meet statutory and CMS survey frequency requirements—by 

taking into consideration the number of facilities, required survey 

frequencies, and average survey hours by facility type. Because OSCAR 

only stores data on the four most recent surveys, we obtained survey 

hours for all facility types from CMS for fiscal years 2000 through 2007. We 

could not include in our calculations the workload impact of complaint 

investigations or revisits intended to ensure that serious deficiencies had 

been corrected because CMS data were either not available or not 

consistently reported over time. We also discussed workload changes and 

completion rates with CMS and state officials. In addition, we used CMS 

data on the quality of state surveys to examine the relationship between

workload completion, state spending, and states’ ability to identify all 

serious deficiencies at the time of a state survey.9

To examine the effectiveness of CMS oversight of states’ use of survey 

funding, we reviewed CMS guidance to regional offices and states on how 

state spending should be monitored, periodic state spending reports from 

several of the 28 states we contacted, and state spending audits conducted 

by the Department of Health and Human Services (HHS) Office of 

Inspector General (OIG). We also interviewed CMS central office officials 

and staff in five CMS regions. For a more detailed description of our scope 

and methodology and our state selection criteria, see appendix I. 

 8

Data on the number of facilities were from December in fiscal years 2000 and 2007. 

9

Throughout this report, we use the term serious deficiency to refer to (1) a deficiency in a

nursing home that results in actual resident harm or places residents at risk of death or

serious injury, or (2) a deficiency at other facility types that adversely affects or has the

potential to adversely affect patients. 

Page 3 GAO-09-64 Funding for State Survey Activities
 

Throughout the course of our work, we discussed our analysis of OSCAR 

data and other data provided by CMS with CMS officials to ensure that the 

data accurately reflected state survey activities. We also tested the 

information provided by the states for completeness and consistency. We 

determined that these data sources were valid and reliable for our 

purposes. We conducted this performance audit from June 2007 through

February 2009 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. 

Under contract with CMS, states survey 13 types of health care facilities 

that participate in Medicare and Medicaid; in 2007, there were about 

60,000 such facilities. State survey activities are primarily funded by the 

federal government.10 Other types of facilities that participate in Medicare 

and Medicaid are also subject to surveys, but the surveys are not always 

conducted by states or are not federally funded. For example, community 

mental health centers are surveyed by federal surveyors located in each of

CMS’s 10 regional offices rather than state surveyors. Four facility types—

ambulatory surgical centers, home health agencies, hospices, and 

hospitals—can choose to be surveyed by accrediting organizations, such 

as the Joint Commission, instead of states.11 However, facilities that 

choose this option are charged fees and are subject to state validation 

surveys that assess how well the accreditation process detects 

Background 

 10In general, obtaining a state license to operate is a prerequisite for a facility to participate 

in Medicare and Medicaid. However, states do not necessarily license every facility that 

participates in federal health care programs. For example, Florida and Washington do not 

license end-stage renal disease facilities and Ohio does not license hospitals. 

11By law, CMS is authorized to enter into agreements with states to survey a selective 

sample of accredited hospitals or individual accredited hospitals where there are

allegations of serious deficiencies. 42 U.S.C. § 1395aa(c). 

Page 4 GAO-09-64 Funding for State Survey Activities
 

deficiencies in compliance with Medicare quality standards.12 Clinical labs

are unique in that CMS collects fees from the labs to cover the cost of state 

surveys and federal oversight, including state validation surveys of a 

sample of accredited labs.

13

Survey Frequency Survey frequencies for nursing homes, intermediate care facilities for the 

mentally retarded, and home health agencies are established by federal

statute, range from about 1 to 3 years, and are defined as maximum time 

intervals between surveys. In contrast, CMS sets survey frequencies for the

10 other facility types that states survey as a matter of policy (see table 1). 

These frequencies are typically every 6 years or more and they have 

generally been defined as the average across all facilities of the same type 

(see app. II). As a result of CMS’s reliance on averages, some facilities 

could be surveyed earlier and others later and still meet the agency’s 

frequency standard. CMS distinguishes, however, between (1) its policies 

on survey frequency, and (2) the survey frequencies that it holds states 

accountable to meeting each year in its state performance reviews 

(discussed below), which may be less frequent than those established by 

policy. Although its policies on survey frequency change infrequently, CMS 

officials told us that nonstatutory survey frequencies are resource driven 

and depend on each year’s funding level. For example, CMS policy for 

most nonstatutory survey frequencies has been about 6 years since fiscal 

year 2001; based on available resources, however, the survey frequencies 

for which CMS has held states accountable have ranged from 3.5 years to 

10 years from fiscal years 2006 through 2008 (see app. II).14 In fiscal year 

 12There are two types of state validation surveys that evaluate accreditation organizations’ 

ability to ensure facilities’ compliance with Medicare quality standards: (1) representative 

sample surveys, which are standard surveys conducted shortly after an accreditation 

organization survey in order to assess the accreditation organization’s survey process, and 

(2) complaint surveys, which are used to identify the compliance of the accredited facility 

with selected regulatory requirements noted in the complaint received by CMS. Serious 

deficiencies identified in validation surveys result in the facility’s placement under state 

survey jurisdiction until another state survey verifies that the facility has returned to 

substantial compliance with Medicare quality standards or the facility is terminated from 

the Medicare program.

13See GAO, Clinical Lab Quality: CMS and Survey Organization Oversight Should Be 

Strengthened, GAO-06-416 (Washington, D.C.: June 16, 2006). 

14CMS’s Mission and Priority Document communicates the survey frequencies used to 

determine states’ workload as a part of establishing annual priorities for states’ required

survey workload. Before fiscal year 2006, this document was called the Survey and

Certification Budget Call Letter. 

Page 5 GAO-09-64 Funding for State Survey Activities
 

2003, CMS introduced a 4-tier structure for prioritizing surveys with tier 1 

being the highest priority—facilities with statutorily mandated survey 

frequencies—and tier 4 the lowest priority. CMS instructs states to ensure 

that tiers 1 and 2 will be completed as a prerequisite for planning surveys 

in subsequent tiers. 

Table 1: Facility Types Whose State Survey Frequencies Are Established by Statute 

and CMS 

Type of facility 

Survey frequency established by statute 

Home health agencya

Intermediate care facility for the mentally retarded

Nursing home 

Survey frequency established by CMS 

Ambulatory surgical centera

Comprehensive outpatient rehabilitation facility 

End-stage renal disease facility 

Hospicea

Hospital

a

Organ transplant centersb

Outpatient physical therapy provider 

Portable X-ray service 

Psychiatric residential treatment facilityc

Rural health clinic 

Validation surveys for accredited providersd

Source: CMS. 

a

Home health agencies, ambulatory surgical centers, hospices, and hospitals can choose to be 

inspected by an accrediting organization, such as the Joint Commission, or by states. The following 

percentage of each facility type was subject to state surveys in 2007: ambulatory surgical centers 

(78 percent), home health agencies (86 percent), hospices (85 percent), and hospitals (33 percent).

b

In 2007, CMS issued a regulation that requires organ transplant center programs to be surveyed. 

These surveys will be phased in over a 3-year period, beginning in 2007. 

c

States conduct validation surveys to ensure that psychiatric residential treatment facilities are in 

compliance with attestations concerning the use of restraints. 

d

States conduct two types of validation surveys of accredited facilities to evaluate accreditation 

organizations’ ability to ensure facilities’ compliance with Medicare quality standards: 

(1) representative sample surveys, and (2) complaint surveys. 

Page 6 GAO-09-64 Funding for State Survey Activities
 

States undertake a variety of survey activities, including standard and 

validation surveys, complaint investigations, revisits, and enforcement 

actions.15 Surveys and complaint investigations are conducted to 

determine facility compliance with federal quality and safety standards.16

The quality-of-care component of a survey focuses on assessing the 

facility’s compliance with all regulatory requirements, other than the 

requirements pertaining to protection from fire. It involves direct 

observation of the provision of care to a sample of patients or residents; 

interviews of a sample of patients or residents; and review of patient or 

resident medical records, as well as other facility documents. The safety 

component of a survey examines a facility’s compliance with federal fire 

safety standards. Complaint investigations allow state surveyors to 

intervene promptly if problems arise between standard surveys or at 

accredited facilities. Compared to surveys, complaint investigations are 

(1) more targeted because they focus on specific concerns, and (2) less 

predictable because they depend on the number and seriousness of the 

allegations. For example, some complaints involve potential immediate 

jeopardy to patient health and safety and must be investigated within 2 to 

5 working days. Less serious complaints must be investigated promptly or, 

in the case of accredited facilities, within 45 calendar days. Moreover, 

when a complaint investigation identifies a serious deficiency at an 

accredited facility, an intermediate care facility for the mentally retarded, 

or a home health agency, a full or extended survey must be conducted. 

Survey Activities 

Deficiencies identified during a survey or complaint investigation are 

categorized according to their severity. States conduct revisits to ensure 

that facilities correct any serious deficiencies identified by state surveyors; 

revisits may also be conducted to determine when a nursing home has 

returned to compliance and an enforcement action known as a sanction 

may be ended. On the basis of state recommendations, CMS may 

implement a sanction when surveyors identify serious deficiencies in a 

facility’s compliance with federal standards.17 The nature of the care 

 15In this report we use the term surveys to refer only to standard and validation surveys. 

16A state may conduct one survey to meet both federal and state licensing requirements. 

17For nursing homes, CMS has a range of sanctions to help encourage compliance with 

quality requirements ranging from less severe sanctions, such as indicating the specific 

actions needed to address a deficiency and providing an implementation time frame, to

those that can affect a home’s revenues and provide a financial incentive to return to and

maintain compliance. For many facility types, however, the only available federal sanction 

is termination from participation in the Medicare and Medicaid programs. 

Page 7 GAO-09-64 Funding for State Survey Activities
 

provided by a facility influences the type of expertise needed to conduct 

surveys. For example, nursing home survey teams primarily consist of 

registered nurses (RN) and social workers. Surveys of intermediate care 

facilities for the mentally retarded, on the other hand, call for the skills of 

a developmental disabilities specialist.

Funding for State Survey 

Activities

In general, state survey activities are funded through a combination of 

Medicare, Medicaid, and non-Medicaid state funds.18 Typically, almost 

60 percent of federal spending on survey activities comes from Medicare, 

with the remaining 40 percent funded by the federal Medicaid share.19

Salaries, particularly surveyor salaries, are the most significant cost 

component of state survey activities. Table 2 shows how the two programs 

fund survey activities for each type of facility. Nursing homes are the only 

facility type whose surveys are funded by both Medicare and Medicaid. 

 18As noted, clinical labs pay for the cost of state surveys and federal oversight. 

19See 42 U.S.C. § 1395aa(b), which directs the Secretary to pay states the reasonable cost of

carrying out survey activities and for Medicare’s fair share of costs related to Medicare

facilities. 

Page 8 GAO-09-64 Funding for State Survey Activities
 

Table 2: Funding Source for Survey Activities by Type of Facility 

Funding source Type of facility 

Medicare Ambulatory surgical center 

Comprehensive outpatient rehabilitation facility 

End-stage renal disease facility 

Home health agency 

Hospice

Hospital

Nursing homea

Organ transplant centers 

Outpatient physical therapy provider 

Portable X-ray service 

Rural health clinic 

Medicaid Intermediate care facility for the mentally retarded

Nursing homea

Psychiatric residential treatment facility 

Source: CMS. 

a

Most nursing homes participate in both Medicare and Medicaid and their surveys are funded equally 

by both programs. Surveys of nursing homes that participate only in Medicare or participate only in 

Medicaid are funded by each program, respectively. 

• Medicare. Medicare funding for survey activities is requested and provided

as part of a lump sum appropriation for the CMS Program Management 

Account, which generally funds CMS operations.20 For each fiscal year, 

CMS develops a budget request for that account, including an amount for 

survey activities, giving priority to funding for statutory requirements. In 

determining the amount for survey activities, CMS considers three factors:

the number of facilities; the number of surveys states need to conduct, as 

determined by the established survey frequencies; and the cost of surveys, 

using the number of hours to complete them as a proxy. The request is 

submitted to Congress as part of the President’s proposed budget. In the 

annual appropriations act for HHS, Congress authorizes the transfer of a 

specific amount from the Medicare Trust Funds to CMS’s Program 

Management Account, which limits the amount of money that CMS can 

 20A lump sum appropriation is available for a wide array of purposes and leaves an agency

discretion with respect to the distribution of the funds among those purposes. 

Page 9 GAO-09-64 Funding for State Survey Activities
 

use for operations, including survey activities.21 Typically, tables within the 

conference report identify amounts for survey and other activities funded 

through the Program Management Account. According to a CMS official, 

the agency generally allocates the amounts specified in the conference 

report tables to the relevant activities.22 Funding for survey activities 

covers (1) state survey operations; (2) direct federal surveys, such as 

community mental health centers; and (3) support contracts, such as for 

training surveyors, developing a new nursing home survey methodology, 

and surveying psychiatric hospitals.23 The costs of managing survey 

activities, such as salaries for staff of CMS’s Survey and Certification 

Group and federal surveyors in each of CMS’s 10 regional offices, are also 

funded through CMS’s Program Management Account, but not as part of 

the funds designated in the conference report for survey activities. 

Each August, CMS notifies states of their projected Medicare budget 

allocations for the federal fiscal year starting October 1, based on the 

President’s proposed budget. After enactment of the appropriations act, 

the agency notifies states of any changes in their Medicare allocations for 

survey activities. At the end of the federal fiscal year, CMS may provide 

supplemental funds to states that spent more than their initial Medicare 

allocations by redistributing funds from states that spent less than their 

allocations.24

• Medicaid.

25 For surveys of facilities funded by Medicaid, states generally 

pay 25 percent of the costs and the federal government pays the remaining 

 21Medicare income in excess of spending is held in the Medicare Trust Funds and invested

in federal government securities. The appropriations act also authorizes CMS to credit the 

account with amounts collected under various authorities and, therefore, to use those 

amounts for its operations. 

22CMS generally has the authority to reprogram funds within the Program Management 

Account, that is, adjust the allocation of funds among the various activities. 

Reprogramming above certain amounts requires advance notice to House and Senate

Committees on Appropriations. A CMS financial management official told us that such

reprogramming is rare.

23CMS recognizes that many states do not maintain the psychiatric expertise necessary to 

survey these facilities. As a result, CMS contracts with a panel of psychiatric consultant

surveyors to survey psychiatric hospitals. 

24States generally rely on their own funds when they spend more than their initial federal 

Medicare allocations on survey activities and may be reimbursed when CMS redistributes 

Medicare funds from states that spent less than their allocations. 

25References to federal Medicaid funding in this report represent government expenditures 

that match state Medicaid expenditures. 

Page 10 GAO-09-64 Funding for State Survey Activities
 

75 percent.26 The President’s budget proposal provides Congress with an 

estimate of Medicaid spending for survey activities based on projected 

workload. The annual appropriations act for HHS includes an amount for 

the federal share of Medicaid expenditures, including states’ expenditures 

for survey activities. Funds are provided to states based on claims 

submitted for survey activities or state estimates of activities to be 

conducted. 

• Non-Medicaid state funding.

27 While states contribute to survey activities 

by paying 25 percent of Medicaid-covered expenditures, states are also 

expected to contribute funds for (1) the benefit they derive from facilities 

meeting federal quality standards and (2) the survey costs associated with 

state licensing requirements. According to CMS guidance, if the survey of a 

Medicare facility covers 100 standards and the state has adopted 50 of

them for licensing purposes, the state and Medicare would contribute 

equally to the survey costs of the 50 shared standards and Medicare would 

cover all the survey costs for the 50 Medicare-only standards.28 If state 

survey requirements are more stringent than federal requirements—for 

example, federal requirements call for a facility type to be surveyed every 

3 years but a state mandates surveys every 18 months—the state is 

expected to pay for the additional surveys. Moreover, if a state has no 

licensing requirements for a facility type, the state still acquires a derived 

benefit from that facility’s having to adhere to federal standards because 

of its participation in Medicare and Medicaid. 

