Nursing homes play an essential role in our health care system. They care for persons who are temporarily or permanently unable to care for themselves but who do not require the level of care provided in an acute care hospital. Titles XVIII and XIX of the Social Security Act establish minimum standards that all nursing homes must meet to participate in the Medicare and Medicaid programs. The states and the federal government share responsibility for oversight of the quality of care in the nation’s 17,000 nursing homes. Oversight includes routine and follow-up surveys to assess compliance with standards and enforcement activities to ensure that identified deficiencies are corrected and remain corrected. At the direction of the Congress, HCFA sets standards for nursing homes’ participation in Medicare and Medicaid. HCFA also contracts with state agencies to check compliance with these standards through surveys at least every 15 months. States also enforce their own licensing requirements in all state-licensed nursing homes, including those with Medicare certification, and check for compliance with these licensure requirements during standard surveys. States also conduct surveys in response to complaints. Enforcement of Medicare and Medicaid standards is likewise a shared responsibility. HCFA is responsible for enforcing standards in homes with Medicare certification—about 86 percent of all homes. When homes are found to have deficiencies at the most severe level, or when homes fail to correct deficiencies in a timely manner, HCFA policies call for states to refer these cases to HCFA, together with any recommendations for sanctions. HCFA normally accepts these recommendations but can modify them. States are responsible for enforcing standards in homes with only Medicaid certification—about 14 percent of all homes. As part of the Omnibus Budget Reconciliation Act of 1987 (OBRA 87), the Congress changed the focus of standards that homes needed to meet to participate in Medicare and Medicaid. Prior to OBRA 87, the Medicare and Medicaid participation standards focused on a home’s capability to provide care, not on the quality of care actually provided. Largely in response to a 1986 Institute of Medicine study, which recommended more resident-oriented nursing home standards, OBRA 87 refocused standards on the actual delivery of care and the results of that care. For example, the focus of the standards moved to such matters as a home’s performance in providing appropriate care for incontinence or for preventing pressure sores, and the performance would be evaluated by reviewing medical records and examining residents. To ensure that facilities would achieve and maintain compliance with the new standards, OBRA 87 also greatly expanded the range of enforcement sanctions. Studies of nursing home regulation had shown that many homes tended to cycle in and out of compliance with standards that were important to protecting residents’ health and safety, thereby placing nursing home residents in jeopardy. For example, in 1987 we reported that more than one-third of nursing homes reviewed failed to consistently meet one or more of the standards that were most likely to adversely affect residents’ well-being. These facilities were nevertheless able to remain in Medicare and Medicaid without incurring any penalties if the deficiencies were corrected in a timely manner. As such, there was no effective federal penalty to deter noncompliance. At that time, the only sanctions available were termination from the program or, under certain circumstances, denial of payments for new Medicare or Medicaid residents. OBRA 87 added several new alternatives, such as civil monetary penalties, and expanded the deficiencies that could result in denial of payments. (See table 1.) the Committee amendment would expressly allow a State to impose civil money penalties for each day in which a facility was found out of compliance with one or more of the requirements of participation, even if the facility subsequently corrected its deficiencies and brought itself into full compliance. This, in the Committee’s view, is essential to creating a financial incentive for facilities to maintain compliance with the requirements for participation (emphasis added). The Department of Health and Human Services (HHS) issued regulations implementing OBRA 87 in two stages. Regulations implementing standards were effective by October 1990, but enforcement regulations covering sanctions did not become effective until July 1995. According to a HCFA official, publication of enforcement regulations was delayed because of the controversial nature of the regulation and the workload associated with responding to the large volume of comments received in the rulemaking process. OBRA 87 gave the HHS Secretary authority to specify criteria as to when and how each sanction should be applied. In developing the regulations implementing these sanctions, HCFA proceeded on the assumption that, while all standards must be met and enforced, failure to meet a standard takes on greater or lesser significance depending on the circumstances and the actual or potential effect on residents. Thus, the regulations established an approach for determining the relative seriousness of each instance of noncompliance with standards. For each deficiency identified in the survey process, the approach places the deficiency in one of 12 categories, labeled “A” through “L” depending on the extent of patient harm (severity) and the number of patients adversely affected (scope). The most dangerous category (L) is for a widespread deficiency that causes actual or potential for death or serious injury to residents; the least dangerous category (A) is for an isolated deficiency that poses no actual harm and has potential only for minimum harm. Homes with deficiencies that do not exceed the C level are considered in “substantial compliance,” and as such, providing an acceptable level of care. The effect of HCFA’s categorizing is that for a home to be out of compliance, it must have one or more deficiencies that subject a resident to at least the potential for more than minimal harm. Identifying the scope and severity of a deficiency also provides the basis for three groups of enforcement sanctions, which may be required or optional. (See table 2.) Homes in substantial compliance are not subject to sanctions. For noncompliant homes referred to HCFA for sanction, the severity