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. 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. 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. 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. 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.