Through staff in its 10 regional offices, CMS oversees the extent to which

states’ performance ensures that facilities participating in Medicare and 

Medicaid provide high-quality care in a safe environment. The agency’s 

primary oversight tools are annual performance reviews that measure 

states’ compliance with specific standards and statutorily required federal 

monitoring surveys of nursing homes to assess the adequacy of state 

Oversight of States’

Performance and Use of 

Funds 

 2642 U.S. C. § 1396b(a)(2). This cost sharing differs from cost sharing applicable to federal 

reimbursement for states’ Medicaid expenditures for services, which are determined by a

statutory formula. Federal financial participation is not available for any expenditures that

are attributable to the state’s overall responsibilities under state law and regulations for 

establishing and maintaining standards. 42 C.F.R.§ 431.610(h) (2008). 

27Throughout this report, we refer to state funds that are in addition to their 25 percent 

share of Medicaid-covered expenditures as non-Medicaid state contributions. 

28See CMS, State Operations Manual, chapters 1 and 4 (noting that while facilities are 

surveyed simultaneously for multiple programs, costs are allocated equitably). 

Page 11 GAO-09-64 Funding for State Survey Activities
 

surveys. CMS regional offices also monitor states’ use of federal funds 

provided for survey activities. 

State performance reviews. CMS established state performance reviews in 

fiscal year 2001. Annually, the agency’s regional offices use the reviews to 

determine whether states are meeting federal requirements—both 

statutory and nonstatutory—and to identify areas for improvement in state 

program management. The reviews assess states’ performance across 18 

standards, which generally focus on the timeliness and quality of surveys, 

complaint investigations, and enforcement actions. Since establishing the 

performance standards, CMS has continued to refine and expand their 

scope. For example, the standards originally focused on state nursing 

home survey activities, but now include ambulatory surgical centers, 

comprehensive outpatient rehabilitation facilities, end-stage renal dialysis

facilities, home health agencies, hospices, hospitals, intermediate care 

facilities for the mentally retarded, and rural health clinics. However, only 

the survey frequency standards—whether states are completing surveys 

within statutory time frames or CMS-established survey priorities—

encompass all 13 facility types surveyed by states. In fiscal year 2006, CMS 

began penalizing states that did not complete their entire tier 1 workload 

by reducing the states’ Medicare funding allocation for the following year.

Federal monitoring surveys of nursing homes. Regional office staff 

conduct statutorily required federal monitoring surveys annually in at least 

5 percent of state-surveyed Medicare and Medicaid nursing homes in each 

state. Federal monitoring surveys, which can be either comparative or 

observational, provide an indication of the quality of state nursing home 

surveys. For a comparative survey, federal surveyors conduct an 

independent survey of a nursing home recently surveyed by a state in 

order to compare the findings. When federal surveyors identify a 

deficiency not cited by state surveyors, they assess whether the deficiency

existed at the time of the state survey and should have been cited by state 

surveyors. In prior work, we used the results of federal comparative 

surveys as a benchmark for identifying when state surveys have failed to

cite a deficiency altogether or cited a deficiency at too low a level.29 For 

observational surveys, federal surveyors accompany a state survey team to 

a nursing home to evaluate the team’s on-site survey performance and

 29For an analysis of the results of federal monitoring surveys conducted from fiscal years 

2002 through 2007, see GAO, Nursing Homes: Federal Monitoring Surveys Demonstrate 

Continued Understatement of Serious Care Problems and CMS Oversight Weaknesses, 

GAO-08-517 (Washington, D.C.: May 9, 2008). 

Page 12 GAO-09-64 Funding for State Survey Activities
 

ability to document survey deficiencies. Observational surveys allow 

federal surveyors to provide more immediate feedback to state surveyors

and to identify state surveyor training needs. In fiscal year 2007, 786 

federal monitoring surveys were conducted, 170 of them comparative, 616 

observational. 

States’ use of federal funds for survey activities. CMS regional offices are 

responsible for reviewing state spending. This oversight has two key 

aspects. First, regional office staff monitor states’ Medicare spending 

during the fiscal year and states’ adherence to CMS policies and 

guidelines. If states request supplemental Medicare funds, regional offices 

evaluate the states’ requests and make recommendations to the CMS 

central office. Second, according to CMS’s State Operations Manual, a 

state must allocate the costs of a survey to Medicare, Medicaid, and state 

licensure based on the extent to which each of these programs benefit 

from the survey. According to CMS central office officials, regional office

staff are responsible for working with states to establish the amount of 

non-Medicaid state funds that states contribute to cover the costs 

associated with their derived benefit and their licensing requirements that 

differ from federal requirements. 

Federal funding for state surveys increased from fiscal years 2000 through 

2002 but was nearly flat from fiscal years 2002 through 2007. In inflationadjusted terms, funding fell 9 percent from fiscal years 2002 through 2007. 

CMS has made incremental adjustments to address both the recent 

funding trend and survey budget allocation weaknesses. CMS shifted 

Medicare funding from certain support contracts, such as the development 

of a new nursing home survey methodology, to increase funding for state 

surveys, providing an increase of about 1 percent on average in fiscal years 

2006 and 2007. CMS also attempted to reduce states’ survey workload by 

increasing the amount of time between surveys for facility types whose 

survey frequencies are not prescribed by statute and, at the same time, 

incorporating a risk-based system for prioritizing surveys of the most 

problematic facilities. About 13 percent of facilities had not been surveyed

by states in 6 years or more as of September 30, 2007. In 2005, CMS 

developed a new budget analysis tool to identify and address funding 

inequities resulting from CMS’s previous method for allocating Medicare 

funds for state survey activities based on past spending. Although CMS has 

used the tool to distribute annual funding increases according to states’ 

survey workload, it has not used the tool to realign states’ base-level

funding with their workload. CMS also asked states to develop

contingency plans to mitigate problems associated with the delayed

Results in Brief 

Page 13 GAO-09-64 Funding for State Survey Activities
 

notification of their final Medicare budget allocations, which has occurred 

6 months or more after the start of states’ fiscal years. 

Almost all states were unable to meet CMS survey priorities across tiers 1 

through 3 in fiscal years 2006 and 2007, but pinpointing the cause is 

difficult because several factors such as workload, funding, staffing, and

management may have affected states’ ability to complete these priorities 

and the quality of the surveys conducted. It is difficult to distinguish the 

extent to which each factor had an impact. We found that states’ required 

survey workload—the workload that states would have to complete to 

meet statutory and CMS survey frequency requirements—decreased 

4 percent from fiscal years 2000 to 2007. This decrease was due to the 

decline in the number of nursing homes and intermediate care facilities for 

the mentally retarded, which are the most resource intensive facilities to 

survey. The declines in these two facility types offset the growth in the 

overall number and type of facilities subject to surveys. Nursing homes 

and intermediate care facilities for the mentally retarded (1) are surveyed 

on average every 12 months, while some other facilities are surveyed every 

10 years as of fiscal year 2007, and (2) require more hours to survey 

compared to other facilities; together these two facility types accounted 

for 93 and 91 percent of states’ required survey workload in fiscal years 

2000 and 2007, respectively. The impact of changes in the number of state 

complaint investigations on state survey workload is unclear because CMS 

lacks reliable and consistent state data on complaints received and 

investigated. While data from fiscal years 2000 through 2007 show small 

increases in average survey hours for most facility types, it is difficult to 

determine whether the changes are due to new CMS directives and more 

stringent survey standards implemented since 2000 or other factors such 

as surveyor experience levels. Furthermore, we could not determine the 

extent to which funding has affected states’ completion of surveys in tiers 

1 through 3 because CMS and states disagree about whether funding is 

sufficient to complete surveys in these tiers and several states that spent 

more than their initial Medicare allocations still did not complete all such 

surveys. In addition, many states we contacted reported that an unstable 

workforce has affected their ability to meet CMS survey priorities in the 

past several years. In some cases, high surveyor attrition rates and state 

hiring freezes prevented 14 states we contacted from spending their entire

Medicare funding allocations. States’ completion of surveys in a given tier 

does not ensure that the surveys are thorough. For example, CMS found 

that 25 percent or more of some nursing home surveys in 7 states missed 

serious deficiencies. In one of these states, performance issues raised 

concerns about the management of survey activities. 

Page 14 GAO-09-64 Funding for State Survey Activities
 

CMS oversight of states’ use of survey funds is limited because it relies on

state-reported data, has inadequate information about non-Medicaid state 

funding, and does not require states to justify supplemental funding 

requests. To oversee how states spend federal funds, CMS regional offices 

now rely primarily on off-site reviews of state reports that document 

expenditures and workload. Regional office officials have expressed 

concern about whether state expenditures are accurately reported through 

CMS’s Web-based, automated reporting system, and there have been 

instances where errors were discovered in states’ expenditure reports well 

after their submission. Regarding states’ non-Medicaid contributions to 

help fund survey activities, officials from the regional offices we spoke 

with told us that these rates have not been reviewed since they were 

established, even though federal survey and state licensure requirements 

may have changed over time. Furthermore, regional officials told us that 

they do not verify that states contributed funds in a manner consistent 

with their established contribution rates, noting limits on their authority to

require submission of such data and states’ refusal to provide it 

voluntarily. In addition, because states are not required to justify requests 

for supplemental Medicare funds, it is difficult for CMS to determine 

whether expenditures in excess of a state’s initial Medicare allocation 

represent a state’s non-Medicaid share of survey costs. 

The evidence is mixed on whether federal funding has kept pace with the 

changing survey workload. The required survey workload decreased 

nationwide, but most states told us that survey frequencies of 6 to 10 years 

for many facilities could adversely affect beneficiaries. Moreover, it is 

often difficult to distinguish the overall impact of funding, staffing, and 

management on state workloads. We believe that these and other 

weaknesses in CMS’s current funding approach will continue to frustrate 

its efforts to support and oversee state survey activities. 

To address weaknesses in the current approach for overseeing facilities 

that participate in Medicare and Medicaid, we recommend that CMS 

undertake a broad reexamination of how survey activities are funded and

conducted. In the shorter term, we also recommend that the CMS 

Administrator take nine actions to address concerns raised in this report, 

including (1) increasing the survey priority assigned to facilities that have 

not been surveyed in 6 years or more, (2) using available tools to better 

align states’ baseline Medicare allocations with their workload, 

(3) identifying appropriate methodologies to help evaluate the efficiency 

and effectiveness of state survey activities, and (4) collecting information 

about current non-Medicaid state shares and the methodologies used to 

calculate them. We provided a draft of this report to HHS for comment. In 

Page 15 GAO-09-64 Funding for State Survey Activities
 

response, the Acting Administrator of CMS provided written comments in 

which the agency disagreed with elements of our survey workload 

analysis, but concurred with 9 of our 10 recommendations and partially 

concurred with the other recommendation. The Association of Health 

Facility Survey Agencies (AHFSA) also disagreed with elements of our 

survey workload analysis.30

Federal funding for state surveys increased from fiscal years 2000 through 

2002 but was nearly flat from fiscal years 2002 through 2007. In inflationadjusted terms, funding fell 9 percent from fiscal years 2002 through 2007. 

CMS has taken incremental steps to address both the recent trend in 

funding levels and survey budget allocation weaknesses. CMS has placed a 

priority on funding state surveys at the expense of certain support 

contracts, such as the development of a new nursing home survey 

methodology. To ensure that states would have to conduct some surveys 

of every facility type each year, CMS distributed the survey requirements 

for several facility types across more than one tier, placing a higher 

priority on surveying the most problematic facilities. At the same time, it 

increased the average time between surveys for many facility types. 

Recognizing that its previous method for allocating Medicare funds for 

state survey activities resulted in over- and underfunding relative to state 

survey requirements, CMS developed a new budget analysis tool in 2005. 

However, use of the tool has been confined to making incremental 

adjustments, rather than baseline reallocations, to Medicare survey 

funding. In addition, the agency asked states to develop contingency plans 

to prepare for possible reductions in Medicare funding. 

CMS Took Modest 

Steps to Address 

Recent Funding 

Trends and Manage 

Survey Funding 

Allocations 

 30AHFSA represents survey agencies from all 51 states. 

Page 16 GAO-09-64 Funding for State Survey Activities
 

Federal funding for state surveys increased from fiscal years 2000 through 

2002 but was nearly flat from fiscal years 2002 through 2007. In inflationadjusted terms, funding increased modestly by 4 percent over the entire 

8 fiscal years, but fell 9 percent from fiscal years 2002 through 2007 (see

app. III). In fiscal year 2008, Medicare funding for survey activities 

increased by about 7 percent after adjusting for inflation.31 Figure 1 

compares overall federal funding for survey activities in actual and 

inflation-adjusted dollars for fiscal years 2000 through 2007.

Figure 1: Federal Medicare and Medicaid Funding for Survey Activities in Actual 

and Inflation-Adjusted Fiscal Year 2000 Dollars, Fiscal Years 2000 through 2007 

Note: Fiscal year 2007 was the last year of complete data for total federal funding. Actual federal 

funding for survey activities increased from approximately $356 million in fiscal year 2000 to almost

$444 million in fiscal year 2007, which is equivalent to a change from $356 million to $371 million 

when adjusted for inflation. 

Federal Funding for 

Survey Activities Was 

Nearly Flat from Fiscal 

Years 2002 through 2007 

0

100

200

300

400

500

600

2000 2001 2002 2003 2004 2005 2006 2007

0

100

200

300

400

500

600

Fiscal year

Inflation-adjusted federal funding

Actual federal funding

Source: GAO analysis of CMS data.

Dollars (in millions) Dollars (in millions)

 31Overall federal funding for fiscal year 2008 survey activities will not be known until the 

end of that fiscal year when final Medicaid expenditures become available. 

Page 17 GAO-09-64 Funding for State Survey Activities
 

For about 3 months in calendar year 2007, CMS charged and retained fees 

for revisits from Medicare facilities.32 In fiscal year 2007, Congress required 

CMS to charge user fees for revisit surveys and to use those fees to cover 

the costs of these surveys.33 That authority was extended through part of 

fiscal year 2008 through a series of continuing resolutions.34 According to 

CMS, the agency sought this authority to encourage Congress to fund 

requested increases in the Medicare survey budget, breaking what they 

perceived to be a cycle of inadequate funding for survey activities.35 The 

agency billed facilities about $8 million during the 3 months that the revisit 

user fee program was in effect. Although this authority was requested in 

the President’s Budget for fiscal year 2008, Congress did not provide it.36

 32In general, agencies have authority to charge fees under the Independent Offices 

Appropriation Act unless prohibited by some other law, 31 U.S.C. § 9701, but may not

retain them unless they have specific statutory authority to do so. See 31 U.S.C. § 3302.

However, the general authority is unavailable to CMS with respect to its survey activities 

because Congress has prohibited CMS from imposing fees for survey activities. 42 U.S.C.

§ 1395aa(e). 

33Revised Continuing Appropriations Resolution, 2007, Pub. L. No. 110-5, § 2, 121 Stat. 8, 33. 

CMS published the final rule for the revisit user fee program in the Federal Register on

September 19, 2007, and the program began on that day. Establishment of Revisit User Fee 

Program for Medicare Survey and Certification Activities, 72 Fed. Reg. 53,628 (Sept. 19, 

2007) (codified at 42 C.F.R. § 488.30). 

34Fees were collected from September 19, 2007 (the date CMS published the final rule for

the revisit user fee program in the Federal Register) through December 25, 2007. A series

of continuing resolutions extended CMS’s authority to charge and retain fees into fiscal 

year 2008 until the Consolidated Appropriations Act, 2008, which did not renew the 

authority, became law on December 26, 2007. See Pub. L. No. 110-92, §101, 121 Stat. 989, 

989 (2007); Pub. L. No. 110-116, div. B, § 101, 121 Stat. 1295, 1341 (2007); Pub. L. No. 110-

137, 121 Stat. 1454 (2007); Pub. L. No. 110-149, 121 Stat. 1819 (2007). CMS published a series 

of Federal Register notices to correspond with its authority to conduct the program under

the continuing resolutions. See 72 Fed. Reg. 61,540 (Oct. 31, 2007); 72 Fed. Reg. 71,579 

(Dec. 18, 2007); 73 Fed. Reg. 3405 (Jan. 18, 2008); 73 Fed. Reg. 11,043 (Feb. 29, 2008). 