of the sanction that must or can be imposed generally increases with the severity of the deficiency. For each category in the scope and severity grid, a sanction from a particular group must be imposed and sanctions from certain other groups can be added. For example, a home with one or more deficiencies rated J or higher must receive a sanction from group 3, and HCFA has the option of levying additional sanctions from groups 1 or 2. HCFA regulations provide that the choice of sanctions is to take into account not only the severity and scope of the deficiency but also a consideration of prior performance, desired corrective and long-term compliance, and the number and severity of all the homes’ deficiencies together. Under their shared responsibility for Medicare-certified nursing homes, state agencies identify and categorize deficiencies and make referrals with proposed sanctions to HCFA. HCFA is responsible for imposing sanctions and collecting monetary penalties. Under HCFA’s policies, most homes are given a grace period, usually 30 to 60 days, to correct deficiencies identified in the standard or complaint surveys. States do not refer these homes to HCFA for sanction unless they fail to correct their deficiencies within the grace period. Exceptions are provided for homes with deficiencies rated J, K, or L and for homes that meet HCFA’s definition of a “poorly performing facility”—a special category of homes with repeat severe deficiencies. HCFA policies call for states to refer these homes immediately for sanction. HCFA also requires a notice period before the sanction takes effect. When a HCFA regional office receives a referral from a state, it reviews the case and the state’s recommendation, decides whether to impose a sanction, and notifies the home if a sanction is to be imposed. Under HCFA regulations, homes have 15 to 20 days to come into compliance, and if a home does so by the deadline, the sanction does not take effect. There are two major exceptions. One is a civil monetary penalty, which can be assessed retroactively even if a home corrects the problem. The other is when a nursing home is found to have a deficiency rated J, K, or L. In this circumstance, HCFA may put a sanction into effect after a 2-day notice period. National data on nursing home surveys for July 1995 to October 1998 showed that the proportion of homes with the most severe deficiencies remained at uncomfortably high levels throughout this period. The total number of homes not in compliance, even for the most serious deficiency categories, remained relatively steady. Furthermore, about 40 percent of the homes found to have serious deficiencies in a survey early in the period were found to have deficiencies of equal or greater severity in a subsequent survey late in the period. Compliance with nursing home standards of care continued to be a problem during the entire 3-year period we examined. Comparing the number of cited deficiencies per noncompliant nursing home during this period showed little overall change from the first, or base, survey (3.79) to the most recent survey (3.74). In the earlier set of surveys, 28 percent of homes had at least one deficiency in the two highest severity categories (actual or potential for death or serious injury and other actual harm); in the most recent set of surveys, the figure was 27 percent (see table 3). In the two highest severity categories, common deficiencies included inadequate attention to prevent pressure sores, failure to provide supervision or assistance devices to prevent accidents, and failure to assess residents’ needs or provide necessary care. Table 4 shows the most frequently cited violations in these severity groups for surveys conducted in the most recent survey period. Although most noncompliant homes eventually returned to compliance, many did not maintain this status. Among those homes cited for deficiencies at the two highest levels of severity during the base survey, about 40 percent were cited for deficiencies at the same or higher level of severity during the most recent survey. In other words, during the 3-year period, 4 of 10 homes that were found by the base survey to have caused actual or potential death or serious injury or other actual harm to residents had deficiencies (possibly different deficiencies) that were just as severe—or worse—in the most recent inspection. Although we focused our analysis on deficiencies in the most severe categories, we noted that among those homes with deficiencies considered to hold potential for more than minimal harm in the first survey, about 77 percent were cited for deficiencies (again, possibly different ones) at the same or higher level of severity during the most recent survey. To determine the role sanctions play in bringing about a greater degree of compliance, we focused on a sample of 74 homes that had been referred for sanctions. The case histories of these homes showed that sanctions helped bring the homes back into temporary compliance but provided little incentive to keep them from slipping back out of compliance. While several aspects of the sanction program, such as civil monetary penalties, have potential to provide the necessary incentive to better ensure continued compliance, certain HCFA policies or practices limited their effectiveness with these homes. The 74 homes we reviewed had been referred by the states to HCFA for possible sanctions a total of 241 times—on average, about 3 times each. All 74 homes also had at least one deficiency that caused actual harm to residents or placed residents at risk of serious injury or death. Some referrals were accompanied by a recommendation for one sanction, while others were accompanied by recommendations for two or more. The most common sanction initiated by HCFA was denial of payments for new admissions—176 times. HCFA also initiated 115 civil monetary penalties and 44 terminations. Many homes corrected their deficiencies after being notified that a sanction would be imposed. In these cases, HCFA rescinded the sanction. (See table 5.) For example, denial of payment never took effect in 97 of the 176 instances in which HCFA gave notice that a sanction would be imposed. Recision usually occurred because the facility corrected the deficiency before the effective date of the sanction. The ability of sanctions to help bring about corrective action is reflected in the fact that, at the time of our study, only 7 of the homes in