Medicare and Medicaid Participating Facilities: CMS Needs to Reexamine Its Approach for Funding State Oversight of Health Care Facilities
Published: 2009-02-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: Federal funding for state surveys increased from fiscal years 2000 through 2002 but was nearly flat from fiscal years 2002 through 2007. In inflation-adjusted 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.

section_title: Letter
paragraphs: 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. 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. Federal Medicare and Medicaid expenditures on such survey  activities totaled about $444 million in fiscal year 2007.
We have reported concerns about state survey activities and CMS  oversight for the past 10 years. 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- site revisits to verify that nursing homes corrected serious deficiencies.  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 three- fourths 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.
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. 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,  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. 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.
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.
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.
subsections: section_title: Background
paragraphs: 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. 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. However, facilities that  choose this option are charged fees and are subject to state validation  surveys that assess how well the accreditation process detects  deficiencies in compliance with Medicare quality standards. 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.
subsections: section_title: Survey Frequency
paragraphs: 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). In fiscal year  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.
section_title: Survey Activities
paragraphs: States undertake a variety of survey activities, including standard and  validation surveys, complaint investigations, revisits, and enforcement  actions. Surveys and complaint investigations are conducted to  determine facility compliance with federal quality and safety standards.  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.
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. The nature of the care  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.
section_title: Funding for State Survey Activities
paragraphs: In general, state survey activities are funded through a combination of  Medicare, Medicaid, and non-Medicaid state funds. Typically, almost   60 percent of federal spending on survey activities comes from Medicare,  with the remaining 40 percent funded by the federal Medicaid share.  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.
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. 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  use for operations, including survey activities. 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. 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. 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.
Medicaid. For surveys of facilities funded by Medicaid, states generally  pay 25 percent of the costs and the federal government pays the remaining  75 percent. 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. 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. 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.
section_title: Oversight of States’ Performance and Use of Funds
paragraphs: 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  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. For  observational surveys, federal surveyors accompany a state survey team to  a nursing home to evaluate the team’s on-site survey performance and  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.
section_title: CMS Took Modest Steps to Address Recent Funding Trends and Manage Survey Funding Allocations
paragraphs: Federal funding for state surveys increased from fiscal years 2000 through  2002 but was nearly flat from fiscal years 2002 through 2007. In inflation- adjusted 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.
subsections: section_title: Federal Funding for Survey Activities Was Nearly Flat from Fiscal Years 2002 through 2007
paragraphs: Federal funding for state surveys increased from fiscal years 2000 through  2002 but was nearly flat from fiscal years 2002 through 2007. In inflation- adjusted 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. Figure 1  compares overall federal funding for survey activities in actual and  inflation-adjusted dollars for fiscal years 2000 through 2007.
For about 3 months in calendar year 2007, CMS charged and retained fees  for revisits from Medicare facilities. 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. That authority was extended through part of  fiscal year 2008 through a series of continuing resolutions. 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. 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.
section_title: CMS Took Modest Steps to Address Budgetary Stress from Fiscal Years 2002 through 2007
paragraphs: 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. 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.
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  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.
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. 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).
Despite CMS’s risk-based approach, some state-surveyed facilities have  not been surveyed for many years. 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. 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.
section_title: CMS’s Attempts to Increase the Effectiveness of the Survey Budget Allocation Process Have Had a Limited Impact
paragraphs: 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.
subsections: section_title: Budget Analysis Tool
paragraphs: 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  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.
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, state- specific data are limited for most facility types other than nursing homes  because they are surveyed less frequently.
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.
section_title: State Contingency Budget Plans
paragraphs: 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. In general, CMS communicates state-projected allocations in  August, before the beginning of the next federal fiscal year. These  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.
section_title: Almost All States Were Unable to Complete Their Survey Workload, and Pinpointing the Cause Is Difficult
paragraphs: 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  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.
subsections: section_title: Almost All States Were Unable to Complete CMS’s Survey Priorities Despite Decreases in the Required Survey Workload
paragraphs: 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. 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.
subsections: section_title: Completion of CMS Survey Priorities
paragraphs: Only one state, Arkansas, was able to complete its surveys in all three tiers  in fiscal year 2006. 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). 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. Counting the few states that narrowly missed the standards as  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.