35In seeking this authority, CMS requested that fees reduce rather than supplement funding 

from the Medicare Trust Funds. As enacted, the authority did not limit the fees to a 

specified amount or provide for such a reduction from the Medicare Trust Funds. 

36Consolidated Appropriations Act, 2008, Pub. L. No. 110-161, div. G, tit. 2, 121 Stat. 1844, 

2177–78 (2007). 

Page 18 GAO-09-64 Funding for State Survey Activities
 

In response to a decline in inflation-adjusted funding since fiscal year 

2002, CMS modestly increased the amount of Medicare funds targeted for 

state surveys in fiscal years 2005 through 2007 by tapping into its support 

contract funds. For example, in fiscal year 2007, CMS cut Medicare 

funding for support contracts by about 17 percent ($2.7 million) and 

correspondingly increased states’ Medicare allocation for conducting 

surveys by 1.3 percent, ranging from about $9,000 to about $368,000 a state 

(see table 3). A CMS official also told us that the agency has decreased 

funding for and thus slowed the refinement and implementation of the 

new nursing home Quality Indicator Survey (QIS)—a project funded 

through a support contract initiated about 10-years ago that is intended to 

improve the consistency and efficiency of state surveys and provide a 

more reliable assessment of quality.

37 CMS had intended to significantly 

expand implementation from the 5 pilot states, but has only added 3 of the 

13 states interested in transitioning to the QIS. As of May 2008, CMS 

projected that the QIS would not be fully implemented nationally until 

2014, at an estimated cost of about $20 million. According to CMS officials, 

further reductions in support contracts would adversely affect the 

activities funded through the contracts. 

Table 3: Changes in Medicare Support Contract Funding and Funding for State 

Surveys 

CMS Took Modest Steps to 

Address Budgetary Stress 

from Fiscal Years 2002 

through 2007 

Fiscal year

Percentage change in 

support contract funding

(dollar amount)

Percentage change in average 

state funding for surveys 

(minimum and maximum 

funding increases per state)

2005 -8.5 ($1,722,000) 3.8 ($6,000 to $1,304,000)

2006 -16.1 ($2,987,000) 1.1 ($7,000 to $315,000)

2007 -17.2 ($2,684,000) 1.3 ($9,000 to $368,000)

Source: CMS. 

In fiscal year 2006, CMS adopted a risk-based approach for state survey 

requirements in response to declining inflation-adjusted funding since 

fiscal year 2002. This approach entailed distributing the survey 

requirements for several facility types across more than one tier, thus 

ensuring that states would have to conduct some surveys of every facility 

 37The QIS is a two-stage, data-driven survey process intended to systematically target 

potential problems at nursing homes by allowing surveyors to use an expanded sample of

residents and structured interviews. In 2007, CMS concluded a demonstration of the QIS

survey methodology. 

Page 19 GAO-09-64 Funding for State Survey Activities
 

type each year. First, CMS required states to survey a targeted sample of 

the most problematic facilities as a tier 2 priority for many facility types. 

States select 5 percent or 10 percent of facilities, depending on the type, 

from a CMS list that identifies those most at risk of providing poor care. In

addition, CMS moved the previous tier 3 requirement for many facility 

types to tier 4 and increased the average time between surveys for tier 3. 

By doing this, CMS effectively increased the average time between surveys 

in tier 3—for example, from every 6 years to every 8 years—for nine 

facility types whose survey frequencies are not set by statute (see app. II). 

For example, survey requirements for end-stage renal disease facilities—a 

tier 3 priority in fiscal year 2005—were spread across tiers 2, 3, and 4 in 

fiscal year 2006. States were required to survey a 10 percent sample of 

these facilities selected for tier 2, while surveying facilities for tiers 3 and 4 

on an average of 3.5 and 3.0 years, respectively (see fig. 2). The 3-year 

average for tier 4 reflects CMS’s policy for end-stage renal disease facility 

surveys, but CMS acknowledges that Medicare funding may not be 

sufficient for most states to accomplish tier 4 survey priorities. 

Figure 2: Average Survey Frequencies for End-Stage Renal Disease Facilities by CMS Workload Prioritization Tiers, Fiscal 

Years 2005 and 2006 

Source: GAO.

TIER 1

TIER 2

TIER 3 (3.0 year average)

TIER 4

TIER 1

TIER 2 (10% of “problem” facilities)

TIER 3 (3.5 year average)

TIER 4 (3.0 year average)

2005 Distribution 2006 Distribution

All renal disease facilities

were in tier 3, and 

all were required to 

be surveyed on a 3.0 

year average.

10 percent of “problem” 

renal disease facilities

were in tier 2. The 

remaining renal disease 

facilities were distributed 

among tiers 3 and 4 

and were required to be 

surveyed on average 

every 3.5 and 3.0 years, 

respectively.

Note: The filled dots represent the proportion of end-stage renal disease facilities surveyed in each 

tier in each year; the change in the volume of dots between 2005 and 2006 does not represent a 

change in the number of facilities between each year. 

Page 20 GAO-09-64 Funding for State Survey Activities
 

In fiscal year 2007, CMS further increased the average survey frequency in

tier 3 for five facility types from 8 years to 10 years and for one facility 

type from 3.5 years to 4 years.38 Despite this, we found that from fiscal 

years 2000 to 2007 the increased average survey frequency had almost no 

impact on states’ required survey workload. Given the fiscal year 2008 

increase in Medicare funding, CMS decreased the time between surveys 

for many facility types, returning them to approximately fiscal year 2000 

levels (see app. II).39

Despite CMS’s risk-based approach, some state-surveyed facilities have 

not been surveyed for many years.40 About 2,700 facilities (13 percent) 

whose survey frequencies are established by CMS had not been surveyed

in 6 years or more as of September 30, 2007 (see table 4); about 900 

(4 percent) had not been surveyed in 10 years or more.41 Officials from 

both CMS and most of the states we contacted told us that the time 

between surveys for facilities without statutory survey frequencies was 

too long, which can increase the risk for quality problems. For example, 

officials from several states told us that they cite deficiencies more often, 

or the deficiencies are more serious, at facilities that are surveyed 

infrequently. Officials from one state said that facility administrators might 

become complacent about meeting federal quality standards during the 

lengthy periods between surveys. Officials from another state told us that, 

in 2006, surveyors of hospices in their state cited serious deficiencies on

four out of eight surveys. Many state officials said that the survey 

frequency for all facilities that are not set by statute should be every 2 to 

3 years. 

 38Fourteen of the 28 states we contacted told us that they survey some providers more

frequently than CMS requires. For example, Florida, Pennsylvania, and Washington survey

unaccredited hospitals every year, every 2 years, or every 1-1/2 years, respectively. 

39Starting in fiscal year 2008, CMS switched from an average to a maximum survey interval 

for facilities in tier 3 in order to (1) increase its ability to hold states accountable, 

(2) increase the clarity of the expectation, and (3) increase the integrity of the measure. 

However, tier 4 survey frequencies remained an average frequency of all facilities in that 

tier. 

40Our analysis excluded accredited facilities. 

41Approximately 74 percent of facilities that had not been surveyed within fiscal year 2007

survey frequencies were in 11 states: Alabama, California, Colorado, Illinois, Louisiana, 

Maryland, Michigan, New York, North Carolina, Ohio, and Pennsylvania. 

Page 21 GAO-09-64 Funding for State Survey Activities
 

Table 4: Facilities with Survey Frequencies Established by CMS That Have Not 

Been Surveyed in 6 Years or More, as of September 30, 2007 

Facilities that have not been 

surveyed in 6 years or more

Facility type Number Percentage 

Non-accredited ambulatory surgical center 783 20%

Outpatient physical therapy provider 531 18%

Rural health clinic 511 14%

Non-accredited hospice 292 11%

End-stage renal disease facility 260 5%

Portable X-ray service 142 25%

Non-accredited hospital 84 5%

Comprehensive outpatient rehabilitation facility 67 12%

Total 2,670 13%

Source: GAO analysis of OSCAR data. 

CMS’s Attempts to 

Increase the Effectiveness 

of the Survey Budget 

Allocation Process Have 

Had a Limited Impact 

CMS’s attempts to make the survey budget allocation process more 

effective have had a limited impact. In fiscal year 2005, it began using a 

budget analysis tool to more equitably distribute funding to states. It also 

asked states to develop contingency plans to deal with the uncertainty 

about state funding due to the timing of the Medicare budget allocation 

process. 

The budget analysis tool was designed to address funding inequities 

resulting from CMS’s previous method for allocating Medicare funds for 

state survey activities, but its impact has been limited. Previously, CMS 

determined states’ allocations based on their past spending, but this 

method did not guarantee that funding levels accurately reflected state 

workloads—some states received too much funding given their survey 

workloads, others too little. For example, regional office staff told us that

a state hiring freeze in the 1990s caused severe understaffing for one state

in their region. One year, this state spent significantly less than its 

Medicare allocation because it was unable to hire staff. Consequently, the 

following year this state’s Medicare funding increases reflected the 

previous year’s low level of expenditures and the relatively low level of

Medicare funding has been carried forward every year. CMS officials 

chose not to use the tool to recalculate states’ base allocations to avoid 

Budget Analysis Tool 

Page 22 GAO-09-64 Funding for State Survey Activities
 

shifts that could result in layoffs of trained staff. CMS officials anticipated 

that over time the use of the budget analysis tool would incrementally 

align state funding with workload.42

The budget analysis tool allows CMS to measure state survey workload 

against funding and compare the match of workload to funding across 

states. It uses both state-specific and national data to measure state survey

requirements, such as hours needed to perform surveys, and states’ costs 

for conducting survey activities, such as salaries, as well as fringe benefits 

for those staff, training, and travel. While state-specific data are used to 

calculate workloads for nursing homes, national averages are used for 

other facilities because they are surveyed so infrequently. The tool makes 

final adjustments based on regional office analysis and other factors. The 

tool then scores each state from 1 (less well-funded, relative to other 

states) to 5 (better funded) given the state’s workload (see fig. 3). In 2005, 

10 states scored 1 and 15 states scored 4 or 5. In 2008, 7 states had a score 

of 1 while 14 had a score of 4 or 5. 

An agency official acknowledged that there are limitations in the tool’s 

effectiveness. First, state scores do not account for state enforcement 

activity or the fixed costs associated with administering survey activities.

Second, CMS officials told us that they did not know how long an efficient 

survey should take and could not assess whether the considerable 

interstate variation in the length of surveys was appropriate. Third, statespecific data are limited for most facility types other than nursing homes 

because they are surveyed less frequently. 

 42The budget allocation process will gradually reflect changes that affect states’ survey 

expenditures. For example, officials from one state told us that, in 2006, the state 

experienced a dramatic increase in its travel reimbursement; however, these increased 

costs were not reflected immediately in the state’s Medicare funding since the budget

allocation process still largely considers states’ historical expenditures. 

Page 23 GAO-09-64 Funding for State Survey Activities
 

Figure 3: Budget Analysis Tool, Including Component Parts

Source: GAO.

Survey requirement + Costs + Adjustment = Score

Total survey hours required by type of 

facility and type of survey. Includes travel 

for each facility type.

Medicare share of salaries, 

fringe benefits, training, 

and travel.

Projected surveys required 

(including standard and complaint).

Adjustments for other state-specific 

conditions, such as additional funding, 

complaint workloads, differing survey 

hours, or surveyor ratios.

CMS has used the budget analysis tool five times: (1) twice to distribute 

annual increases in Medicare funds to states (after allocating a small 

across-the-board inflation increase), and (2) three times to redistribute 

Medicare funds at the end of the fiscal year to states that spent more than 

their initial allocations by using state funds and had requested 

supplemental funding. In fiscal year 2005, CMS used the tool to distribute a 

3 percent increase in survey funding, which translated into a 0.5 percent to

9.5 percent increase depending on the state. In fiscal year 2008, average

increases to states ranged from about 10 percent for states which scored 1 

to about 6.5 percent for states which scored 5. In fiscal years 2005 through 

2007, CMS used the tool to redistribute year-end supplemental funding to 

states, but the amount to be redistributed has shrunk in recent years. For

example, CMS had about $6 million available to redistribute in fiscal year 

2005 but only about $2.5 million in fiscal year 2007. 

To help address uncertainty about federal Medicare funding levels, CMS 

asked states to develop a baseline budget and contingency plans for a 

specified reduction or increase to the baseline for fiscal years 2007 and

2008.

43 In general, CMS communicates state-projected allocations in 

August, before the beginning of the next federal fiscal year. These 

State Contingency Budget 

Plans 

 43In fiscal year 2007, CMS asked states to develop contingency plans to accommodate a 

0.5 percent reduction and an increase ranging from 0.5 percent to 3.5 percent, depending

on the state’s budget analysis tool score. For fiscal year 2008 funding, CMS asked for 

contingency plans to accommodate a reduction from 0.5 percent to 2.5 percent and an

increase ranging from 1.5 to 2.5 percent, again depending on the state’s budget analysis tool 

score. After the fiscal year 2007 and 2008 appropriations were enacted, CMS communicated

states’ actual Medicare allocations. 

Page 24 GAO-09-64 Funding for State Survey Activities
 

projected allocations may be more or less than the final allocation and, for

the past several years, CMS’s budget for state survey activities has not 

been finalized until 6 to 8 months later. CMS acknowledged the 

uncertainty that resulted from states not knowing their final Medicare 

allocations until well into the state fiscal year, which for most states 

begins on July 1. 

Regional office and state officials identified several problems that can 

result from finalizing states’ Medicare allocations late in the state fiscal 

year. First, officials from one regional office told us that states had to 

conduct their survey work cautiously until they received their final 

Medicare allocations, which could be less than initially projected. In some 

cases, the uncertainty may cause states to defer some of their surveys until 

the end of the fiscal year, potentially causing them to spend less than their 

Medicare allocations. Second, officials from one state told us that if their 

Medicare allocation was less than initially projected, they would have to 

cut staff or other direct costs such as travel—all essential to completing 

their survey workload. Third, officials from another state said that the lag 

in receiving their final Medicare allocation further delayed hiring new 

staff. 

Only one state, Arkansas, was able to complete all surveys in tiers 1 

through 3 in fiscal year 2006, but pinpointing the cause is difficult because

(1) several factors such as workload, funding, staffing, and management 

could have had an impact and (2) distinguishing the extent to which each 

factor contributed to state completion rates and the quality of each states’ 

surveys is challenging. Overall, we found that states’ required survey 

workload—the workload that states would have to complete to meet 

statutory and CMS survey frequency requirements—decreased 4 percent 

from fiscal years 2000 to 2007. This decrease was due to a decline in the 

number of the most frequently surveyed facilities that also require more 

time to survey compared to other facilities. This decline offset the 

workload increase from the overall growth in the number and type of 

other facilities subject to surveys over the same time period. It is unclear 

how states’ complaint investigation workload changed over this same time 

period because CMS lacks reliable and consistent state data on complaints 

received and investigated. According to CMS, the agency adjusts the 

survey priorities in tiers 1 through 3 so that the workload is feasible given 

Medicare funding levels, but the states we contacted disagree. However, 

some of the states we contacted that spent significantly more than their 

initial Medicare allocations still did not complete all surveys in those tiers. 

Sixteen of the 28 states we contacted were unable to spend their entire 

Almost All States 

Were Unable to

Complete Their 

Survey Workload, and 

Pinpointing the Cause 

Is Difficult 

Page 25 GAO-09-64 Funding for State Survey Activities
 

Medicare allocations, most indicating that this was due to high surveyor 

attrition rates and hiring freezes. Though many states believe that 

noncompetitive surveyor salaries contribute to attrition, states, not CMS, 

establish those salaries. In two states, CMS concluded that poor 

management of the survey process had compromised the quality of state 

surveys, but acknowledged that in one of the states staffing levels, salaries, 

and other issues may have been a contributing factor. 