our sample that were sanctioned with termination remained terminated from the Medicare and Medicaid programs. However, sanctions—or the penalties they carry—only temporarily induced homes into taking action to correct identified deficiencies, as many were again out of compliance by the time the next survey or follow-up inspection was conducted. Of the 74 homes we reviewed, 69 were again referred for sanctions after being found out of compliance once more—some went through this process as many as six or seven times. Table 6 shows some of the cases in our sample where homes had been cited for serious deficiencies, referred to HCFA for sanctions, and subsequently cited for serious deficiencies again. This yo-yo pattern of compliance and noncompliance could be found even among homes that were terminated from Medicare, Medicaid, or both. Termination is usually thought of as the most severe sanction and is generally done only as a last resort. Once a home is terminated, however, it can generally apply for reinstatement if it corrects its deficiencies. For three of the six reinstated homes in our group, the pattern of noncompliance returned. For example, a Texas nursing home was terminated from Medicare for a string of violations that included widespread deficiencies at the severity level of actual harm to residents. About 6 months after the home was terminated, it was readmitted under the same ownership. Within 5 months, state surveyors identified a series of deficiencies involving harm to residents, including failure to prevent avoidable pressure sores or ensure that residents received adequate nutrition. Other sanctions authorized by OBRA 87—increased state monitoring, appointment of a temporary manager to oversee the home while it corrects its deficiencies, and state-directed plans of correction (see table 1)—have so far been applied infrequently. All three are receiving limited use, state officials said, because of various cost and administrative concerns. For example, officials in three of the four states said they lacked a pool of qualified administrators to act as temporary managers. Michigan was an exception to this pattern. In the first quarter of 1998, Michigan entered into a contract with the Michigan Public Health Institute to provide oversight of facilities with significant compliance problems. Oversight activities focus on directed plans of correction and state monitoring. Sanctions have been unable to ensure continued compliance because several procedures for implementing sanctions can minimize their effectiveness or invalidate them altogether. Civil monetary penalties, a sanction with strong potential deterrent effect, were hampered by a growing backlog of appeals. Imposing sanctions without a grace period was seldom used because of restrictive HCFA guidance. And termination, the ultimate sanction because it removes homes from the program, had little effect because many homes were able to reenter the program with little consequence for their past actions and were given a clean slate for the future. Civil monetary penalties have an advantage in encouraging homes to remain in compliance—they can be applied retroactively to the date of initial noncompliance. In other words, they cannot be avoided simply by taking corrective action, and the longer the deficiency remains, the larger the penalty can be. HCFA initially planned to make wide use of the new sanctions when they were put in place but has since modified its policy by reserving civil monetary penalties for more serious deficiencies (G or higher in the scope and severity grid). However, the use of civil monetary penalties for even this narrow range of deficiencies has resulted in a growing backlog of appeals. Nursing homes can appeal civil monetary penalties before HHS’ Departmental Appeals Board. Appealed penalties are not collected until the case is closed, usually through the ruling of an administrative law judge or a negotiated settlement between HCFA and the nursing home. Nationwide, a lack of hearing examiners has created a backlog of about 620 cases awaiting decision as of August 1998, with some cases dating back to 1996. By February 1999, the backlog had grown to over 700 cases and is predicted to grow further. HHS budget documents estimated that each year at least twice as many appeals would be received as would be settled. This backlog creates a bottleneck for timely collections. For example, HCFA accounting records showed, as of September 1998, only 37 of the 115 monetary penalties imposed on the 74 homes we reviewed had been collected. Unless penalties are actually collected they have minimal deterrent effect. Large backlogs undermine the effectiveness of civil monetary penalties in two ways. First, they increase the pressure on HCFA to resolve the appeal by negotiating settlements—a strategy that helps somewhat in controlling the growth of the backlog but can also lower the size of the fine, potentially reducing the effect of the penalty. Second, even if the appeal goes to a hearing and a penalty is upheld, considerable time may have elapsed without the home having to pay. As a result, it is not surprising that some nursing home owners routinely appeal imposed penalties. For example, regional enforcement logs showed one large Texas nursing home chain appealed 62 of the 76 civil monetary penalties imposed on its nursing homes (including chain-owned homes that were not in our sample) between July 1995 and April 1998. These 62 penalties totaled $4.1 million. Under HCFA policy, HCFA can apply sanctions on an immediate basis (that is, without a grace period to correct deficiencies) to homes designated as poor performers and to homes that place residents in immediate jeopardy (actual death or serious injury or potential for such an outcome). Doing so can help encourage sustained compliance because eliminating the grace period means that homes are more likely to be affected by penalties. However, HCFA’s guidance for when to apply poor performer and immediate jeopardy designations has allowed severe and repeat violators to avoid immediate sanctions. Until September 1998, HCFA’s definition of a poorly performing home was so narrow that it excluded many nursing homes that had repeated deficiencies causing actual harm to residents. In our earlier report on California nursing homes, we found that 73 percent of homes cited repeatedly for harming residents did not meet HCFA’s definition of a poorly performing