Oversight of nursing homes is a shared federal and state responsibility. CMS is the federal agency that manages Medicare and Medicaid and oversees compliance with federal nursing home quality standards. On the basis of statutory requirements, CMS defines standards that nursing homes must meet to participate in the Medicare and Medicaid programs and contracts with states to certify that homes meet these standards through annual inspections and complaint investigations. The “annual” inspection, called a survey, which must be conducted on average every 12 months and no less than every 15 months at each home, entails a team of state surveyors spending several days in the home to determine whether care and services meet the assessed needs of the residents. CMS establishes specific protocols, or investigative procedures, for state surveyors to use in conducting these comprehensive surveys. In contrast, complaint investigations, also conducted by state surveyors within certain federal guidelines and time frames, typically target a single area in response to a complaint filed against a home by a resident, the resident’s family or friends, or nursing home employees. Quality-of-care problems identified during either standard surveys or complaint investigations are classified in 1 of 12 categories according to their scope (the number of residents potentially or actually affected) and their severity (potential for or occurrence of harm to residents). Ensuring that documented deficiencies are corrected is likewise a shared responsibility. CMS is responsible for enforcement actions involving homes with Medicare or dual Medicare and Medicaid certification—about 86 percent of all homes. States are responsible for enforcing standards in homes with Medicaid-only certification—about 14 percent of the total. Enforcement actions can involve, among other things, requiring corrective action plans, imposing monetary fines, denying the home Medicare and Medicaid payments for new admissions until corrections are in place, and, ultimately, terminating the home from participation in these programs. Sanctions are imposed by CMS on the basis of state referrals. States may also use their state licensure authority to impose state sanctions. CMS is also responsible for overseeing each state survey agency’s performance in ensuring quality of care in its nursing homes. One of its primary oversight tools is the federal monitoring survey, which is required annually for at least 5 percent of all Medicare- and Medicaid-certified nursing homes. Federal monitoring surveys can be either comparative or observational. A comparative survey involves a federal survey team conducting a complete, independent survey of a home within 2 months of the completion of a state’s survey in order to compare and contrast the findings. In an observational survey, one or more federal surveyors accompany a state survey team to a nursing home to observe the team’s performance. Roughly 85 percent of federal surveys are observational. Based on prior work, we have concluded that the comparative survey is the more effective of the two federal monitoring surveys for assessing state agencies’ abilities to identify serious deficiencies in nursing homes and have recommended that more priority be given to them. A new federal oversight tool, state performance reviews, implemented in October 2000, measures state survey agency performance against seven standards, including statutory requirements regarding survey frequency, requirements for documenting deficiencies, and timeliness of complaint investigations. These reviews replaced state self-reporting of their compliance with federal requirements. CMS also maintains a central database—the On-Line Survey, Certification, and Reporting (OSCAR) system—that compiles, among other information, the results of every state survey conducted at Medicare- and Medicaid-certified facilities nationwide. State survey data indicate that the proportion of nursing homes with serious quality problems remains unacceptably high, despite a decline in such reported problems since mid-2000. For an 18-month period ending in January 2002, 20 percent of nursing homes (about 3,500) were cited for deficiencies involving actual harm or immediate jeopardy to residents. This share is down from 29 percent (about 5,000 homes) for the previous period. (Appendix I provides trend data on the percentage of nursing homes cited for serious deficiencies for all 50 states and the District of Columbia.) Despite this decline, there is still considerable variation in the proportion of homes cited for such serious deficiencies, ranging from about 7 percent in Wisconsin to about 50 percent in Connecticut. Federal comparative surveys completed during a recent 21-month period found actual harm or higher-level deficiencies in about 10 percent fewer homes where state surveyors found no such deficiencies, compared to an earlier period. Fewer discrepancies between federal and state surveys suggest that state surveyors’ performance in documenting serious deficiencies has improved. However, the magnitude of the state surveyors’ understatement of quality problems remains a serious issue. From June 2000 through February 2002, federal surveyors conducting comparative surveys found examples of actual harm deficiencies in about one fifth of homes that states had judged to be deficiency free. For example, federal surveyors found that a home had failed to prevent pressure sores, failed to consistently monitor pressure sores when they did develop, and failed to notify the physician promptly so that proper treatment could be started. These federal surveyors noted that inadequate monitoring of pressure sores was a