Almost All States Were 

Unable to Complete CMS’s 

Survey Priorities Despite 

Decreases in the Required 

Survey Workload 

CMS state performance reviews for fiscal years 2006 and 2007 found that 

few states were able to complete or nearly complete all surveys in tiers 1 

through 3, despite decreases in the required survey workload from fiscal 

years 2000 to 2007.44 However, the impact of complaint investigations and 

revisits on state workloads during this time period is unclear because the 

data were not complete or reliable. 

Only one state, Arkansas, was able to complete its surveys in all three tiers 

in fiscal year 2006.45 Seventeen states did not complete their tier 1 surveys 

in fiscal year 2006 and, as a result, were assessed deductions totaling 

$298,200 from their fiscal year 2007 Medicare survey allocations (see 

table 5).46 Thirty-five states were unable to complete their tier 2 surveys 

and 46 states were unable to complete their tier 3 surveys. Some states 

narrowly missed completing surveys in one or more tiers, while others 

missed completion by a wide margin. For example, in fiscal year 2006 one

state completed 99.9 percent of the surveys of intermediate care facilities 

for the mentally retarded, while another state completed only 33 percent

of such surveys, but CMS rated both states as not meeting the survey 

workload.47 Counting the few states that narrowly missed the standards as 

Completion of CMS Survey 

Priorities 

 44In state performance reviews, CMS only examines states’ accomplishment of the agency’s 

workload priorities in tiers 1 through 3 because CMS believes funding is not sufficient for

states to complete tier 4 priorities. 

45Two other states completed almost all of their workload in tiers 1 through 3. Pennsylvania 

completed 99.6 percent of home health agency surveys and Tennessee completed 

99 percent of surveys for home health agencies and immediate care facilities for the 

mentally retarded. 

46The nationwide completion rates for nursing home (at least every 15 months) and home 

health agency (every 3 years) surveys have improved significantly since 2000 when states 

only accomplished about 96 percent and 89 percent of such surveys, respectively. In 2006

and 2007, the nationwide completion rates were 99.9 percent and 99.7 percent, respectively. 

47The state that completed almost all of these surveys had over 1,000 intermediate care 

facilities for the mentally retarded.

Page 26 GAO-09-64 Funding for State Survey Activities
 

passing had little impact on the results presented in table 5. These results 

were similar in fiscal year 2007—25 states were unable to complete their 

tier 1 surveys, 34 did not complete tier 2 surveys, and 41 did not complete 

tier 3 surveys. CMS officials believe that recent Medicare funding levels 

have been sufficient for states to complete surveys in tiers 1 through 3. 

Table 5: Number of States That Completed Required Surveys by Tier as Reported

by CMS, Fiscal Year 2006 

Tier 

Number of states that 

completed requirement 

Number of states that did

not complete requirement

1 34 17

2 16 35

3 5 46

Source: CMS. 

States’ required survey workload—the workload that states would have to 

complete to meet statutory and CMS survey frequency requirements—

decreased nationally from fiscal year 2000 to fiscal year 2007, even though 

the number and type of facilities subject to surveys during that period 

increased. The decrease in the required survey workload was due 

primarily to the decline of more than 1,100 nursing homes and 300 

intermediate care facilities for the mentally retarded (see app. IV). 

Declines in these two facility types offset overall increases in other 

facilities subject to surveys because nursing homes and intermediate care 

facilities for the mentally retarded are comparatively the most resourceintensive facilities to survey: (1) statute dictates that nursing homes and 

intermediate care facilities for the mentally retarded must be surveyed 

approximately every 12 months, and (2) their surveys take longer than 

most other facilities to complete. For example, even though the number of 

ambulatory surgical centers increased by 31 percent from fiscal year 2000 

to fiscal year 2007, the increase had a small impact on the required survey

workload because on average ambulatory surgical centers require 

26 hours to survey and, as of fiscal year 2007, only had to be surveyed once 

every 10 years to meet tier 3 workload priorities; in contrast, nursing 

homes take 157 hours to survey and their surveys are tier 1 workload 

priorities that must occur an average of every 12 months. After factoring in 

both average survey hours and required frequencies, 1 less nursing home 

can offset the workload increase of 60 new ambulatory surgical centers 

(see fig. 4). Surveys of nursing homes and intermediate care facilities for 

the mentally retarded together accounted for about 93 percent of states’ 

required survey workload in fiscal year 2000 and 91 percent of states’ 

Decline in Required Survey 

Workload 

Page 27 GAO-09-64 Funding for State Survey Activities
 

required survey workload in fiscal year 2007; all other surveyed facilities 

accounted for less than 10 percent of the workload in both years.48 When 

all facilities are considered, the required survey workload decreased by 

about 4 percent (see fig. 5).49 Almost all of the decrease was due to the 

decline in nursing homes and intermediate care facilities for the mentally 

retarded; the increase in the interval between surveys had a negligible

impact. 

Figure 4: Formula to Estimate Required Survey Workload as Applied to Nursing

Homes and Ambulatory Surgical Centers as of Fiscal Year 2007 

Source: GAO (analysis), Art Explosion (clip art).

Formula applied 

to a nursing

home

1

nursing 

home

Annually

(100 percent 

of all homes)

157.1

hours per

home

157.1 survey 

hours

per year 

per home

x

x

=

1

ambulatory

surgical 

center

Every 10 

years

(10 percent 

of all centers)a

26.3

hours per 

center

2.6 survey 

hours

per year 

per center

x

x

=

Formula applied

to an ambulatory

surgical center

1

nursing

home

60

ambulatory

surgical

centers

a

On average, 10 percent of ambulatory surgical centers are surveyed annually. 

 48The impact on the required survey workload of facilities inspected by accrediting 

organizations was smaller than the number of facilities might suggest. Between December

2000 and December 2007, the number of facilities inspected by accrediting organizations 

increased by 39 percent from 5,399 to 7,488. Even though the increase is significant, CMS 

only requires that between 1 percent and 5 percent of these accredited facilities receive 

state validation surveys each year. 

49We also examined the required survey workload by state (see app. V). 

Page 28 GAO-09-64 Funding for State Survey Activities
 

Figure 5: Decline in Required Survey Workload (the Completion of Surveys within 

the Time frames for which CMS Holds States Accountable), Based on the Number 

of Facilities and Average Survey Hours, December 2000 to December 2007 

Hours (in thousands)

0 500 1000 1500 2000 2500 3000 3500

2007

2000

All others

Hospitals

End-stage renal disease facilities

Home health agencies

Intermediate care facilities for the mentally retarded

Nursing homes

Fiscal year

-4%

Source: GAO analysis of CMS data.

Note: In 2000, nursing homes comprised 80 percent of the required survey workload, intermediate 

care facilities for the mentally retarded were 12 percent, home health agencies were about 3 percent, 

end-stage renal disease facilities and hospitals were about 1 percent each, and all other categories

were less than 1 percent. In 2007, nursing homes were 79 percent, intermediate care facilities for the 

mentally retarded remained 12 percent, home health agencies were about 4 percent, end-stage renal 

disease facilities were about 2 percent, hospitals were about 2 percent, and all other categories were 

less than 1 percent. 

The disproportionate impact of decreases in nursing homes and 

intermediate care facilities for the mentally retarded on states’ required 

survey workload is illustrated by Washington. From fiscal year 2000 to 

fiscal year 2007, the number of facilities subject to surveys in Washington

increased by about 16 percent due largely to growth in ambulatory surgical

centers, end-stage renal dialysis centers, and rural health centers. In fiscal 

year 2007, these facility types were subject to surveys on average every 10, 

4, and 10 years, respectively. During the same period, however, 

Washington experienced decreases in the numbers of nursing homes and 

intermediate care facilities for the mentally retarded, which, on average, 

are surveyed every 12 months. As a result, the number of surveys that 

Washington was expected to conduct each year decreased about 

9 percent; when average survey hours are taken into account, the state’s 

required survey workload decreased by 11 percent. Eleven states—

Alabama, Alaska, Delaware, Florida, Georgia, Mississippi, New Jersey, 

North Carolina, Texas, Utah, and Virginia—experienced increases in their 

Page 29 GAO-09-64 Funding for State Survey Activities
 

required survey workload, ranging from less than 1 percent to about 

8 percent (see app. V). 

In addition to changes in the number and type of facilities subject to 

surveys, two other survey activities as well as survey process 

improvements could have affected states’ overall workload, but the results 

for complaints and revisits were unclear because the data were not 

available or reliable.50 It is difficult to discern from the data whether survey 

process improvements contributed to the small increases from fiscal years 

2000 to 2007 in average survey hours for most facility types. 

Workload Impact of 

Complaints, Survey Process 

Improvements, and Revisits 

• Complaint investigations. Although complaint investigations represent 

a significant portion of state workload, CMS officials told us that the 

agency lacks complete and reliable data on complaints received and 

investigated.

51 CMS implemented a new complaint database in 2004 but 

officials told us that the data are not reported consistently.52 First, a few 

states either do not report complaints in the CMS database or investigate 

complaints under state licensure, thus underreporting the number of 

complaints in the database. Second, states may not be consistently 

reporting complaints. According to CMS, the agency instructs states to 

differentiate between facility-reported incidents, which they can choose to 

investigate as complaints, and complaints received from residents, family 

members, or others. According to CMS, however, some states report few if 

any facility-reported incidents. Third, CMS believes that some states may 

be overestimating the number of complaints by reporting complaints 

received and investigated during standard surveys in the CMS complaints 

database. According to CMS, about 15 percent of complaints are 

investigated during standard surveys. 

Although the changes in the complaint workload are difficult to quantify,

both CMS and state officials told us that resource constraints have 

hampered complaint investigations. For example, according to both CMS 

and state officials, states may be bundling complaints—waiting until they

 50Revisits take place when state surveyors identify serious deficiencies that require 

additional on-site visits to ensure that the deficiencies have been corrected. 

51For example, the President’s fiscal year 2007 budget request estimated that the number of

complaint investigations were almost double the number of state surveys.

52In October 1999, CMS instructed states to investigate nursing home complaints alleging 

actual harm within 10 working days. A primary objective of survey funding increases in 

fiscal years 1999 and 2000 was to enable states to hire additional nursing home surveyors, 

particularly to perform complaint surveys.

Page 30 GAO-09-64 Funding for State Survey Activities
 

receive two to three complaints about a particular facility and then 

investigating them all at the same time—resulting in less timely complaint 

investigations. One state now sends in one surveyor to investigate 

complaints rather than two or three, which had been a more typical team 

size. Officials from a different state expressed concern that complaint 

bundling may affect the adequacy of their investigations. State officials 

stressed that the unpredictable nature of complaint investigations can be 

disruptive to scheduling and completing standard and validation surveys. 

State officials told us that CMS does not adequately fund complaint 

investigations and that CMS expects states to use their own funds. 

According to CMS officials, the amount identified for such investigations 

in the fiscal year 2008 President’s budget request does not fully fund all 

anticipated complaint investigations. We believe, however, that it is 

appropriate for states to cover the additional costs of completing 

complaint investigations within state time frames that are more stringent 

than federal requirements. For example, both California and Pennsylvania

require all investigations to be initiated within 10 days, while CMS requires 

such rapid investigations only for complaints alleging immediate jeopardy 

or actual harm. In contrast, Florida requires all complaints to be 

investigated within 90 days. We believe that it is difficult to determine the

appropriate federal funding level for complaint investigations without a 

complete estimate of the complaint workload. 

• Revisits. CMS does not have reliable and complete data on revisits from 

fiscal years 2000 to 2004 due to changes in how revisit survey activities 

were reported across states. As a result, it is not possible to fully account 

for the impact of revisits on states’ overall survey workload. However, 

CMS data for fiscal years 2005 to 2007 show that the revisit workload 

declined by 4 percent. Revisits for standard surveys accounted for 

approximately 8 percent of states’ survey workload in fiscal year 2007 and 

nursing homes and intermediate care facilities for the mentally retarded 

constituted about 85 percent of states’ revisit workload in 2007. We believe 

that the decline in revisits for fiscal years 2005 to 2007 is consistent with 

states’ overall decline in survey workload since fiscal year 2000. 

• Survey process improvements. To improve the quality of state surveys,

CMS has implemented new directives and more stringent standards for 

surveys, which CMS believes have increased states’ survey workload. For 

example, CMS added new survey requirements for hospices and end-stage 

renal disease facilities and required states to include in their surveys home 

health and outpatient physical therapy locations (branches and 

extensions, respectively) that are under the supervision of a licensed 

Page 31 GAO-09-64 Funding for State Survey Activities
 

facility. According to one state we interviewed, new requirements 

(1) increase the time required to conduct surveys and (2) require 

additional surveyor training, which decreases productivity and is not 

reflected in recorded survey hours. Although new requirements that result 

in additional time to conduct surveys should be reflected in the survey 

hours that states report, CMS expressed doubt that survey hours were 

actually increasing as a result of these initiatives because it believes that 

states lack adequate resources to carry them out. Data for fiscal years 2000 

to 2007 show small increases in average survey hours for most facility 

types; however, it is difficult to determine whether these changes are due

to the new requirements or to factors such as surveyor experience levels.

Several other factors—funding, staffing, and management of the survey 

process—may have an impact on states’ ability to complete survey 

workloads and these factors also influence the quality of surveys. These 

factors are often interrelated and can play out differently in each state. 

States disagree with CMS’s position that there is sufficient funding to 

complete the workload in tiers 1 through 3, primarily because of 

workforce instability due to noncompetitive salaries. However, states, not 

CMS, establish these salaries and manage the workforce and the survey 

process. 

CMS established the tiered survey priorities to ensure that Medicare 

funding was sufficient for states to complete surveys in tiers 1 through 3.53

While most of the states we contacted believe that CMS’s expectations are 

unreasonable, the data suggest the influence of factors other than the 

federal Medicare allocation. For example, 16 of the 28 states we contacted

spent more than their fiscal year 2006 initial Medicare allocations, but 

none were able to complete all required surveys in these three tiers. Seven 

of these states were unable to complete even their tier 1 requirements—

those that are statutorily mandated. For example, Missouri spent more 

than its fiscal year 2006 initial Medicare allocation and was able to 

complete all of its surveys in tiers 2 and 3 but failed to complete its entire

tier 1 workload. On the other hand, 16 of the states we contacted spent 

less than their Medicare funding for fiscal years 2000 through 2006, 11 of 

these states spent less than their fiscal year 2006 allocations. For some of 

these states, the ability to spend Medicare allocations—not the Medicare 

funding level itself—affected their ability to complete the required surveys. 

Multiple Factors May 

Affect States’ Ability to 

Complete Survey 

Workloads

Funding Sufficiency

 53The Medicare funding penalties that CMS assesses when states fail to complete all tier 1 

surveys underscore that at a minimum a state should be able to complete all such surveys. 

Page 32 GAO-09-64 Funding for State Survey Activities
 

Officials from 23 of the states we contacted told us that an additional 

$35 million in cumulative Medicare funding was needed, primarily to 

increase surveyor salary levels so that states could fill staff vacancies and 

offer incentives to retain current staff, issues that they believe have 

significantly inhibited their ability to complete required surveys.54

Conversely, officials from 4 states told us they did not need any additional 

Medicare funding.55

Officials from AHFSA and many of the 28 states we contacted told us that

an unstable workforce had affected their ability to meet CMS survey 

priorities over the past several years. The workforce instability arises 

mostly from noncompetitive salaries, which result in the hiring of less 

qualified candidates, and hiring freezes.56 Salary levels, minimum 

qualifications, and decisions about when to hire or not hire surveyors are 

the result of state personnel policies that affect surveyor positions as well 

as positions for other state employees. 

According to AHFSA and state officials, staff retention issues among states 

can be attributed primarily to noncompetitive salaries for RNs—the 

profession that comprises the largest proportion of surveyors nationally. 