facility. In the other states we visited, we also found instances of severe and repeated deficiencies that were not designated as poor performers and thus avoided immediate sanctions. HCFA has since revised its definition to broaden the circumstances under which a nursing home could be designated as a poorly performing facility. The new definition includes homes with any deficiencies rated H or higher in the scope and severity grid on its current survey and in its previous standard survey or any intervening survey (including complaint investigations). HCFA said it would expand the definition in 1999 to include deficiencies rated G. The revision, however, narrowed the definition in certain other respects, such as shortening the period during which deficiencies could be considered from the previous two surveys to the most recent one. The revised definition also excluded F-rated deficiencies (widespread potential for more than minimal harm) from consideration of poorly performing facility status. Because the changes are so recent, it is too early to tell what their effect will be on the number of homes designated as poor performers. A second area—which HCFA has not addressed—involves referral of homes cited for deficiencies that contributed to the death of a resident. We found several examples where state surveyors cited the deficiency during a complaint investigation that took place some time after the incident and found that the deficient practice contributing to the death had ceased at the time of the investigation. Under HCFA policy, such deficiencies corrected at the time of the investigation are considered “past noncompliance” and are to be cited as isolated actual harm, level G in HCFA’s scope and severity grid. HCFA does not require homes with level-G deficiencies to be referred for sanctions. As a result, homes cited for deficiencies so severe that they contributed to resident deaths may not be referred to HCFA for sanctions at all. By allowing these homes to escape immediate sanction, much of the ability to deter future noncompliance is lost. Table 7 shows examples of homes that were not referred for immediate sanction. Another group of homes that can largely avoid the threat of immediate sanction even though they exhibited a pattern of recurring and serious noncompliance are those that have been terminated from Medicare and subsequently readmitted. After a terminated home has been readmitted in Medicare, HCFA policy prevents state agencies from considering the home’s prior record in determining if the home should be designated as a poorly performing facility, effectively giving the home a “clean slate.” This policy produces the disturbing outcome that termination could actually be advantageous to a home with a poor history of compliance because this history would no longer be considered in making enforcement decisions after it was readmitted to Medicare. Given the continuing spotty performance we found among those homes in our sample that had been terminated and subsequently reinstated, this policy merits reexamination. Two other aspects of HCFA’s use of termination also limit its effectiveness. First, HCFA typically paid terminated homes in our sample for 30 days after termination regardless of whether transfers of patients were under way. This policy in effect gives terminated homes 30 extra days of payment while they seek reinstatement. Second, HCFA generally used a short “reasonable assurance period” to determine if homes seeking reinstatement to Medicare had corrected their problems and were otherwise complying with the standards. While HCFA can make this period last up to 180 days, the homes we examined were given reasonable assurance periods of 15 to 60 days—a shorter period that provides less assurance that homes can sustain long-term compliance. Recent actions taken or proposed by HCFA to improve nursing home oversight can help make sanctions more of a deterrent against continued noncompliance, but on their own they are not enough to fully address the problems we identified. HCFA began a series of actions in response to our earlier report on California nursing homes and its own July 1998 report to the Congress summarizing a 2-year study of nursing home regulation.These actions address a number of problems we identified in our earlier report but do not resolve all of them or additional problems we have identified through our ongoing work. Further, weaknesses in HCFA’s management information systems will continue to limit HCFA’s ability to implement its initiatives and further strengthen its enforcement processes. In July 1998, HHS announced several actions that HCFA would take to toughen enforcement of nursing home regulations, particularly focusing on homes with serious and repeat deficiencies. The actions include plans to expand the definition of “poorly performing facility” to include more homes with repeat deficiencies that harmed residents. HCFA also directed that the results of an intervening survey, such as complaint investigations, be considered in determining whether a home should be designated as “poorly performing.” The actions also called for increased survey frequency for homes with the most chronic compliance problems and focusing enforcement efforts on nursing homes in chains that have a record of noncompliance with federal rules. With regard to the problems we have identified in this report, however, HCFA’s actions leave several issues unresolved. HCFA may be able to resolve one of the issues (the backlog of civil monetary appeals) if HHS’ budget request for additional staff positions is adopted. However, there are no actions under way with regard to two other issues—referring homes for sanction in all cases where deficiencies contributed to the death of a resident and better using the deterrent effect of termination from the Medicare and Medicaid programs (see table 8). HCFA initiatives also include a proposal to allow civil monetary penalties to be assessed on instances of noncompliance as an alternative to the number of days out of compliance. Since the proposed regulation had not been issued at the time we completed our review, we were not able to evaluate the extent, if any, that it could have on increasing use of civil monetary penalties. HCFA’s initiatives to focus more oversight on homes with serious and repeat noncompliance are likely to encounter obstacles due to three weaknesses in HCFA management information: the inability to