problem during the state’s survey that should have been found and cited. CMS plans to hire a contractor to perform approximately 170 additional comparative surveys each year, bringing the annual total to 330, including those conducted by CMS surveyors. We continue to believe that comparative surveys are the most effective technique for assessing state agencies’ ability to identify serious deficiencies in nursing homes because they constitute an independent evaluation of the state survey. Beyond the continuing high prevalence of actual harm or immediate jeopardy deficiencies, we found a disturbing understatement of actual harm or higher deficiencies in a sample of surveys that were conducted since July 2000 at homes with a history of harming residents but whose current surveys indicated no actual harm deficiencies. Overall, 39 percent of 76 surveys we reviewed had documented problems that should have been classified as actual harm: serious, avoidable pressure sores; severe weight loss; and multiple falls resulting in broken bones and other injuries. We were unable to assess whether the scope and severity of other deficiencies in our sample of surveys were also understated because of weaknesses in how those deficiencies were documented. Despite increased attention in recent years, widespread weaknesses persist in state survey, complaint investigation, and enforcement activities. In our view, this reflects not necessarily a lack of effort but rather the magnitude of the challenge in effecting important and consistent systemic change across all states. We identified several factors that contributed to these weaknesses and the understatement of survey deficiencies, including confusion over the definition of actual harm. Moreover, many state complaint investigation systems still have timeliness problems and some states did not comply with HCFA’s policy to refer to the agency for immediate sanction those nursing homes that showed a pattern of harming residents, resulting in hundreds of nursing homes not appropriately referred for action. We identified several factors at the state level that contributed to the understatement of serious quality-of-care problems. State survey agency officials expressed confusion about the definitions of “actual harm” and “immediate jeopardy,” which may contribute to the variability in identifying deficiencies among states. Several states’ comments on our draft report underscored how the lack of clear and consistent CMS guidance on these definitions may have contributed to such confusion. For example, supplementary guidance provided to one state by its CMS regional office on how to assess the severity of a newly developing pressure sore was inconsistent with CMS’s definition of actual harm. Other factors that have contributed to the understatement of actual harm include lack of adequate state supervisory review of survey findings, large numbers of inexperienced surveyors, and continued survey predictability. While most of the 16 states we contacted had processes for supervisory review of deficiencies cited at the actual harm level and higher, half did not have similar processes to help ensure that the scope and severity of less serious deficiencies were not understated. According to state officials, the large number of inexperienced surveyors, which ranged from 25 percent to 70 percent in 27 states and the District of Columbia and is due to high attrition and hiring limitations, has also had a negative impact on the quality of surveys. In addition, our analysis of OSCAR data indicated that the timing of about one-third of the most recent state surveys nationwide remained predictable—a slight reduction from homes’ prior surveys, about 38 percent of which were predictable. Predictable surveys can allow quality-of-care problems to go undetected because homes, if they choose to do so, may conceal certain problems such as understaffing. CMS’s 2001 review of a sample of complaints in all states demonstrated that many states were not complying with CMS complaint investigation timeliness requirements. Specifically, 12 states were not investigating all immediate jeopardy complaints within the required 2 workdays, and 42 states were not complying with the new requirement established in 1999 to investigate actual harm complaints within 10 days. Some states attributed the timeliness problem to an increase in the number of complaints and to insufficient staff. CMS also found that the triaging of complaints to determine how quickly to investigate each complaint was inadequate in some states. A CMS-sponsored study of the states’ complaint practices also raised concerns about state approaches to accepting and investigating complaints. For example, 15 states did not provide toll-free hotlines to facilitate the filing of complaints and the majority of states lacked adequate systems for managing complaints. To address the latter problem, CMS planned to implement a new complaint tracking system nationwide in October 2002, but as of today, the system is still being tested and its implementation date is uncertain. State survey agencies did not refer a significant number of cases where nursing homes were found to have a pattern of harming residents to CMS for immediate sanction as required by CMS policy, significantly undermining the policy’s intended deterrent effect. Our earlier work found that nursing homes tended to “yo-yo” in and out of compliance, in part because HCFA rarely imposed sanctions on homes with a pattern of deficiencies that harmed residents. In response, the agency required that, as of January 2000, homes found to have harmed residents on successive standard surveys be referred to it for immediate sanction.