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 resource- intensive 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’  required survey workload in fiscal year 2007; all other surveyed facilities  accounted for less than 10 percent of the workload in both years. When  all facilities are considered, the required survey workload decreased by  about 4 percent (see fig. 5). 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.
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  required survey workload, ranging from less than 1 percent to about   8 percent (see app. V).
section_title: Workload Impact of Complaints, Survey Process Improvements, and Revisits
paragraphs: 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. 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.
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. CMS implemented a new complaint database in 2004 but  officials told us that the data are not reported consistently. 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  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  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.
section_title: Multiple Factors May Affect States’ Ability to Complete Survey Workloads
paragraphs: 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.
subsections: section_title: Funding Sufficiency
paragraphs: CMS established the tiered survey priorities to ensure that Medicare  funding was sufficient for states to complete surveys in tiers 1 through 3.  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.
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.  Conversely, officials from 4 states told us they did not need any additional  Medicare funding.
section_title: Workforce Instability
paragraphs: 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. 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. 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  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.
section_title: Survey Process Management
paragraphs: 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.
section_title: Quality of Surveys
paragraphs: 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. 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.
section_title: CMS Oversight of States’ Use of Funds Is Limited
paragraphs: 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.
subsections: section_title: Regional Office Oversight Now Relies on State- Reported Data
paragraphs: 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. 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  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  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.
section_title: Non-Medicaid State Contributions Are Based on Long-standing Rates That Are Not Reviewed and Vary Greatly by CMS Regional Office
paragraphs: 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.
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.
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). 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. 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 non- Medicaid 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.
section_title: Most Regional Offices We Interviewed Do Not Require States to Justify Requests for Supplemental Medicare Funds
paragraphs: 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  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. 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.
section_title: Conclusions
paragraphs: 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.
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  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. Non- Medicaid 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.
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.
section_title: Recommendations for Executive Action
paragraphs: 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 shorter- term 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:  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:  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.
section_title: Agency and AHFSA Comments and Our Evaluation
paragraphs: 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. Although CMS  disagreed with elements of our survey workload analysis, the agency  concurred with 9 of our 10 recommendations. For 2 of these, we  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.
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 Medicare- funded 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  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  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  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  listed in appendix VIII.
section_title: Appendix I: Scope and Methodology
paragraphs: 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. 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  recent data available at the time we conducted our analysis. 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 2007  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. 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- specific survey hours was incomplete for fiscal years 2000 through 2004.  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. 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.
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. 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. At the time of our  state selection, data for fiscal year 2006 were the most recent data  available.
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.
section_title: Appendix II: CMS Survey Frequency Changes for Facilities Surveyed by States, Fiscal Years 2000 through 2008
paragraphs: 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.
section_title: Appendix III: Federal Funding for Survey Activities in Actual and Inflation-Adjusted Dollars, Fiscal Years 2000 through 2007
paragraphs: Appendix III: Federal Funding for Survey  Activities in Actual and Inflation-Adjusted  Dollars, Fiscal Years 2000 through 2007 Change from 2000 to 2007  Change from 2000 to 2007  (9.0%)
section_title: Appendix IV: Number of and Percentage Change in Facilities Subject to State Standard and Validation Surveys, 2000 to 2007
paragraphs: Appendix IV: Number of and Percentage  Change in Facilities Subject to State Standard  and Validation Surveys, 2000 to 2007 (percentage change)
Facilities subject to state standard surveys  906 (31) 1,099 (28) 577 (27)  1,340 (20)  447 (13) 17 (3)
Outpatient physical therapy or outpatient speech pathology services  42 (1) 101 (5)
Intermediate care facility for the mentally retarded   -324 (-5) -1,119 (-7) -125 (-19) 254 (N/A) 87 (N/A) 3,302 (7)
Facilities subject to state validation surveys  769 (138) 405 (614) 903 (534) 185 (N/A) -173 (-4) 2,089 (39) 5,391 (10)
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 organ- specific program, each of which will be surveyed separately.
section_title: Appendix V: Change in States’ Required Survey Workload from Fiscal Year 2000 to Fiscal Year 2007
paragraphs: 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.
section_title: Appendix VI: Comments from the Centers for Medicare & Medicaid Services
section_title: Appendix VII: Comments from the Association of Health Facility Survey Agencies
section_title: Appendix VIII: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: 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.
section_title: Related GAO Products
paragraphs: 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.