centrally track enforcement actions, the lack of needed data on the results of complaint investigations, and the inability to identify nursing homes under common ownership. HCFA lacks a system that integrates federal and state enforcement information to help ensure that homes receive appropriate regulatory attention. Such a system would track key information about steps taken by HCFA offices and the states, such as verification that deficiencies were corrected or sanctions imposed. Although HCFA’s Online Survey, Certification, and Reporting (OSCAR) system was developed for this purpose, we learned that the system’s information was incomplete and inaccurate because states and HCFA have not consistently entered data into OSCAR. We found that the HCFA regions and states that we visited maintain and use their own systems, not OSCAR, to monitor enforcement actions. At the time of our initial inquiry, HCFA’s regional systems ranged from manual paper-based systems to complex computerized programs, and none of the four states’ tracking systems was compatible with OSCAR or the regional systems. This lack of management information makes it difficult for HCFA’s central office to coordinate and oversee the actions of its 10 regional offices, which are responsible for working with the states to administer the enforcement system. For example, officials in HCFA’s central office were not aware that regions were frequently late in imposing the sanction of denial of payment for new admissions on nursing homes out of compliance for 3 months—a sanction mandated under HCFA regulation. The four HCFA regional offices we visited often missed the time frame and sometimes did not impose the sanction at all. Of the 241 enforcement actions we reviewed, 85 involved situations where payment for new admissions was not stopped, even though homes had been out of compliance for more than 3 months. In 61 of the 85 cases, the regional office imposed denial of payment an average of 24 days after the deadline. In the remaining 24 cases, the region never denied payments at all, despite these homes being out of compliance for an average of 156 days. When we discussed this problem with responsible HCFA headquarters staff, they were unaware of the extent of this problem. If HCFA’s central office lacks adequate management information on the activities of its regional offices, it will be unable to monitor whether they are properly carrying out HCFA’s initiatives. A second area in which HCFA lacks adequate information is the results of complaint surveys. HCFA does not require states to cite violations of federal standards if the deficiencies were found during complaint surveys or to ensure that if such deficiencies are cited, they are reported to HCFA. One of the four states we reviewed based its decisions to refer homes to HCFA for sanctions solely on the results of the surveys. California did not report the results of complaint investigations to HCFA; instead it chose to deal with the homes under the state’s licensing authority. These practices leave HCFA without full information about nursing homes’ compliance status with Medicare and Medicaid standards. In September 1998, HCFA modified its guidance to states to stipulate that any federal deficiencies cited during complaint investigations must be used in determining if a nursing home is a “poorly performing facility.” The situation in California exemplifies how this lack of information limited HCFA’s ability to get a full picture of a home’s compliance with Medicare and Medicaid standards. California surveyors usually do not cite federal deficiencies when they find violations in complaint investigations. As a result, California does not recommend, and HCFA has no basis to impose, federal sanctions on deficient nursing homes resulting from complaint investigations. In many instances, substantiated complaint investigations disclosed severe deficiencies that were not part of the record referred to HCFA. For example, one home had 61 complaints between September 1995 and July 1998. State investigators substantiated violations in 30 of these complaints, some of which resulted in actual harm and placed residents in immediate danger, such as abuse of a resident by a staff member and failure to prevent or treat pressure sores. The state agency levied fines totaling $80,000 under its licensing authority but did not cite any federal deficiencies although many of its findings clearly violated Medicare and Medicaid standards. The home’s surveys did not document major problems. As a result, HCFA remained unaware of this home’s compliance problems. The third weakness with HCFA’s management information is the lack of data about homes with common ownership that are having severe compliance problems. Chain-owned nursing homes, a significant and growing segment of the nursing home industry, often cross state and regional boundaries. Effective oversight requires an information system that will be able to identify which chains have experienced severe compliance problems. However, HCFA tracks enforcement actions by individual facility provider number only. Consequently, regulators considering enforcement actions against a chain provider in one part of the state or country cannot easily determine the extent to which the problems they have identified are reflective of a broader pattern within the chain. To illustrate the impact of this lack of ownership information, we identified a chain provider and linked the records on the provider by three available sources: HCFA, states, and fiscal intermediaries. The linking showed that the chain provider had a disproportionate number of enforcement actions relative to other homes in the same states. In Texas, the provider owned about 11 percent of the nursing homes but accounted for over 18 percent of the state’s enforcement actions, including 25 percent of the state’s immediate jeopardy cases and 25 percent of the poorly performing facilities. In Michigan, where the chain owned eight facilities, six of the eight had a total of 27 separate enforcement actions. Despite multiple enforcement actions against these homes, Michigan and HCFA regional officials were unaware that the Michigan homes had a common owner or of the problem history of the owner’s facilities in Texas. In discussing this finding with HCFA officials, they noted that this example clearly demonstrated the need for information on common ownership. The inability to identify and track