In fiscal year 2006, the surveyor attrition rate among the 28 states we 

contacted ranged from 0 percent to about 46 percent, and 17 of these 

states reported attrition rates of 10 percent or higher. Officials from one 

state told us that the starting salary for their RN surveyors ranged from 

$30,000 to $35,000 and that trained RNs typically leave surveyor positions 

after a few years to seek jobs in the private sector for higher salaries. The 

average salary for RN surveyors in the 28 states we contacted was about 

$59,000 in fiscal year 2006 and ranged from about $37,000 to about 

$88,000.57 More recently, some states have been able to increase surveyor 

salaries from previous levels to compete with the private sector. For 

instance, in one state, the salaries of experienced surveyors increased by

Workforce Instability

 54In fiscal year 2008, Medicare survey and certification funding increased approximately 

$23 million. 

55One state did not respond to this question. 

56We first reported on this issue in 2003. See GAO, Nursing Home Quality: Prevalence of 

Serious Problems, While Declining, Reinforces Importance of Enhanced Oversight, 

GAO-03-561 (Washington, D.C.: July 15, 2003). 

57This salary range reflects variation across states in experience and education levels for

RN surveyors. For example Washington only hires RNs with master’s degrees and 10 years

of experience, while other states hire RNs with no experience. 

Page 33 GAO-09-64 Funding for State Survey Activities
 

about 28 percent in fiscal year 2007. However, officials from 13 states are 

concerned that any increase in surveyor salaries may not be sustainable in

the long-term without increases in state Medicare allocations. Without an 

increase, these states indicate that they may have to lay off staff, which 

would adversely affect their ability to complete the survey workload. 

According to AHFSA officials, states have hired applicants that are less 

qualified for surveyor positions due to noncompetitive surveyor salaries. 

They told us that some states formerly hired RN surveyors with bachelor’s 

degrees, but given current salary levels, these positions may only be 

attractive to licensed practical nurses with 2-year rather than 4-year 

degrees. States are also hiring nurses with less nursing experience to fill 

the positions. Of the 28 states we contacted, 6 states offered surveyor 

positions to applicants with no prior experience. AHFSA officials believe 

that inexperienced surveyors tend to be less productive and require 

increased supervision and oversight.

Hiring freezes have also affected states’ abilities to manage their survey 

workloads. During the past few years, some states temporarily suspended 

the hiring of state employees due to state budget deficits. Consequently, 

states had to suspend hiring of surveyors, even though they may have had 

sufficient federal funding to support the additional staff. Of the 28 states 

we contacted, 16 states spent less than their Medicare budget allocations 

from fiscal years 2000 through 2006 and 14 of them identified hiring 

freezes or vacancies as the primary reason. With consistently high 

turnover rates among these states’ surveyors, the hiring freezes prevented 

states from filling vacant positions. 

Given workforce instability, states told us that they have adjusted how 

they manage surveys to meet CMS priorities. Some states adjust the size of 

a survey team depending on the availability of staff. Of the 28 states we 

contacted, officials from 20 states indicated that they reduced the survey 

team size or restricted the time a surveyor is allowed to spend in a facility 

in fiscal year 2006. Officials from one of these states explained that, in the

past, a survey team may have consisted of four surveyors plus a specialist,

but now a survey team only consists of three surveyors. As noted earlier, 

they also told us that a state may send one surveyor to investigate several 

complaints whereas previously, multiple surveyors were sent to 

investigate complaints. Additionally, a state may limit or restrict the time a

surveyor is allowed to spend in a facility to ensure that other facilities are 

surveyed and the state meets CMS performance measures. As a result, 

officials from 11 states told us that surveyors do not have enough time to

conduct thorough surveys. 

Survey Process Management 

Page 34 GAO-09-64 Funding for State Survey Activities
 

Although states may complete surveys in a given tier, this does not ensure 

that the surveys are thorough. CMS’s 2006 state performance review 

indicated that Missouri, Oklahoma, New Mexico, South Carolina, South 

Dakota, Tennessee, and Wyoming completed all of their nursing home 

surveys within the statutorily required time frames. But, as we previously 

reported, more than 25 percent of federal comparative surveys conducted 

in these states from fiscal years 2002 through 2007 found that state 

surveyors had missed serious deficiencies.58 For example, South Carolina 

missed at least one serious deficiency on 6 of the 18 comparative surveys 

during those 6 fiscal years, with an overall total of 19 missed deficiencies 

that caused harm or placed residents in immediate jeopardy.

In one of these states, CMS told us that performance issues raised 

concerns about the management of survey activities. For example, 

26 percent of federal comparative surveys conducted in Tennessee from 

fiscal years 2002 through 2007 found that state surveyors had missed 

serious deficiencies. Moreover, the results of federal observational surveys 

from this same time period indicated that the proportion of Tennessee 

surveyors with below satisfactory ratings in investigative skills and 

deficiency determination was more than double the national average. A 

new director took over the state survey agency in October 2007 and, due 

to the surveyor performance issues and staff turnover, brought in CMS 

regional office staff to assist in retraining all of the state’s surveyors. 

Unlike these seven states, about 93 percent of Alabama’s nursing home 

surveys in fiscal year 2007 were not completed within the maximum 

15.9 month interval. In a June 2007 letter to the state, CMS described these 

results as alarming and asked Alabama to develop an action plan in 2007 to 

address persistent weaknesses in state performance. The agency used 

both comparative and observational data from federal monitoring surveys 

to highlight persistent weaknesses in the survey process to Alabama state

officials. Although CMS recognized that the state’s inability to complete 

surveys could be due to staffing levels, salaries, and other issues, CMS 

ultimately concluded that Alabama needed to improve organization, 

management, and oversight of all regulatory systems and functions. 

Quality of Surveys 

 58See GAO-08-517. 

Page 35 GAO-09-64 Funding for State Survey Activities
 

CMS oversight of states’ use of funds for survey activities is limited. To 

oversee how states spend federal funds, CMS regional offices we spoke 

with now rely primarily on off-site reviews of state reports documenting 

their expenditures and workload, but there are limitations to relying on 

such reports, including their accuracy. In eliminating the budget and 

financial standard from annual state performance reviews in 2006, CMS 

redefined these financial responsibilities as core state functions, but not 

all regional offices we reviewed are attempting to hold states accountable

for ensuring the appropriate application of costs to Medicare, Medicaid, 

and state licensure programs. We also found that regional offices we spoke 

with had taken a variety of approaches to determining non-Medicaid 

contribution rates for the states in their regions. Most told us that these 

rates have not been reviewed in recent years, even though federal survey 

and state licensure requirements may have changed over time. Regional 

officials told us that they do not verify that states actually contributed 

funds in a manner consistent with their shares, noting limits on their 

authority to require state data and states’ refusal to provide it voluntarily. 

However, CMS assumes that the cost for a state to operate a survey 

program is higher than the amount CMS provides them and the agency is 

convinced that states were likely contributing more than their fair share to 

survey activities. Finally, most regional offices we spoke with do not 

require states to justify requests for supplemental Medicare funds. As a 

result, it is difficult for CMS to determine whether expenditures in excess 

of a state’s initial Medicare allocation represent the state’s non-Medicaid 

share of survey costs. 

To oversee states’ use of federal funds for survey activities, the five CMS 

regional offices we spoke with now rely primarily on the off-site review of 

reports on expenditures, workload, and survey hours that states submit 

during the fiscal year, but reliance on such reports for financial oversight 

has limits.59 CMS’s central office believes that the majority of the analyses 

regional offices are expected to perform as part of their oversight can now 

be accomplished using the reports states submit. In contrast, officials from 

four of the five CMS regional offices we spoke with generally told us that 

in the 1990s, they either conducted more formal, on-site reviews or more 

detailed reviews of systems, such as those used for time and effort 

reporting, which served as the basis for states’ allocations of survey costs 

CMS Oversight of 

States’ Use of Funds 

Is Limited 

Regional Office Oversight 

Now Relies on StateReported Data 

 59Of the 28 states that we contacted, only 2 reported to have been audited by CMS regional 

office officials since 2000. 

Page 36 GAO-09-64 Funding for State Survey Activities
 

to Medicaid, Medicare, and state licensure programs. This allowed 

regional offices to verify the accuracy of states’ expenditures and ensure 

that states complied with financial procedures established by CMS. 

Effective fiscal year 2006, CMS eliminated the state performance review 

standard that focused on states’ budget practices and financial reporting 

and redefined these financial responsibilities as “core” functions that 

states were required to perform. As a part of the state performance review, 

the state’s budget practices were evaluated against 14 elements to 

determine if the state used acceptable methods for (1) charging the federal

programs, and (2) monitoring the current rate of expenditures and planned 

workload. Two of these 14 elements dealt with the appropriate application 

of program contribution rates across Medicare, Medicaid, and state 

licensure programs. Specifically, states must provide reasonable 

assurances that survey and certification costs were appropriately applied 

to the Medicare, Medicaid, and state licensure programs for all items and 

costs in their budgets and across providers and suppliers and the various 

types of facilities. According to CMS, however, regional offices are still 

expected to ensure that states are fulfilling their responsibilities under the 

standards, but only one of the five regional offices we spoke with (San 

Francisco) determines whether or not it has reasonable assurances that 

survey and certification program costs are appropriately applied to 

Medicare, Medicaid, and state licensure programs. Two other regional 

offices (Chicago and Dallas) inspect state records regarding the 

application of program costs across the three programs, but do not 

determine reasonable assurance of this accounting. Two regional offices

(Atlanta and New York) have not incorporated these two elements into a 

review of this standard and its oversight of state survey activities. 

Relying primarily on state-reported expenditure data for federal financial 

oversight has limits. Since fiscal year 2002, states have been required to 

submit their financial information electronically through a Web-based, 

automated reporting system provided by CMS. Regional office officials 

have expressed concern regarding whether state expenditures are 

accurately reported through this system, as there have been instances 

where errors were discovered in states’ expenditure reports well after 

their submission. For example, Washington state officials told us that they

identified a significant error on the state’s expenditure report for fiscal 

year 2006. In reporting the amount of staff time it took to complete its 

workload, the state provided the data in terms of months, though it was 

required to provide staff time in years. As a result, the information in the 

expenditure report was contradictory. In addition, officials from the Dallas 

regional office told us that Texas underreported its expenditures in fiscal 

Page 37 GAO-09-64 Funding for State Survey Activities
 

years 2003 and 2004 due to errors that resulted as the state transitioned to 

a new accounting system. The error was not discovered until the Medicare 

funds the state appeared not to have spent had been reallocated to other 

states. Officials from the Chicago regional office told us that it is difficult 

to verify the figures presented on state expenditure reports because of 

delays by many states in entering information into OSCAR, which regional 

offices may use to verify states’ expenditures. Also, a lack of timeliness in 

reporting such information can limit regional office oversight efforts. For 

example, in its review of Delaware’s survey expenditures for fiscal years 

1998 and 1999, HHS’s OIG found that, in addition to not having sufficient 

internal controls for preparing accurate reports of its Medicare and 

Medicaid expenditures, the state did not file its fiscal year 1999 

expenditure reports on time. 

The contribution rates for states in the five regions we spoke with were 

determined using different methodologies and in most cases have not been 

reviewed in recent years. Moreover, states are not required to report their 

non-Medicaid state expenditures to CMS and, as a result, the agency has 

no way of verifying that states are contributing their own funds 

appropriately. Nonetheless, CMS central office and regional office officials 

we spoke with generally assume that the cost of conducting survey 

activities is greater than the federal funds provided. Consequently, they 

believe states are contributing more than their fair share to the cost of 

survey activities and that the exact amount of the non-Medicaid state 

contribution is less important. 

CMS guidance reflects the complexity of establishing equitable state 

shares and acknowledges that regional office staff must be knowledgeable 

about state licensure requirements to negotiate states’ non-Medicaid 

contribution rates. For 21 states, the non-Medicaid state share for nursing 

homes ranged from 12 to 48 percent (see table 6). Regional offices we 

spoke with have taken a variety of approaches to setting these rates. In 

some regions, regional office staff determined the rates, while in other 

regions the states determined the rates themselves. 

Non-Medicaid State 

Contributions Are Based 

on Long-standing Rates 

That Are Not Reviewed 

and Vary Greatly by CMS 

Regional Office 

Page 38 GAO-09-64 Funding for State Survey Activities
 

Table 6: Range of Medicare, Medicaid, and Non-Medicaid State Contribution Rates 

(as a percentage) for Nursing Home Survey Activities for 21 States, as of January 

2008 

Medicare Medicaid Non-Medicaid State

Minimum 28 21 12

Median 34 36 25

Maximum 53 51 48

Source: GAO analysis of state-reported data.

Note: Although 28 states responded to our inquiries, this table excludes 7 states that did not report 

percentages or whose reported percentages could not be summarized. One state reported its nonMedicaid state contribution rate, but did not report its Medicare and Medicaid contribution rates. 

• Officials from the Chicago regional office told us that the methodology 

used by their staff to determine state contribution rates was complex and 

involved determining a separate state share for each facility type that was

surveyed. Regional office staff took into consideration the number of 

surveys that each state needs to conduct in a given year, the average

amount of time each survey should take, and how much of a benefit each 

state derived from having to conduct the survey.

• Officials from the San Francisco regional office told us that contribution 

rates for the states in their region are mostly based on historical figures, as

reported in states’ time and effort record keeping systems. 

• Officials from the New York regional office told us that their staff and 

state officials jointly determined that Medicare, Medicaid, and state 

licensure programs derived equal benefit from federal nursing home 

surveys conducted by states in the region. As a result, they concluded that 

each program should be responsible for one-third of the cost of these 

surveys. In contrast to what other regions told us, however, states in this 

region do not have a non-Medicaid state share for other facility types. 

• Officials from the Atlanta regional office told us that they played no role in

establishing these rates and were unaware of the process states in their 

region used to determine them. 

• Officials from the Dallas regional office told us that, due to the complexity

involved in determining an appropriate state share, states in their region 

do not have pre-established non-Medicaid state contribution rates. Instead, 

a staff person reviews state surveyor salaries and makes sure that states 

have apportioned them appropriately between federal and state licensure 

activity, based on the surveyors’ workload from the previous year. 

Page 39 GAO-09-64 Funding for State Survey Activities
 

Officials from four CMS regions indicated that the rates for states in their 

regions are not regularly reviewed and in one case have not been reviewed 

since they were established. CMS guidance does not prescribe how often 

the rates should be updated given changes in requirements for federal and 

state licensure surveys over time. A 2002 HHS OIG review also found that

states in four of the five regions it reviewed allocated survey costs based 

on predetermined, historical contribution rates. Because these rates were 

established in prior years, documentation of the basis for the rates was not 

available. 

CMS officials told us that the agency does not collect information from 

states on their non-Medicaid survey expenditures. As a result, CMS does 

not know if states are contributing their own funds appropriately (see 

fig. 6).60 CMS officials noted limits on the agency’s authority to collect state

data, particularly regarding licensure activities. In addition, states are not 

willing to voluntarily disclose information on state funding.61 For example, 

officials from the Dallas regional office told us that Texas officials 

indicated the Dallas officials were not entitled to this information when 

they requested it. However, information on state expenditures could be 

relevant to federal oversight of state survey activities in certain situations. 

For example, if a state requests supplemental funding for shared survey 

activities—that is, those not exclusively conducted for purposes of state 

licensure—having information on the state’s expenditures for the nonMedicaid share could be relevant in evaluating whether survey costs are 

equitably shared and that Medicare is not paying more than its fair share 

for survey activities. 

 60Officials from several of the regional offices we spoke with told us that in the past staff 

used to conduct on-site audits to verify states’ non-Medicaid state spending on survey 

activities. Staff would interview budget personnel and review a sample of surveyor time 

records to evaluate how states accounted for their Medicare funds and to obtain assurance 

that the state had done so appropriately. 

61According to a 2002 HHS-OIG report, HHS’s Office of General Counsel concluded that the

agency could not require states to disclose information on state funding of their licensure

activities. See HHS, Office of Inspector General, Results of Survey and Certification 

Review, A-05-00-00020 (May 31, 2002). 