Nursing Home Reform: Continued Attention Is Needed to Improve  Quality of Care in Small but Significant Share of Homes. GAO-07-794T.  Washington, D.C.: May 2, 2007.
Nursing Homes: Efforts to Strengthen Federal Enforcement Have Not  Deterred Some Homes from Repeatedly Harming Residents. GAO-07-241.  Washington, D.C.: March 26, 2007.
Clinical Labs: CMS and Survey Organization Oversight Is Not Sufficient  to Ensure Lab Quality. GAO-06-879T. Washington, D.C: June 27, 2006.
Clinical Lab Quality: CMS and Survey Organization Oversight Should  Be Strengthened. GAO-06-416. Washington, D.C.: June 16, 2006.
Nursing Homes: Despite Increased Oversight, Challenges Remain in  Ensuring High-Quality Care and Resident Safety. GAO-06-117.  Washington, D.C.: December 28, 2005.
Nursing Home Deaths: Arkansas Coroner Referrals Confirm Weaknesses  in State and Federal Oversight of Quality of Care. GAO-05-78.  Washington, D.C.: November 12, 2004.
Medicare: CMS Needs Additional Authority to Adequately Oversee  Patient Safety in Hospitals. GAO-04-850. Washington, D.C.: July 20, 2004.
Nursing Home Fire Safety: Recent Fires Highlight Weaknesses in  Federal Standards and Oversight. GAO-04-660. Washington D.C.: July 16,  2004.
Dialysis Facilities: Problems Remain in Ensuring Compliance with  Medicare Quality Standards. GAO-04-63. Washington, D.C.: October 8,  2003.
Nursing Home Quality: Prevalence of Serious Problems, While  Declining, Reinforces Importance of Enhanced Oversight. GAO-03-561.  Washington, D.C.: July 15, 2003.
Nursing Homes: Public Reporting of Quality Indicators Has Merit, but  National Implementation Is Premature. GAO-03-187. Washington, D.C.:  October 31, 2002.
Medicare Home Health Agencies: Weaknesses in Federal and State  Oversight Mask Potential Quality Issues. GAO-02-382. Washington, D.C.:  July 19, 2002.
Nursing Homes: Quality of Care More Related to Staffing than Spending.  GAO-02-431R. Washington, D.C.: June 13, 2002.
Nursing Homes: More Can Be Done to Protect Residents from Abuse.  GAO-02-312. Washington, D.C.: March 1, 2002.
Nursing Homes: Federal Efforts to Monitor Resident Assessment Data  Should Complement State Activities. GAO-02-279. Washington, D.C.:  February 15, 2002.
Nursing Homes: Sustained Efforts Are Essential to Realize Potential of  the Quality Initiatives. GAO/HEHS-00-197. Washington, D.C.:   September 28, 2000.
Medicare Quality of Care: Oversight of Kidney Dialysis Facilities Needs  Improvement. GAO/HEHS-00-114. Washington, D.C.: June 23, 2000.
Nursing Home Care: Enhanced HCFA Oversight of State Programs  Would Better Ensure Quality. GAO/HEHS-00-6. Washington, D.C.:  November 4, 1999.
Nursing Home Oversight: Industry Examples Do Not Demonstrate That  Regulatory Actions Were Unreasonable. GAO/HEHS-99-154R. Washington,  D.C.: August 13, 1999.
Nursing Homes: Proposal to Enhance Oversight of Poorly Performing  Homes Has Merit. GAO/HEHS-99-157. Washington, D.C.: June 30, 1999.
Nursing Homes: Complaint Investigation Processes Often Inadequate to  Protect Residents. GAO/HEHS-99-80. Washington, D.C.: March 22, 1999.
Nursing Homes: Additional Steps Needed to Strengthen Enforcement of  Federal Quality Standards. GAO/HEHS-99-46. Washington, D.C.:   March 18, 1999.
California Nursing Homes: Care Problems Persist Despite Federal and  State Oversight. GAO/HEHS-98-202. Washington, D.C.: July 27, 1998.