Titles XVIII and XIX of the Social Security Act establish minimum requirements that all nursing homes must meet to participate in the Medicare and Medicaid programs, respectively. The Omnibus Budget Reconciliation Act of 1987 focused the requirements on the quality of care actually provided by a home. To help beneficiaries make informed decisions when selecting or evaluating nursing homes, CMS increased the amount of information publicly available on its Nursing Home Compare Web site in 2008 by rating the quality of each nursing home on a five-level scale. To assess whether nursing homes meet federal quality standards, state survey agencies conduct standard surveys, which occur roughly once per year, and complaint investigations. A standard survey involves a comprehensive assessment of quality standards. In contrast, complaint investigations generally focus on a specific allegation regarding resident care or safety made by a resident, family member, or nursing home staff. Federal quality standards focus on the delivery of care, resident outcomes, and facility conditions. These quality standards, totaling approximately 200, are grouped into 15 categories, such as Resident Rights, Quality of Care, Quality of Life, and Resident Behavior and Facility Practices. Nursing homes that meet these quality standards can be certified to participate in Medicare, Medicaid, or both programs. Homes may occasionally change their participation type, or, according to CMS, states may require nursing homes to change their participation type. We refer to this type of change that results in a new provider identification number as a “technical status change.” Such a change may affect the source of payment—Medicare or Medicaid—that the nursing home is eligible to receive. When a technical status change occurs, CMS’s SFF methodology as applied does not incorporate the nursing home’s complete survey history. States classify deficiencies identified during either standard surveys or complaint investigations in 1 of 12 categories according to their scope (i.e., the number of residents potentially or actually affected) and severity (i.e., the potential for or occurrence of harm to residents). (See table 1.) An A-level deficiency is the least serious and is isolated in scope, while an L-level deficiency is the most serious and is widespread throughout the nursing home. Nursing homes with deficiencies at the A, B, or C levels are considered to be in substantial compliance with quality standards, whereas nursing homes with D-level through L-level deficiencies are considered noncompliant. For most deficiencies, a home is required to prepare a plan of correction, and depending on the severity of the deficiency, surveyors may conduct a revisit to ensure that the nursing home has implemented its plan and corrected the deficiency. Revisits are not required for most deficiencies below the actual harm level—A through F. As we reported in May 2008, there can be considerable variation among states in the proportion of nursing homes cited for deficiencies at the G through L levels. We concluded that this interstate variation suggests that surveyors in some states are missing some serious deficiencies or understating their scope and severity. We provided examples of such understatement in our May 2008 report. Specifically, we reported that during fiscal years 2002 through 2007, about 15 percent of federal comparative surveys nationwide found that the state surveys had failed to cite at least one deficiency at the most serious levels of noncompliance (G through L levels) and about 70 percent of them found that the state surveys had failed to cite at least one deficiency at the potential for more than minimal harm level (D through F levels). When deficiencies are cited, federal enforcement actions known as sanctions can be imposed to encourage homes to make corrections. Sanctions are generally reserved for serious deficiencies—those at the G through L levels—that constitute actual harm and immediate jeopardy to residents. Sanctions include fines known as civil money penalties, denial of payment for new Medicare or Medicaid admissions, and termination from the Medicare and Medicaid programs. Such sanctions can affect a home’s revenues and therefore provide financial incentives to return to and maintain compliance. CMS requires states to refer for immediate sanction homes that receive at least one G- through L-level deficiency on successive standard surveys or intervening complaint investigations. In addition, a nursing home with one or more deficiencies at the F through L level—but not G level—in Quality of Care, Quality of Life, or Resident Behavior and Facility Practices must be cited for substandard quality of care (SQC), which generally results in the home’s losing its approval to hold in-house or facility-sponsored nurse aide training. Two of CMS’s efforts that identify poorly performing nursing homes are the SFF Program and the Five-Star System. CMS’s Nursing Home Compare Web site identifies nursing homes that are in the SFF Program, provides a rating of from one to five stars, and also includes data on deficiencies cited during standard surveys and complaint investigations, selected quality of care measures, and nurse staffing