Page 40 GAO-09-64 Funding for State Survey Activities
 

Figure 6: Federal and State Funding for State Survey Activities in Fiscal Year 2007

a

Numbers do not sum due to rounding. 

Though officials from CMS’s central office told us that regional offices 

should require states to justify any requests for supplemental Medicare 

funds they submit, three of the five regional offices we interviewed told us 

that they do not require states to do so. Without an examination of state 

justifications, it would be difficult for CMS to know if expenditures in 

excess of states’ initial Medicare allocations represent their non-Medicaid 

share of state costs. 

According to CMS guidance, states can request supplemental Medicare 

funds in two ways. They can submit a memo to their regional office that 

includes the amount of funds requested and a detailed rationale for why 

the funds are needed. A second method is for states to include actual 

Medicare expenditures in excess of their allocation on the expenditure 

report they submit at the end of the fiscal year. The state is eligible to 

0

100

200

300

400

500

600

Medicare Medicaid Non-Medicaid Total

Dollars (in millions)

Funding source

State

Federal

?

258.1

185.7

66.5

443.9

66.5

Medicaid

Non-Medicaid

258.1 

+185.7 

443.9a

66.5

+ ??.?

??.?

Medicare

Medicaid

Source: GAO analysis of CMS data.

Most Regional Offices We

Interviewed Do Not 

Require States to Justify 

Requests for Supplemental 

Medicare Funds 

Page 41 GAO-09-64 Funding for State Survey Activities
 

receive supplemental Medicare funding as reimbursement for the portion 

of these expenditures that exceeds the amount in Medicare funds CMS 

allocated to it during the fiscal year. According to CMS central office 

officials, both the memo and the amounts reported on states’ expenditure 

forms are subject to review and approval by the regional offices prior to 

the funding of states’ supplemental requests. 

Central office officials told us that the amount of Medicare supplemental 

funds requested each year has been substantially more than the amount of

funds available to redistribute. Consequently, CMS expects that regional

offices will use their judgment regarding the intensity of reviews so that 

they are not spending time reviewing requests that will not be funded 

anyway.62 The level of review conducted by three of five regional offices 

we interviewed was limited. Officials from the New York regional office

told us that their staff checks to see whether a state completed its 

workload and if the state’s expenditures reflect what was included in its 

budget plan. Officials from the Atlanta and Chicago regional offices said 

that they do not require documentation or conduct audits to verify these 

requests. However, officials from the Dallas and San Francisco offices told

us that their staff follows up with states to verify their need for 

supplemental funding, such as asking states for documentation to justify 

their expenditures in excess of their initial Medicare allocations. On at 

least one occasion, the Dallas region told CMS that some of a state’s 

requested money should be disallowed because the state conducted tier 4 

work before completing work in a higher priority tier. 

The current approach for funding state surveys of facilities participating in

Medicare and Medicaid is ineffective—yet these surveys are meant to 

ensure that these facilities provide safe, high-quality care. We found 

serious weaknesses in CMS’s ability to (1) equitably allocate more than 

$250 million in federal Medicare funding to states according to their 

workload, (2) determine the extent to which funding or other factors 

affected states’ ability to accomplish their workload, and (3) guarantee 

appropriate state contributions. These weaknesses make assessing the 

adequacy of funding difficult. 

Conclusions 

 62For example, central office officials told us that when regional offices reviewed fiscal 

year 2007 supplemental requests, one region recommended that a state receive $399,786 in 

supplemental funding, though it requested $1,363,901. Central office officials told us that

even this reduced request may not be funded due to the limited amount of Medicare 

supplemental funds available for the fiscal year. 

Page 42 GAO-09-64 Funding for State Survey Activities
 

• CMS has made limited progress in ensuring that federal Medicare 

allocations reflect state workloads. Since 2000, CMS has taken several 

steps in response to relatively flat, inflation-adjusted federal funding for 

state surveys, but these efforts have had little impact. Reducing funding 

for support contracts—such as one to develop and implement a new 

nursing home survey methodology to improve the consistency and 

efficiency of state surveys—provided only about 1 percent more funding 

to states in fiscal years 2006 and 2007. In our view, the delay in 

implementation of the QIS is problematic and CMS and beneficiaries 

would benefit from its implementation well before 2014. Increasing the 

time between surveys for many facility types had almost no impact on 

state workloads and state officials believed many facilities were already 

surveyed too infrequently. Asking states to develop funding contingency 

plans could not resolve the problem that states do not know their final 

Medicare allocations until late in the fiscal year, which can hamper efforts 

to effectively manage state resources. In addition, while Congress did not 

provide CMS authority to charge facilities for revisit surveys in fiscal year 

2008, revisit fees could offer (1) Medicare Trust Funds savings if they 

result in reductions of amounts that would be otherwise transferred, and 

(2) somewhat more predictable funding to the extent the fees do not 

require annual appropriations. Oversight of clinical labs, which pay user 

fees, provides a precedent for facility contributions to defray the cost of

survey activities. 

• CMS took these steps because it believed that Medicare funding had not

kept pace with state workloads. But we found that the required survey 

workload actually decreased from fiscal years 2000 to 2007, suggesting 

that resources available in fiscal year 2007 were similar to or slightly 

greater than those in fiscal year 2000 given the modest 4 percent increase 

in inflation-adjusted federal funding. Nevertheless, because state 

allocations have been based on historical spending, CMS believes that 

some states have too much funding given their workload while others have 

too little. The budget analysis tool that CMS developed to align survey 

funding with state workloads has been used only incrementally to address 

state funding inequities, rather than adjusting the mismatch between 

federal allocations and states’ current survey workloads. We believe that 

CMS’s concerns about the instability that would be created if it changed 

baseline funding for state survey activities could be mitigated through 

other means. For example, CMS could limit the annual adjustments on 

states with shrinking baselines to a fixed percentage of each state’s 

historical funding baseline. In addition, CMS lacks adequate data on states’ 

complaint workloads, a significant weakness in its ability to ensure that it 

is requesting adequate Medicare funding. Moreover, agency officials 

believed that the amounts identified for complaint investigations in 

Page 43 GAO-09-64 Funding for State Survey Activities
 

connection with the President’s budget request had not fully funded state 

complaint surveys. 

• It is difficult to determine the extent to which funding and other 

factors affected states’ ability to accomplish survey workloads. 

Twenty-three of the 28 states we contacted told us that more funding was 

needed and many of these states said that RN salaries were not 

competitive, which created workforce instability. Although states set 

surveyor salaries, Medicare allocations that do not support salary 

increases could result in states’ laying off staff, further limiting their ability 

to accomplish survey workloads. For some states that did not spend their

initial allocations, the inability to spend their full allocations rather than 

the level of funding may interfere with workload completion. Most states 

told us that underspending was the result of insufficient staff due to 

retention problems or state hiring freezes. Other states spent more than 

their initial Medicare allocations and still failed to complete their survey 

workload. Even if states complete their workload, ensuring that facilities 

comply with federal quality and safety standards is not guaranteed. For 

example, seven states completed their nursing home surveys in fiscal year

2006, but CMS found that they missed serious deficiencies on more than a 

quarter of federal comparative surveys. 

• CMS lacks information on state contributions, which impedes an 

overall assessment of the resources available for state surveys. 

While CMS knows states’ Medicare and Medicaid spending, including 

requests for supplemental federal funding, it has no way to ensure that 

states contribute their fair share of non-Medicaid state funds. NonMedicaid state shares for nursing homes vary widely across states, state 

contribution rates are not determined consistently, and CMS officials do 

not collect information on such state expenditures. But CMS officials said

the agency assumes that the cost of conducting all required surveys is 

greater than the federal funds provided, so the exact amount each state 

contributes is less important. Further, states in most regions we 

interviewed were not required to justify supplemental funding requests. 

Without examining state justifications, CMS cannot be sure that spending 

above states’ initial Medicare allocations represents their non-Medicaid 

state share of survey costs. 

The evidence is mixed on whether federal funding has kept pace with the 

changes in states’ required survey workload—the workload that states 

would have to complete to meet statutory and CMS survey frequency

requirements. On the one hand, the required survey workload decreased 

nationwide. On the other hand, most states told us that survey frequencies 

of 6 to 10 years for many facilities could adversely affect beneficiaries. 

Page 44 GAO-09-64 Funding for State Survey Activities
 

Moreover, it is often difficult to distinguish the impact of funding, staffing, 

and management on state workloads overall. We believe that these and 

other limitations of the current funding approach will continue to frustrate 

CMS’s efforts to support and oversee state survey activities. 

To address significant shortcomings in the current system for financing 

and conducting surveys of Medicare and Medicaid facilities, we 

recommend that the CMS Administrator take the following nine shorterterm actions. 

To help ensure that those facilities that have not been surveyed in at least

6 years are in compliance with federal quality standards, we recommend 

that the CMS Administrator take the following two actions: 

Recommendations for 

Executive Action 

• Increase the survey priority assigned to such facilities in the annual 

instructions given to state survey agencies with the goal of surveying them

as quickly as possible. 

• Monitor the progress made by state survey agencies that have a significant 

number of such facilities. 

To ensure that Congress has adequate information on the impact of 

funding on facility oversight, we recommend that the CMS Administrator 

take the following two actions: 

• Inform Congress of the projected cost of surveying all facilities that lack 

statutorily mandated survey frequencies a minimum of at least once every

3 years. 

• Include information in the President’s budget request on projected state

complaints and the cost of completing the associated workload. 

To help address state survey funding inequities, we recommend that the 

CMS Administrator: 

• Use available tools to adjust the annual baseline Medicare allocations 

provided to each state.

To improve CMS’s ability to differentiate between funding and 

management issues and help ensure the quality of surveys, we recommend 

that the CMS Administrator take the following two actions: 

Page 45 GAO-09-64 Funding for State Survey Activities
 

• Identify appropriate methodologies to help evaluate the efficiency and 

effectiveness of state survey activities. One such methodology may be the 

new Quality Indicator Survey, developed to help ensure the consistency, 

efficiency, and effectiveness of state nursing home surveys. Explore the 

feasibility of using a similar methodology to survey other Medicare and 

Medicaid facilities. 

• Provide Congress with an estimate of the cost of implementing, over 

3 years, the Quality Indicator Survey methodology for nursing homes. 

To improve the oversight of state expenditures, we recommend that the

CMS Administrator take the following two actions: 

• Collect information about current state shares, including the 

methodologies used to determine them and the date that they were last 

reviewed. 

• Regularly review state shares to ensure that they are accurate, explore 

ways to obtain information from states on non-Medicaid expenditures 

where such information is relevant for ensuring that costs are actually

shared on an equitable basis, and consider ways to simplify the process of 

determining state shares. 

Over the longer term, we are also recommending that the CMS 

Administrator undertake a broad-based reexamination of the current 

approach for funding and conducting surveys of Medicare and Medicaid 

participating facilities. This reexamination should consider issues such as 

(1) the source and availability of funding, including possible imposition of

user fees, and (2) ways of ensuring an adequate survey workforce with 

sufficient compensation to attract and retain qualified staff. 

We provided a draft of this report to HHS for comment. In response, the 

Acting Administrator of CMS provided written comments. We also 

received written comments from AHFSA. CMS’s and AHFSA’s comments 

are reproduced in appendices VI and VII, respectively.63 Although CMS 

disagreed with elements of our survey workload analysis, the agency 

concurred with 9 of our 10 recommendations. For 2 of these, we

Agency and AHFSA 

Comments and Our 

Evaluation 

 63During the course of our work, we collected information from 28 states. AHFSA agreed to 

provide us with consolidated comments on our draft report on behalf of all states. 

Page 46 GAO-09-64 Funding for State Survey Activities
 

recommended that CMS provide Congress with certain information and 

the agency indicated that it would do so upon Congress’ request. CMS 

partially concurred with 1 of our 10 recommendations. While the agency 

agreed to produce special follow-up reports and have its regional offices 

contact states with a significant number of facilities that have not been 

surveyed for lengthy periods, it did not agree to increase the survey 

priority assigned to facilities that have not been surveyed in at least 

6 years with the goal of surveying them as quickly as possible. Instead, 

CMS noted that the agency had expanded its risk-based approach in fiscal 

year 2008 such that the maximum tier 3 survey frequency is a 7-year 

interval (down from an 8-year average). Additionally, for those facilities

that have not been surveyed in 7 years and that are identified with certain 

risk factors, CMS will consider these facilities as part of the tier 2 targeted 

surveys. As noted in our draft report, many state officials told us that the 

survey frequency for all facilities that are not set by statute should be 

every 2 to 3 years. CMS concurred with our recommendation to inform 

Congress of the projected cost of surveying these facilities a minimum of 

at least once every 3 years. We continue to believe that all 2,700 facilities 

that had not been surveyed in more than 6 years as of September 30, 2007

(900 in 10 years or more), should be inspected as soon as possible, 

regardless of their risk factors. Finally, AHFSA also disagreed with 

elements of our survey workload analysis, specifically our treatment of 

complaints and enforcement actions. CMS’s and AHFSA’s comments and 

our evaluation are summarized below. 

Funding trends. CMS noted that surveys are the principal quality 

assurance system for Medicare and that the portion of the Medicare 

budget devoted to quality assurance decreased from 0.1 percent in fiscal 

year 2000 to 0.06 percent in fiscal year 2008. CMS commented that by 

combining Medicare and Medicaid federal funding in our draft report, we 

obscured the differences between the two funding sources and the 

different decisions that face the Congress and executive branch. We 

reported aggregate federal funding in our draft report because it is the 

total federal funding available to support state survey activities. However, 

we reported Medicare and Medicaid funding levels separately for fiscal 

years 2000 through 2007 in appendix III and described in the background 

section how both Medicare and Medicaid fund state survey activities. 

Examining the change in states’ required survey workload. CMS 

commented that our basic approach to examining the change in states’ 

required survey workload from fiscal years 2000 through 2007 was sound, 

but disagreed with some elements of our analysis. AHFSA also disagreed 

with a few elements. 

Page 47 GAO-09-64 Funding for State Survey Activities
 

• Use of tier 3 priorities. CMS commented that we understated the number 

of facilities subject to state surveys in fiscal year 2007 and omitted other 

survey activities, such as initial surveys of new providers, which are a 

tier 4 priority. As we noted in our draft report, however, the nationwide 

survey workload would still have declined from fiscal year 2000 to fiscal 

year 2007 if we included tier 4 surveys. Because CMS’s four-tier structure 

for prioritizing states’ survey workload did not exist in fiscal year 2000, we 

used the fiscal year 2000 survey frequencies required by CMS policy. For 

fiscal year 1999, CMS’s budget for survey activities was increased 

significantly and CMS expected states to complete all surveys. Our draft 

report pointed out that CMS subsequently established a system for 

distinguishing between (1) its policy on survey frequencies (essentially 

those for fiscal year 2000), and (2) the survey priorities, as reflected in its 

tier structure, to which it holds states accountable for meeting each year 

in its state performance reviews. For the latter, CMS officials told us that 

they based their reviews on the requirements in tiers 1 through 3 because 

they did not believe funding was adequate to survey facilities that were a 

tier 4 priority. CMS adopted priorities because of the concern that 

resources were insufficient to accomplish all of the survey workload but 

maintained its policy on survey frequencies. CMS’s comments indicate that

states that conduct initial surveys of new providers (a tier 4 priority) 

before completing all surveys in tiers 1 through 3 may be required to 

submit a plan of correction and, in addition, there could be other 

consequences. As such, our workload analysis for fiscal year 2007 used the 

survey priorities for which CMS held states accountable in its state 

performance reviews during that fiscal year—tier 1 through 3 priorities. 