homes by chain could pose an immediate limitation on HCFA’s recent initiative to direct more enforcement efforts toward nursing home chains. To be successful in this initiative, HCFA needs to ensure that it can identify and track homes with common ownership. Despite reforms to ensure that nursing homes maintain compliance with federal quality standards, one-fourth of all homes nationwide continue to be cited for deficiencies that either caused actual harm to residents or carried the potential for death or serious injury. This pattern has not changed since the July 1995 reforms were implemented. Although the reforms equipped federal and state regulators with many alternatives and tools to help promote sustained compliance with Medicare and Medicaid standards, the way in which states and HCFA have applied them appears to have resulted in little headway against the pattern of serious and repeated noncompliance. Such performance may do little to dispel concerns over the health and safety of frail and dependent nursing home residents. The enforcement system we observed still sends signals to noncompliant nursing homes that a pattern of repeated noncompliance carries few consequences. HCFA’s recent actions, such as broadening the definition of a “poorly performing facility,” are a step in the right direction. However, four key problems we identified remain in need of attention. First, if the backlog of civil monetary penalties is not reduced, much of the deterrent effect of this sanction will continue to be lost. Second, weaknesses remain in the deterrent effect of termination, including the lack of a tie to “poorly performing facility” status for reinstated homes and the limited “reasonable assurance period” for monitoring terminated homes before reinstating them. Third, under HCFA guidance, states are not required to refer for sanction all homes with deficiencies that contribute to resident deaths. And finally, the changes do not address the need for HCFA to improve its management information system. HCFA’s ability to improve its oversight of nursing homes will depend heavily on whether it has the information to identify and monitor those homes that pose the greatest risk of harm. To strengthen its ability to ensure that nursing homes maintain compliance with Medicare and Medicaid quality-of-care standards, we recommend that the Administrator of HCFA take the following actions: Improve the effectiveness of civil monetary penalties. The Administrator should continue to take those steps necessary to shorten the delay in adjudicating appeals, including monitoring progress made in reducing the backlog of appeals. Strengthen the use and effect of termination. The Administrator should (1) continue Medicare and Medicaid payments beyond the termination date only if the home and state Medicaid agency are making reasonable efforts to transfer residents to other homes or alternate modes of care, (2) ensure that reasonable assurance periods associated with reinstating terminated homes are of sufficient duration to effectively demonstrate that the reason for termination has been resolved and will not recur, and (3) revise existing policies so that the pre-termination history of a home is considered in taking a subsequent enforcement action. Improve the referral process. The Administrator should revise HCFA guidance so that states refer homes to HCFA for possible sanction (such as civil monetary penalties) if they have been cited for a deficiency that contributed to a resident’s death. Develop better management information systems. The Administrator should enhance OSCAR or develop some other information system that can be used both by the states and by HCFA to integrate the results of complaint investigations, track the status and history of deficiencies, and monitor enforcement actions. We obtained comments on our draft report from HCFA and the four states that we visited. HCFA, California, Michigan, and Pennsylvania commented in writing (see app. II through app. V); Texas provided oral comments. In general, HCFA and the states concurred with our findings and recommendations and cited steps being taken to strengthen enforcement of Medicare and Medicaid requirements. They also suggested technical changes, which we included in the report where appropriate. HCFA commented that our findings underscore the need for the agency’s recent initiatives and will help sharpen the focus on areas that still need to be addressed. In its response (see app. II), HCFA generally agreed with our four recommendations and cited specific steps that it was planning to address them. HCFA concurred with our recommendation to shorten the delay in adjudicating appeals but also noted that it does not oversee the department’s appeals board. HCFA pointed out that the President’s fiscal year 2000 budget includes funds to double the number of administrative law judges that hear appeals for the board. We recognize that HCFA does not have administrative oversight of appeals board activities, but it does have the key role in monitoring and evaluating the effectiveness of civil monetary penalties as a sanction. Our recommendation was made with this latter role in mind. Regarding our recommendation for a better management information system, HCFA stated that a major system redesign is being undertaken. HCFA stated that the redesign was a long-term project but that it had plans for interim steps to make the existing system more useful to both state and HCFA offices. Also, concerning our recommendation to improve its referral process, HCFA indicated that it would reiterate to the states the need to use civil monetary penalties in serious cases of past noncompliance. HCFA also concurred with two specific steps that we recommended to strengthen termination as a sanction but did not concur with the third—using a longer reasonable assurance period before reinstating the home. HCFA pointed out that a long reasonable assurance period would not be appropriate if the home were terminated because it ran out of time correcting a minor deficiency that was corrected shortly after termination. This recommendation was based on evidence that a short reasonable assurance period appears to be given without attention to a home’s past performance. For example, four of the six reinstated homes in our sample were given reasonable assurance periods of 30 days or less. Most had repeated and serious deficiencies—those causing actual harm to patients. Our