hours. Both the SFF Program and the Five-Star System score nursing homes by assigning points to deficiencies and the number of revisits, but the points assigned to certain deficiencies differ. CMS compiles a list of SFF candidates for each state generally on a quarterly basis by using the numeric score generated by its SFF methodology. The SFF candidates are those nursing homes with the 15 highest total scores in each state. From the candidate list, state officials select, with CMS concurrence, nursing homes they think should participate in the program based on their knowledge of the candidates’ circumstances. With the exception of Alaska, each state has between one and six SFFs, depending on the number of nursing homes in the state. CMS requires states to survey SFFs twice as frequently as other nursing homes to help motivate SFFs to improve. If an SFF meets CMS’s criteria for improved performance, CMS removes the SFF designation and the nursing home “graduates” from the program. According to CMS guidance to states, SFFs that fail to significantly improve after three standard surveys, or about 18 months, may be involuntarily terminated from Medicare and Medicaid. Nursing homes may also choose to terminate from Medicare and Medicaid voluntarily. (See fig. 1.) The SFF methodology assigns points to deficiencies on standard surveys and complaint investigations, and to revisits associated with deficiencies cited on standard surveys, as follows: Deficiencies. More points are assigned to deficiencies that are higher in scope and severity. Additional points are assigned to deficiencies classified as SQC. For example, a nursing home with one J-level deficiency in the Quality of Care category would be assigned 75 points (50 points plus an additional 25 points because the deficiency was SQC). See table 2 for a comparison of the deficiency points assigned by the SFF methodology and the Five-Star System. Revisits. Multiple revisits are an indicator of more serious problems in achieving or sustaining compliance. The points for revisits are as follows: 0 for the first revisit, 50 for the second revisit, an additional 75 (total 125) for the third revisit, and an additional 100 (total 225) for the fourth revisit. MS has changed its scope and From 1999 to 2004, each state had two SFFs at any one time, which they selected from a list of four candidates, and the SFF methodology assign a different numb eficiency data. der of points to deficiencies using only about 1 year of In 2005, CMS expanded the program’s scope by changing the number of SFFs from 1 to 6 per state (excluding Alaska), for a total of 136, and altered the SFF methodology by changing the points assigned to deficiencies and using about 3 years of deficiency data, weighted equally. In 2007, CMS began requiring states to notify a nursing home and its other accountable parties (i.e., the nursing home’s administrator, owners, operators, and governing body) when the nursing home was designated as an SFF. In 2008, CMS began designating SFFs on the Nursing Home Compare Web site and also changed the scoring methodology to assign weights to each year, such that the most recent year’s standard and complaint surveys are given the greatest weight. During the course of our work, CMS implemented its Five-Star System for nursing homes. Every nursing home in the United States is rated from one (much below average) to five (much above average) stars. The Five-Star System provides an overall quality rating based on individual ratings for three separate components: (1) assessment of federal quality standards from standard surveys and complaint investigations, which CMS refers to in the Five-Star System as health inspections; (2) ratings on nursing home staffing levels; and (3) ratings on quality of care measures. In December 2008, CMS’s Nursing Home Compare Web site began reporting the star ratings that nursing homes receive for each component of the Five-Star System as well as an overall quality rating. According to CMS officials, as of March 2009 the rating for the health inspections component was based on CMS’s SFF methodology, with one variation: the Five-Star System assigns more points to D- through I-level deficiencies than does the SFF methodology. (See table 2.) CMS explained that it changed some of the points assigned to deficiencies in the Five-Star System because the purpose is different from that of the SFF Program. The SFF Program focuses on facilities in each state whose performance is consistently extremely poor, and so it assigns many points to immediate jeopardy deficiencies relative to other, lower-level deficiencies. In contrast, the purpose of the Five-Star System is to distinguish performance across all nursing homes, rather than focus on the poorest performers, and so CMS modified the points to provide more emphasis on deficiencies at the potential for more than minimal harm and actual harm levels. The rating for the second component, staffing data, is based on two elements— total nursing hours per resident day and registered nurse hours per resident day. The rating for the third component of the Five-Star System is based on nursing home performance on 10 quality of care measures, such as percentage of high-risk residents who have pressure sores.