• Differentiating between Medicare and Medicaid. CMS attempted to 

replicate our survey workload analysis but separated it by the source of 

funding—Medicare and Medicaid. CMS concluded that the Medicarefunded workload increased by up to 20 percent from fiscal year 2000 to 

fiscal year 2007. First, because we were attempting to measure states’ 

overall required workload, we did not differentiate between funding 

streams. While the results of CMS’s analysis are not inconsistent with ours, 

the net effect remains a decrease in states’ required survey workload when 

the Medicaid workload is considered. Thus, we reported that the decline 

from fiscal year 2000 to fiscal year 2007 in the number of nursing homes 

and intermediate care facilities for the mentally retarded, whose surveys 

receive significant Medicaid funding, offset overall increases in other 

facilities, whose surveys are largely Medicare-funded, because the two 

facility types are comparatively the most resource-intensive facilities to 

survey. Second, in replicating our methodology to incorporate the effect of

survey hours on workload, CMS used average survey hours by facility type

for fiscal year 2000. As noted in our draft report, because the yearly CMS 

Page 48 GAO-09-64 Funding for State Survey Activities
 

survey hour data were not consistent or reliable, we calculated national 

average survey hours for each facility type for all fiscal years from 2000 

through 2007. We used these national averages in our analysis for both 

fiscal years 2000 and 2007. This could account for some of the difference 

between CMS’s and our results. 

• Inclusion of 2008 data. CMS commented that our analysis did not include 

data for fiscal year 2008 and, as such, may not accurately reflect states’ 

current workload. Our analysis was limited to the change in states’ 

required survey workload from fiscal year 2000 to fiscal year 2007 because 

fiscal year 2008 data were not available when we conducted our analysis. 

Wherever possible, we tried to note recent CMS initiatives or regulations 

that could potentially affect workload, including recent regulations 

requiring organ transplant center programs to be surveyed and new survey 

requirements for hospices and end-stage renal disease facilities. AHFSA 

commented on the costs associated with implementing additional CMS 

requirements, such as new survey protocols and data-entry time frames. 

However, CMS’s comments acknowledged that not all of the workload 

associated with its recent initiatives can be quantified. 

• States’ complaint workload. Both CMS and AHFSA commented that our 

analysis of the change in states’ required survey workload did not 

adequately account for the work associated with investigating complaints. 

AHFSA noted that when its members were surveyed, those states that 

responded indicated an overall increase in complaint growth over the last 

5 years. AHFSA’s response did not quantify the increase. CMS commented 

that the number of complaints investigated on-site increased by about 13.1 

percent from fiscal years 2005 to 2007. In our draft report, we 

acknowledged that complaint investigations represented a significant 

portion of states’ workload. Although CMS implemented a new complaint 

tracking system in fiscal year 2004, officials told us that the agency lacks 

complete and reliable data on complaints received and investigated. For 

example, in our draft report we noted that CMS believes some states may 

be overestimating by 15 percent the number of complaints investigated by

reporting those complaints received and investigated during standard 

surveys in the complaints database. We included in our draft report a 

recommendation that the CMS Administrator include information in the 

President’s budget request on projected state complaints and the cost of

completing the associated workload and the agency concurred with our 

recommendation. 

• Enforcement workload. AHFSA commented that our analysis did not 

account for the workload associated with enforcement activities. The 

association noted that decoupling states’ responsibilities to conduct 

Page 49 GAO-09-64 Funding for State Survey Activities
 

surveys, complaint investigations, and enforcement follow up is 

impossible. As noted in our draft report, CMS (1) did not have reliable and 

complete data on revisit surveys from fiscal years 2000 through 2004 and 

(2) data for fiscal years 2005 through 2007 showed that the revisit 

workload declined by 4 percent. Because revisits are an indication of 

enforcement actions, we believe that states’ enforcement workload also 

decreased. 

• Length of an efficient survey. Finally, CMS commented that we did not 

address how long a survey should take to achieve a quality result. In its 

written comments, CMS noted that the only relevant hard data are for 

survey hours that CMS regional office staff devote to federal comparative 

surveys and that, for nursing homes, these surveys are typically 15 percent

to 25 percent longer than the average state survey time. As noted in our 

draft report, CMS officials told us that they did not know how long an 

efficient survey should take and could not assess whether the 

considerable interstate variation in the length of surveys was appropriate.

Comparative surveys may not be the best measure of how long a survey

should take. Indeed, many officials from the states we contacted during 

the course of our work told us that comparative surveys were not a good

measure. Moreover, our May 2008 report found that when the number of 

surveyors and time on-site are taken together, federal comparative surveys 

averaged 12.9 surveyor-days and the corresponding state surveys averaged 

12.6 surveyor-days in fiscal year 2007.

CMS oversight and state performance standards. CMS commented 

that in fiscal year 2000, the base year of our analysis, there were few 

consequences for poor performance and few, if any, effective national

measures of survey performance. CMS highlighted the improvements it 

had since made to its performance system, which we noted in our draft 

report. CMS commented further that its overall approach to accountability 

is to communicate workload priorities by organizing them into tiers, 

initiate consequences for unacceptable performance, and match the 

strength of consequences with the priority and importance of the work. 

We acknowledged CMS’s efforts to link states’ performance to workload 

priorities and, as a result, we focused on changes in the workload that 

CMS holds states accountable to complete. 

Future trends. CMS believed that the Medicare-funded survey workload

is likely to continue to increase and that, given the overall federal budget

situation, it is imperative that the agency design survey methodologies that

leverage resources to ensure maximum productivity and effectiveness. 

CMS highlighted examples of such productivity enhancements, including 

Page 50 GAO-09-64 Funding for State Survey Activities
 

implementing the Quality Indicator Survey methodology for conducting 

nursing home surveys nationwide, targeting resources to surveys of the 

most at-risk facilities, and investing in methodologies that help states 

address their staffing barriers. AHFSA also noted staffing challenges, such

as (1) vacant or frozen surveyor positions and (2) a lack of cross-trained 

surveyors who can survey more than one type of facility. We noted some 

of these initiatives and challenges in our draft report and, to the extent 

that we were able, we indicated how these issues might affect states’ 

survey workload. We also made specific recommendations to the CMS 

Administrator for improving the agency’s ability to differentiate between 

funding and management issues and to help ensure the quality of surveys.

CMS and AHFSA also provided technical comments, which we 

incorporated as appropriate. 

As agreed with your offices, unless you publicly announce the contents of

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Administrator of the 

Centers for Medicare & Medicaid Services and appropriate congressional 

committees. The report also will be available at no charge on the GAO 

Web site at http://www.gao.gov. 

If you or your staffs have any questions about this report, please contact 

me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

John E. Dicken 

listed in appendix VIII. 

Director, Health Care 

Page 51 GAO-09-64 Funding for State Survey Activities
Appendix I: Scope and Methodology Appendix I: Scope and Methodology 

This appendix provides a more detailed description of our scope and 

methodology. 

Centers for Medicare & Medicaid Services (CMS) budget and 

expenditure data. To identify the trends in federal funding for survey 

activities, we reviewed the President’s budget request and analyzed federal 

funding for survey activities CMS expended for survey activities from 

fiscal years 2000 through 2008.1

 We selected fiscal year 2000 because of the 

significant increase in funding for survey activities for fiscal year 1999 to

support an increased workload associated with the Nursing Home 

Oversight Improvement Program. We also analyzed data provided by CMS 

on state survey expenditures from fiscal years 2000 through 2007, 

including the provision of supplemental funds to states that spent more 

than their initial Medicare allocations by redistributing unspent state 

allocations. To understand the Medicare funding allocation process, we 

reviewed CMS’s State Survey and Certification Budget Call Letters or 

Mission and Priority Documents for fiscal years 2000 through 2008; CMS 

uses these documents to (1) provide instructions to states on preparing 

budget requests for federal funds, (2) communicate anticipated federal

Medicare funding levels to states, and (3) communicate state survey 

priorities based on the requested funding. We also discussed the survey 

budget process with CMS officials, including their use of the Budget 

Analysis Tool, which the agency began using in 2005 to better calibrate

federal funding with states’ survey workloads. Because of its limited use, 

we did not evaluate the tool’s effectiveness. To gain a state and regional 

office perspective on the budget process and how it had changed over 

time, we interviewed regional office officials as well as state officials in 

two states that spent more (Florida and New York) and two states that 

spent less (Ohio and Washington) than their initial Medicare allocations 

for fiscal years 2000 through 2006 and reviewed periodic state expenditure 

reports. 

CMS databases on state survey activities. To determine the extent to 

which states completed their survey workloads, we analyzed CMS data on 

the results of the fiscal year 2006 state performance review, the most 

 1

We used the gross domestic product price index to adjust for inflation during this time 

period. 

Page 52 GAO-09-64 Funding for State Survey Activities
Appendix I: Scope and Methodology 

recent data available at the time we conducted our analysis.2 We

subsequently compared state completion rates to those from the fiscal 

year 2007 review when that data became available. In addition, we used 

CMS’s On-Line Survey, Certification, and Reporting (OSCAR) system data 

to determine the number of facilities with survey frequencies established 

by CMS that states had not surveyed within 6 and 10 years. 

We also used OSCAR and CMS documents for fiscal years 2000 and 20073

to examine changes in states’ required survey workload—the workload 

that states would have to complete to meet statutory and CMS survey 

frequency requirements. We then analyzed the effect of the following three 

factors on states’ required survey workload: (1) changes in the number of 

facilities subject to state surveys including state validation surveys of 

accredited facilities, (2) changes in intervals between surveys from fiscal 

year 2000 to fiscal year 2007 for facility types that lack statutory survey 

time frames, and (3) differences in the time devoted to surveys across 

facility types. First, we calculated the proportion of each facility type 

subject to standard and validation surveys in every state based on survey

frequency requirements for fiscal years 2000 and 2007.

4

 Second, we 

multiplied this result by national average survey hours for each facility 

type to estimate survey workload in hours and computed the percentage 

change in the required survey workload between fiscal years 2000 and 

2007 (see app. V). We used national average hours instead of state average 

survey hours for each facility type because surveys for many facility types 

were too infrequent at the state level to produce reliable data. We asked 

CMS to provide the survey hour data because OSCAR data on state-

 2

State performance reviews evaluate states’ completion of CMS survey priorities, a four-tier 

structure for prioritizing surveys and adjusting nonstatutory survey frequencies to reflect 

available funding with tier 1 being the highest and tier 4 the lowest priority. State 

performance reviews hold states accountable for completing surveys in tiers 1 through 3,

but not tier 4. 

3

Data available for the number of facilities in fiscal years 2000 and 2007 were archived in 

December of the respective fiscal years. 

4

Survey frequencies set by statute were the same in fiscal years 2000 and 2007. The tier 

structure for prioritizing states’ survey workload did not exist in fiscal year 2000 and most 

nonstatutory survey frequencies were between 6 and 7 years (see app. II). For fiscal year

2007, we used the same survey frequencies that CMS uses to assess states’ abilities to meet 

the agency’s survey priorities, which ranged from about 4 years to 10 years (see app. II). 

However, even if we had used CMS’s policy for fiscal year 2007, which is 6 years for most 

facilities lacking statutory survey time frames, the nationwide survey workload would still 

have declined. 

Page 53 GAO-09-64 Funding for State Survey Activities
Appendix I: Scope and Methodology 

specific survey hours was incomplete for fiscal years 2000 through 2004.5

Because we used national average survey hours, our analysis does not 

reflect differences in average facility size across states; it also does not 

reflect any differences in survey hours over time. Although CMS survey 

hour data from fiscal years 2000 to 2007 showed an increase of about 

4 percent overall, this increase was not gradual from year-to-year and the

increases and decreases could not be explained. Therefore, we determined 

that the yearly survey hour data were not consistent or reliable. In 

assessing how states’ survey workload changed over this time period, we 

also considered state complaint investigations, survey process 

improvements that increased survey hours, and facility revisits required to 

ensure that serious deficiencies had been corrected. We did not attempt to 

incorporate these state survey activities into our workload analysis 

because the data lacked reliability and consistency and the increases in 

survey hours were modest for most facility types.

CMS oversight of states’ use of federal funds. To assess the 

effectiveness of CMS oversight of states’ use of survey funds, we reviewed 

CMS’s State Operations Manual, which sets expectations for both CMS 

regional offices and states on budgeting and expenditure reporting. We 

also examined CMS’s state performance review protocols, which included

a standard on state budget practices and financial reporting, and several 

audits of states’ survey expenditures conducted by the Department of 

Health and Human Services (HHS) Office of Inspector General in fiscal 

years 2001 and 2002.6

 We discussed expectations of how CMS regional 

offices should carry out oversight with central office officials and staff 

from five regional offices and also obtained the perspective of state 

officials. 

 5

OSCAR only retains data for the four most recent surveys, roughly fiscal years 2005 

through 2008 for nursing homes, but longer for facilities that are surveyed less frequently. 

6

HHS, Office of Inspector General, Commonwealth of Virginia Department of Health,

Section 1864-1902 Survey and Certification Costs for Health Care Providers and 

Suppliers: October 1, 1997 – September 30, 1999 (August 2001); HHS, Office of Inspector 

General, State of Delaware Department of Health and Social Services, Section 1864-1902 

Survey and Certification Costs for Health Care Providers and Suppliers: October 1, 1997 

– September 30, 1999 (November 2001); and HHS, Office of Inspector General, Results of

Survey and Certification Review (May 2002). 

Page 54 GAO-09-64 Funding for State Survey Activities
Appendix I: Scope and Methodology 

State perspectives. During early data collection for this study, we 

interviewed state officials from Florida, New York, Ohio, and Washington 

on issues such as the survey budget process, reasons for over- or 

underspending federal Medicare allocations, completion of CMS workload

priorities, state licensure requirements, and staff recruitment and 

retention. Subsequently, we sent e-mail questionnaires to 27 other states 

covering similar issues as well as questions on federal oversight, and we 

followed up with the 4 states already interviewed. We used five factors to 

select these additional states, which follow. 

• Expenditure of federal Medicare allocations. We selected states that 

spent at least 5 percent more or less than their total federal Medicare 

budget from fiscal years 2000 through 2006 and whose total over- or 

underspending was at least $500,000. At the time of our state selection, 

data for fiscal year 2006 were the most recent data available.

• Accomplishment of CMS workload priorities. We selected states that

accomplished 50 percent or fewer of CMS’s workload priorities in tiers 1 

through 3 for fiscal year 2006. At the time of our state selection, data for 

fiscal year 2006 were the most recent data available. 

• Quality of nursing home surveys. To gauge the quality of states’ nursing 

home surveys which most states were able to complete, we analyzed the 

results of federal comparative surveys conducted from fiscal years 2002 

through 2007 using CMS’s federal monitoring survey database. We 

reported the results of this analysis in May 2008.7

 We selected states in 

which at least 25 percent of federal surveys found that state surveys had 

missed serious deficiencies. 

• Number of facilities. Using CMS’s OSCAR database, we selected states 

that had experienced an increase or decrease of at least 20 percent in the

number of facilities from fiscal years 2000 through 2006.8

 At the time of our 

state selection, data for fiscal year 2006 were the most recent data 

available. 

 7

GAO, Nursing Homes: Federal Monitoring Surveys Demonstrate Continued

Understatement of Serious Care Problems and CMS Oversight Weaknesses, GAO-08-517 

(Washington, D.C.: May 9, 2008). 

8

By grouping the states into three clusters for fiscal year 2006—small (500 or fewer 

facilities), medium (between 500 and 2,000 facilities), and large (2,000 or more facilities)—

we ensured that we had selected several states in each cluster. We included 7 of the 7 large 

states, 12 of the 27 medium states, and 9 of the 17 small states. 

Page 55 GAO-09-64 Funding for State Survey Activities
Appendix I: Scope and Methodology 

• Geographic distribution. We selected at least two states from each of 

the 10 CMS regions. 

Twenty-four of the 28 additional states responded to our e-mail 

questionnaire; considering the 4 states contacted initially, we collected 

information from a total of 28 states. In addition, we also interviewed 

officials from the Association of Health Facility Survey Agencies, an 

organization that represents state survey agencies. 