earlier work in California also showed that reinstated homes were often cited soon after reinstatement with new deficiencies that harmed residents. The intent of this recommendation is to help accomplish the stated purpose of the reasonable assurance provision—that there be some assurance that the cause for termination has been removed and will not recur. In response to HCFA’s comment, we revised the recommendation to clarify this intent. While in agreement with our recommendations, California’s comments recommended additional steps, such as enhanced funding to the states, that would help strengthen nursing home oversight (see app. III). Michigan’s comments largely focused on the implementation of initiatives taken in 1998 to correct problems that we discuss in the report. Michigan particularly highlighted its resident protection initiative, designed to monitor facility corrective action and performance both before and after the state determines the facility has achieved substantial compliance. It emphasizes such sanctions as directed plans of correction and state monitoring-–steps the homes must pay for themselves. We were aware of this initiative, which had become operational shortly before our visit in June 1998, and have revised the report where appropriate to reflect this initiative. However, data on its effectiveness in creating incentives for homes to maintain compliance with the standards were not available at the time we conducted our work. The results of future surveys will be needed to assess the initiative’s success. We also provided a copy of the report for review by the American Health Care Association (AHCA) and the American Association of Homes and Services for the Aging (AAHSA). AHCA officials expressed agreement with the report’s recommendations. They did express concern, however, about our sample size and methodology for selecting homes for detailed review. In selecting 74 homes that states had referred to HCFA for enforcement action, we focused on homes with serious and often repeat deficiencies. Our rationale in selecting these homes was if we found that such homes had been effectively dealt with, there might be some assurance that the system was at least addressing the worst problems. However, we did not find that the enforcement process was working as effectively as it should, even for these homes. Both AHCA and AAHSA also pointed out that deficiencies cited as actual harm (level G) on HCFA’s scope and severity grid may represent broad variation in seriousness and, by definition, refer to isolated situations that affect one or a very limited number of residents, with some citations appearing to be less serious than others. We acknowledge that there may be variation in the seriousness of actual harm violations but also found in the course of our work that a G-level citation most often involved serious resident care issues and at times did affect more than one resident. Copies of this report are also being sent to the Administrator of HCFA and other interested parties. If you or your staff have any questions about this report, please contact me or Kathryn Allen, Associate Director, at (202) 512-7114. This report was prepared by Margaret Buddeke, Peter Schmidt, Terry Saiki, Stan Stenersen, and Evan Stoll under the direction of Frank Pasquier. To determine the extent to which nursing homes maintain compliance with federal standards, we analyzed HCFA’s nationwide database of nursing home inspections—the Online Survey, Certification, and Reporting (OSCAR) system. This data system records the results of states’ recertification surveys in standard format. The format changed to recognize the deficiency scope and severity classifications made effective by the July 1995 final enforcement regulations. As a result, analysis of the scope and severity of nursing home deficiencies is inherently limited to periods after July 1995. Accordingly, the period of our analysis included surveys done from July 1995 through October 1998. We restricted our analysis to the 187 nursing home requirements for participation in Medicare and Medicaid categorized as related to patient care. Therefore, our analysis did not include data on compliance with safety code standards, such as fire protection and physical plant requirements. In addition to using these data to analyze the extent to which homes comply with the standards, we used the data to determine the most frequently occurring deficiencies and their relative severity. In order to compare nursing homes’ performance in achieving and maintaining compliance over time, we used OSCAR data to identify the earliest recertification survey performed after the regulations became effective compared to the homes’ most current surveys. To do this, we used data from a facility’s first survey during the period July 1, 1995, to December 31, 1996, which became part of the “base” period. Data from the latest survey since January 1, 1997, became part of the “current” period. For some nursing homes, there was an intervening survey, but we did not use data from these surveys. Although we did not thoroughly assess the reliability of the OSCAR database, for purposes of analyzing findings of nursing home recertification surveys, HCFA officials as well as private researchers who work with the database generally recognize the data as reliable. Even though the data are considered reliable for recertification deficiencies reported by the states, the extent to which they provide a consistent measure of the quality of care across states is unknown. Nevertheless, OSCAR data contain omissions that likely understate the extent of deficiencies found during other surveys by state inspectors. For example, in California, serious violations found during complaint investigations conducted by state inspectors were not routinely shown in OSCAR and appear to be understated in national data as well. To determine the extent to which the new sanctions contribute to nursing homes’ sustained compliance, we were unable to use OSCAR to perform a similar nationwide analysis. We found that OSCAR does not contain complete or reliable data on enforcement actions, such as the extent to which sanctions are imposed, and no other system exists that provides such nationwide data. For this reason, we relied on enforcement monitoring databases from the four HCFA regional offices we visited. Thus, to obtain information about the effectiveness of sanctions in deterring future