Data reliability. We verified the consistency and reliability of

documentations and data that CMS provided through various means. On 

the basis of CMS’s documentation, we determined that CMS’s data on state 

survey expenditures from fiscal years 2000 through 2007 were reliable for 

examining state expenditures and the allocation of supplemental funds to

states. We determined that CMS’s state performance reviews were reliable 

to understand states’ completion of CMS survey priorities because CMS 

uses this information for the same purpose. In addition, CMS generally

recognizes OSCAR data to be reliable and throughout the course of our 

work we discussed our analysis of OSCAR data with CMS officials to 

ensure that the data accurately reflected state survey activities. We tested 

the data provided by CMS on survey hours for consistency and compared 

the data to survey data from OSCAR. We also interviewed CMS officials to

learn about how they use the data and to clarify any data discrepancies. 

We reviewed state-reported data for consistency and plausibility and 

followed up with state officials to retrieve missing data and resolve data

inconsistencies. In general, we determined that the data provided by the 

states were accurate for our purposes. 

Page 56 GAO-09-64 Funding for State Survey Activities
Appendix II: CMS Survey Frequency Changes 

for Facilities Surveyed by States, Fiscal Years

2000 through 2008

Table 7 shows the overall survey frequencies by facility type against which 

CMS measures each states’ completion of its survey workload. In fiscal 

year 2006, in response to available Medicare funding, the agency began 

adjusting survey frequencies for facility types that lack statutory survey 

time frames. According to CMS officials, these adjustments did not alter its 

policy on survey frequency, which remains at about every 6 years for most 

facilities with nonstatutory survey frequencies. 

Table 7: CMS Survey Frequency Changes for Facilities Surveyed by States, Fiscal Years 2000 through 2008 

Survey frequency 

Type of facility Fiscal year 2000 

Fiscal years 

2001-2005 Fiscal year 2006 Fiscal year 2007 Fiscal year 2008 

Survey frequency established by statute 

Home health agencya

Nonaccredited home health 

agency 

3 years 3 years 3 years 3 years 3 years

Intermediate care facility for the 

mentally retarded 

Annually Annually Annually Annually Annually

Nursing homecAnnuallycAnnuallycAnnuallycAnnuallycAnnuallyc

Survey frequency established by CMS 

Ambulatory surgical centera

Nonaccredited ambulatory 

surgical center

6.67 years 6 years 8 years 10 years 7 years

Accredited ambulatory 

surgical centers

b

N/A 5 percente5 percent 5 percent 5 percent

Comprehensive outpatient 

rehabilitation facility 

6.67 years 6 years 8 years 10 years 7 years

End-stage renal disease facility 6.67 years 3 years 3.5 years 4 years 4 years

Home health agencya

Accredited home health 

agency validation surveysb

N/A 5 percent 5 percent 5 percent 5 percent

Hospicea

Nonaccredited hospice 6.67 years 6 years 8 years 10 years 7 years

Accredited hospicesbN/A 5 percente5 percent 5 percent 5 percent

Hospital

a

Nonaccredited hospital 9 years 3 years 4.5 years 4.5 years 4.5 years

Accredited hospitalsb5 percent 1 percentf1 percent 1 percent 1 percent

Organ transplant centerdN/A N/A N/A To be determined 3 years

Outpatient physical therapy 6.67 years 6 years 8 years 10 years 7 years

Portable X-ray service 6.67 years 6 years 8 years 8 years 7 years

Appendix II: CMS Survey Frequency Changes 

for Facilities Surveyed by States, Fiscal Years 

2000 through 2008 

Page 57 GAO-09-64 Funding for State Survey Activities
Appendix II: CMS Survey Frequency Changes 

for Facilities Surveyed by States, Fiscal Years

2000 through 2008

Survey frequency 

Type of facility Fiscal year 2000 

Fiscal years 

2001-2005 Fiscal year 2006 Fiscal year 2007 Fiscal year 2008 

Psychiatric residential treatment 

facilityb

N/A 5 yearsg5 years 5 years 5 years

Rural health clinic 6.67 years 6 years 8 years 10 years 7 years

Source: CMS. 

Note: In fiscal years 2000 and 2001, CMS required that states survey an established percentage of

providers for a given provider type (e.g., 15 percent). CMS changed this requirement in later years to 

intervals (e.g., every 6 years). In order to allow comparison among years, we present the 2000 and 

2001 requirements in intervals (e.g., every 6.67 years) instead of percentages (e.g., 15 percent).

Requirements for fiscal years 2006 through 2008 reflect CMS’s survey priorities as established in 

tiers 1 to 3.

a

These facility types can choose to be inspected by an accrediting organization, such as the Joint 

Commission, or by states. Nearly 80 percent of ambulatory surgical centers and 85 percent of 

hospices were surveyed by states as of fiscal year 2007. 

b

There are two types of state validation surveys that evaluate accreditation organizations’ ability to 

ensure facilities’ compliance with Medicare quality standards: (1) representative sample surveys,

which are standard surveys conducted shortly after an accreditation organization survey in order to 

assess the accreditation organization’s survey process, and (2) complaint surveys, which are used to

identify the compliance of the accredited facility with selected regulatory requirements noted in the

complaint received by CMS. This table reflects representative sample validation surveys. In the case 

of a psychiatric residential treatment facility, state surveys verify that the facility is in compliance with 

its attestation concerning the use of restraints. 

c

By statute, every nursing home receiving Medicare or Medicaid payments must undergo a standard 

survey not less than once every 15 months, and the statewide average interval for these surveys 

must not exceed 12 months. 

d

In 2007, CMS issued a regulation that requires organ transplant center programs to be surveyed. 

These surveys will be phased in over a 3-year period, beginning in 2007. See 42 C.F.R. § 488.61 

(2008). 

e

Accredited ambulatory surgical centers and hospices did not have an established rate for their 

validation surveys until 2002. 

f

The rate for representative sample validation surveys of accredited hospitals changed from 5 percent 

to 1 percent in 2003. 

g

Accredited psychiatric residential treatment facilities did not have an established rate for their 

representative sample validation surveys until 2002 and in 2003 validation surveys were done for 

5 percent of facilities.

Page 58 GAO-09-64 Funding for State Survey Activities
Appendix III: Federal Funding for Survey 

Activities in Actual and Inflation-Adjusted Appendix III: Federal Funding for Survey Dollars, Fiscal Years 2000 through 2007 

Activities in Actual and Inflation-Adjusted 

Dollars, Fiscal Years 2000 through 2007 

Table 8: Federal Funding for Survey Activities (in millions), Actual Dollars, Fiscal 

Years 2000 through 2007 

Fiscal year Medicare Medicaid Total

2000 $209.7 $146.7 $356.4

2001 242.1 162.2 404.4

2002 253.1 172.2 425.3

2003 252.7 164.1 416.8

2004 251.3 169.8 421.0

2005 258.7 177.4 436.1

2006 258.1 183.7 441.8

2007a258.1 185.7 443.9

Change from 2000 to 2007 23.1% 26.6% 24.5%

From 2000 to 2002 19.3%

From 2002 to 2007 4.3%

Source: CMS. 

a

Numbers do not sum due to rounding. 

Table 9: Federal Funding for Survey Activities (in millions), Inflation-Adjusted to 

Fiscal Year 2000 Dollars, Fiscal Years 2000 through 2007 

Fiscal year Medicare Medicaid Total

2000 $209.7 $146.7 $356.4

2001 236.6 158.5 395.1

2002 242.6 165.1 407.7

2003 237.5 154.1 391.6

2004 230.1 155.5 385.6

2005 229.6 157.4 387.0

2006 221.7 157.8 379.5

2007 215.9 155.3 371.2

Change from 2000 to 2007 3.0% 5.9% 4.2%

From 2000 to 2002 14.4%

From 2002 to 2007 (9.0%)

Source: GAO analysis of CMS data. 

Page 59 GAO-09-64 Funding for State Survey Activities
Appendix IV: Number of and Percentage 

Change in Facilities Subject to State Standard Appendix IV and Validation Surveys, 2000 to 2007 : Number of and Percentage 

Change in Facilities Subject to State Standard 

and Validation Surveys, 2000 to 2007 

Number of facilities 

Type of facility December 2000 December 2007 

Change

(percentage change)

Facilities subject to state standard surveys 

Ambulatory surgical center 2,959 3,865 906 (31)

End-stage renal disease facility 3,951 5,050 1,099 (28)

Hospice 2,169 2,746 577 (27)

Home health agency 6,569 7,909 1,340 (20) 

Rural health clinics 3,334 3,781 447 (13)

Comprehensive outpatient rehabilitation facility 518 535 17 (3)

Outpatient physical therapy or outpatient speech pathology services 2,871 2,913 42 (1)

Hospital 2,086 2,187 101 (5)

Intermediate care facility for the mentally retarded 6,767 6,443 -324 (-5)

Nursing home 16,946 15,827 -1,119 (-7)

Portable X-ray service 675 550 -125 (-19)

Organ transplant centera0 254 254 (N/A)

Psychiatric residential treatment facility 0 87 87 (N/A)

Total 48,845 52,147 3,302 (7)

Facilities subject to state validation surveys 

Home health agency 557 1,326 769 (138)

Hospice 66 471 405 (614)

Ambulatory surgical center 169 1,072 903 (534)

Psychiatric residential treatment facility 0 185 185 (N/A)

Hospital 4,607 4,434 -173 (-4)

Total 5,399 7,488 2,089 (39)

Overall 54,244 59,635 5,391 (10)

Source: GAO analysis of CMS data and Organ Procurement and Transplantation Network data.

a

The total number of organ transplant centers is as of January 2008; collectively these centers 

operated 844 organ transplant programs. Each transplant center may have more than one organspecific program, each of which will be surveyed separately.

Page 60 GAO-09-64 Funding for State Survey Activities
Appendix V: Change in States’ Required 

Survey Workload from Fiscal Year 2000 to 

Fiscal Year 2007 

In order to determine how states’ required survey workload—the 

workload that states would have to complete to meet statutory and CMS 

survey frequency requirements—has changed from fiscal year 2000 to 

fiscal year 2007, we analyzed OSCAR and CMS data for fiscal years 2000 

and 2007. First, we determined percentage changes in the number of 

facilities subject to state surveys, including state validation surveys of 

accredited facilities. Second, we combined the effects of the number of 

facilities subject to standard and validation surveys with the survey 

frequency requirements for fiscal years 2000 and 2007. Third, we 

incorporated the effect of survey hours for each facility type using average 

national survey hours to determine the change in states’ required survey 

workload between fiscal years 2000 and 2007. States are listed from 

highest to lowest based on the percentage change in the number of 

facilities subject to surveys. 

Table 10: Percentage Change in Number of Facilities Subject to State Surveys, 

Number of Surveys Each State Is Expected to Conduct, and Required Survey 

Workload after Factoring in National Survey Hours, Fiscal Years 2000 and 2007 

State 

Percentage change

in number 

of facilities 

subject to surveys

Percentage change in 

number of surveys 

each state is 

expected to conduct

a

Percentage

change in

required workloadb

Nevada 36.4% 3.4% -1.7%

Utah 35.8% 16.6% 7.1%

Florida 31.1% 11.5% 1.0%

Texas 26.2% 7.2% 0.5%

Michigan 24.4% -1.0% -2.1%

Mississippi 18.8% 7.2% 7.8%

Missouri 16.7% -2.5% -5.5%

Arizona 16.5% 0.0% -4.5%

Washington 16.3% -9.1% -11.1%

Delaware 14.2% 2.0% 2.7%

Illinois 13.7% 1.0% -4.0%

Alabama 12.6% 1.8% 2.5%

Georgia 12.2% 2.8% 1.3%

Nebraska 12.2% 0.7% -1.8%

Colorado 12.1% -2.0% -4.4%

Oregon 12.0% -3.5% -6.5%

Kentucky 11.4% -2.3% -4.3%

Idaho 11.4% -2.7% -4.5%

Appendix V: Change in States’ Required 

Survey Workload from Fiscal Year 2000 to 

Fiscal Year 2007 

Page 61 GAO-09-64 Funding for State Survey Activities
Appendix V: Change in States’ Required 

Survey Workload from Fiscal Year 2000 to 

Fiscal Year 2007 

State 

Percentage change

in number 

of facilities 

subject to surveys

Percentage change in 

number of surveys 

each state is 

expected to conduct

a

Percentage

change in

required workloadb

New Jersey 10.7% 0.4% 0.2%

Louisiana 10.2% 2.1% -3.4%

Virginia 9.8% 5.3% 0.8%

Ohio 7.3% -1.4% -3.5%

California 6.5% 0.6% -2.7%

Oklahoma 5.9% -1.9% -9.6%

North Carolina 5.1% 4.9% 3.5%

Iowa 4.1% -0.4% -1.3%

New Mexico 4.0% -3.0% -5.5%

South Carolina 2.8% -15.7% -10.5%

Maryland 2.8% -8.8% -9.6%

Tennessee 2.4% -8.9% -8.6%

Pennsylvania 1.8% -6.0% -6.8%

Kansas 1.7% -8.5% -8.9%

New Hampshire 0.9% -2.5% -1.3%

Indiana 0.9% -7.2% -8.6%

South Dakota 0.6% -1.4% -1.0%

Arkansas 0.1% -5.6% -6.6%

Connecticut -0.2% -4.5% -5.1%

Alaska -2.0% -0.6% 4.4%

Hawaii -3.7% -3.8% -0.2%

Wisconsin -3.8% -8.7% -7.0%

West Virginia -4.8% 0.5% -2.9%

Massachusetts -4.8% -13.2% -14.9%

Montana -5.1% -9.1% -8.9%

Minnesota -5.4% -11.3% -10.3%

Wyoming -6.3% -6.0% -1.8%

Vermont -7.6% -11.1% -8.7%

Maine -8.1% -15.3% -11.3%

District of Columbia -8.1% -9.9% -8.7%

New York -8.7% -11.8% -7.7%

North Dakota -10.1% -4.1% -2.7%

Rhode Island -13.1% -21.8% -17.2%

Page 62 GAO-09-64 Funding for State Survey Activities
Appendix V: Change in States’ Required 

Survey Workload from Fiscal Year 2000 to 

Fiscal Year 2007 

State 

Percentage change

in number 

of facilities 

subject to surveys

Percentage change in 

number of surveys 

each state is 

expected to conduct

a

Percentage

change in

required workloadb

Nation 9.0% -1.9% -4.2%

Source: GAO analysis of CMS data. 

a

The total number of surveys each state is expected to conduct in a given year is calculated by 

summing the product by facility type of the (1) number of facilities and (2) survey frequency.

b

Required workload for each state in a given year is calculated by summing the product of (1) number 

of facilities, each facility type, (2) average survey hours of all surveys conducted from 2000 through 

2007 in the U.S., each facility type, and (3) survey frequency, each facility type. 

Page 63 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for Appendix VI: Comments from the Centers for Medicare & Medicaid Services 

Medicare & Medicaid Services 

Page 64 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 65 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 66 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 67 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 68 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 69 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 70 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 71 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 72 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 73 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 74 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 75 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 76 GAO-09-64 Funding for State Survey Activities
Appendix VI: Comments from the Centers for 

Medicare & Medicaid Services 

Page 77 GAO-09-64 Funding for State Survey Activities
Appendix VII: Comments from the Association Appendix VII: Comments from the of Health Facility Survey Agencies 

Association of Health Facility Survey 

Agencies 

Page 78 GAO-09-64 Funding for State Survey Activities
Appendix VII: Comments from the Association 

of Health Facility Survey Agencies 

Page 79 GAO-09-64 Funding for State Survey Activities
Appendix VII: Comments from the Association 

of Health Facility Survey Agencies 

Page 80 GAO-09-64 Funding for State Survey Activities
Appendix VIII: 

A

GAO Contact and Staff 

cknowledgments 

Page 81 GAO-09-64 

Appendix VIII: GAO Contact and Staff 

Acknowledgments 

GAO Contact John E. Dicken, (202) 512-7114 or dickenj@gao.gov 

In addition to the contact named above, Walter Ochinko, Assistant 

Director; Kaycee M. Glavich; Leslie V. Gordon; Thomas Han; Keyla Lee; 

Jessica C. Smith; and Timothy J. Walker made key contributions to this 

report. 

Acknowledgments 

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(290643) Page 84 GAO-09-64 Funding for State Survey Activities
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