noncompliance, we had to gather available data on enforcement actions from states and HCFA’s regional offices. In general, we used a two-step process. First, we looked at the extent to which states were referring cases of noncompliance to HCFA for enforcement sanctions. Second, we reviewed a sample of cases where states had recommended to HCFA that sanctions be imposed. We selected 4 of HCFA’s 10 regional offices—Philadelphia (region III), Chicago (region V), Dallas (region VI), and San Francisco (region IX)—for further review. We selected these four regions because they are geographically dispersed and contain about 55 percent of the nation’s nursing homes. Within each region, we selected one state—Pennsylvania, Michigan, Texas, and California, respectively—in which to gather additional information on specific providers and chains. We selected these four states because they had substantial numbers of nursing homes that accounted for about 23 percent of the nation’s nursing homes. At the states, we reviewed procedures for referring cases to HCFA; discussed these procedures with each state’s ombudsman; and where appropriate, reviewed selected case files to obtain a better understanding of procedures in place. At each of the four HCFA regional offices, we used HCFA regional enforcement records to identify nursing homes that had scope and severity designations of G or higher for which the state survey agencies had forwarded to HCFA survey files with recommendations for sanctions. From these records, we selected a sample of enforcement cases to review. The sample was not designed to be representative of the universe of enforcement actions. Rather, it was designed to give us a sufficient number of cases where different types of sanctions, including termination, were possible. We then reviewed these case files with an eye toward determining the implemented sanction’s strength or weakness as a deterrent to future noncompliance. Accordingly, we focused the sample on nursing homes, including known chain providers that had multiple referrals by state agencies to HCFA for enforcement or had been terminated. In all, we selected 74 separate nursing home providers. These providers accounted for 241 enforcement actions between July 1995 and October 1998 (see table I.1). These enforcement actions consisted of both recertification surveys and other abbreviated surveys (follow-up or complaint) where the state had referred cases to the HCFA regional office for sanctions. To determine the extent to which HHS’ actions were sufficient to ensure sanctions were applied in a timely and effective manner, we reviewed the actions announced by HCFA from July through November 1998 that concerned enforcement of nursing home standards. As such, proposed changes to the nursing home survey and certification process were outside the scope of our review. We also reviewed the extent to which adequate management information systems existed to support and oversee HCFA’s revised initiatives to strengthen its enforcement process. This included an examination of record formats in OSCAR, HCFA’s regional office tracking system, and state nursing home compliance systems. We also reviewed HCFA regulations, policies, and guidance; interviewed officials in HCFA’s headquarters and regional offices; and interviewed state survey agency officials. We also interviewed representatives from industry groups and advocacy groups and academic researchers. 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Summary: Pursuant to a congressional request, GAO provided information on the enforcement of federal nursing home standards, focusing on: (1) national data on the existence of serious deficiencies in nursing home compliance with Medicare and Medicaid standards; and (2) the use of sanction authority for homes that failed to maintain compliance with the standards. GAO noted that: (1) GAO's work showed that while the Health Care Financing Administration (HCFA) has taken steps to improve oversight of nursing home care, it has not yet realized a main goal of its enforcement process--to help ensure that homes maintain compliance with federal health care standards; (2) surveys conducted in the nation's 17,000-plus nursing homes in recent years showed that each year, more than one-fourth of the homes had deficiencies that caused actual harm to residents or placed them at risk of death or serious injury; (3) the most frequent violations causing actual harm included inadequate prevention of pressure sores, failure to prevent accidents, and failure to assess residents' needs and provide appropriate care; (4) although most homes were found to have corrected the identified deficiencies, subsequent surveys showed that problems often returned; (5) about 40 percent of the homes that had such problems in their first survey during the period GAO examined (July 1995 to October 1998) had them again in their last survey during the period; (6) sanctions initiated by HCFA against noncompliant nursing homes were never implemented in a majority of cases and generally did not ensure that the homes maintained compliance with standards; (7) GAO's review of HCFA's survey data combined with GAO's analysis of 74 homes that had a history of problems showed a common pattern; (8) HCFA would give notice to impose a sanction, the home would correct its deficiencies, HCFA would rescind the sanction, and a subsequent survey would find that problems had returned; (9) the threat of sanctions appeared to have little effect on deterring homes from falling out of compliance again because homes could continue to avoid sanctions' effect as long as they kept correcting their deficiencies; (10) HCFA has some tools to address this cycle of repeated noncompliance but has not used them effectively; (11) fines are potentially a strong deterrent because they can be applied even if a home comes back into compliance; (12) however, the usefulness of civil monetary penalties is being hampered by a backlog of administrative appeals coupled with a legal provision that prohibits collection of the penalty until the appeal is resolved; (13) the sanction is often delayed for several years; and (14) GAO also found problems with several aspects of HCFA's policies for ensuring that sufficient attention is placed on homes that have serious deficiencies or a history of recurring noncompliance as well as policies for reinstating homes that have been terminated from the Medicare and Medicaid programs.