Medicare and Medicaid Participating Facilities:

CMS Needs to Reexamine Its Approach for Funding State Oversight of Health Care Facilities

GAO-09-64: Published: Feb 13, 2009. Publicly Released: Mar 19, 2009.

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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.

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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: We shared our analysis with CMS showing that there was little change in the number of facilities that had not been surveyed in 6 years or more. CMS officials agreed to examine this issue. However, CMS officials did tell us that the agency had instituted a requirement for a 7.0 year maximum survey interval for all types of facilities. Previously, there was no maximum survey interval for all facility types, only a 6-year average. As a result, it was possible for states to meet the average but not survey some facilities for 10 years or more. Because, CMS believes that the FY 2010 survey budget only funded about 80 percent of the cost of surveying all providers within statutory and policy mandated intervals, officials expect that a number of states still will not meet the 7-year maximum survey interval.

    Recommendation: To address significant shortcomings in the current system for financing and conducting surveys of Medicare and Medicaid facilities, and to help ensure that those facilities that have not been surveyed in at least 6 years are in compliance with federal quality standards, the CMS Administrator should 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.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  2. Status: Closed - Implemented

    Comments: CMS officials told us that, in 2009, the agency began to require states that had failed to meet established survey frequency standards to a significant extent for certain facility types to submit a plan of correction acceptable to the CMS regional offices. The regional offices must, in turn, notify CMS central office that they have received and approved such state plans. These actions should help to increase the survey frequency of facilities that have not been surveyed in some time, thereby decreasing the risk for quality problems at these facilities.

    Recommendation: To address significant shortcomings in the current system for financing and conducting surveys of Medicare and Medicaid facilities, and to help ensure that those facilities that have not been surveyed in at least 6 years are in compliance with federal quality standards, the CMS Administrator should monitor the progress made by state survey agencies that have a significant number of such facilities.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  3. Status: Closed - Not Implemented

    Comments: In 2012, CMS officials told us that, given the challenge that Congress currently faces on budgetary matters, they determined that their immediate efforts would best be devoted to designing, testing, and implementing additional efficiency initiatives (e.g., S&C memo 12-12 regarding their undertaking of a national Quality Assurance Efficiency & Effectiveness initiative). They told us that they still plan to develop a report, but expect that the timeline will continue to be stretched out, and that the eventual report will communicate not only the cost of surveying all facilities at a 3-year interval, but the savings made possible by their efficiency initiatives and other fiscal reforms, such as the savings to the Medicare Trust fund made possible by ensuring that Medicaid is paying its fair share of home health survey expenses. In June 2013, CMS officials told us that the President's budget request conveyed the minimum funding level required to complete the scheduled survey workload, and each year made it clear that funding lower than the requested level would have negative impacts. In recent years, the congressional appropriation has consistently been lower than the President's budget request and CMS officials believe that Congress has been informed of the minimum funding levels necessary to sustain adequate Survey and Certification oversight. However, in the 2012 President's budget requests, CMS requested a funding level to allow it "to maintain more rigorous survey frequencies of at least once every six years for all facility types". The 2013 President's budget request indicated that it included funding levels to allow for nursing home surveys every 15 months, on average, and home health agency surveys every 3 years; survey frequencies for other facility types are "determined by policy and funding levels".

    Recommendation: To address significant shortcomings in the current system for financing and conducting surveys of Medicare and Medicaid facilities, and to ensure that Congress has adequate information on the impact of funding on facility oversight, the CMS Administrator should 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.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  4. Status: Closed - Not Implemented

    Comments: CMS officials told us they report to Congress each year in the Congressional justification of the budget and that in fiscal year 2012, Congress did not fully support the President's budget. They stated that the final appropriation for Medicare administration, including Survey and Certification, was significantly below the budget request. CMS officials told us they believe they have made ample information available to Congress regarding Survey and Certification workload and funding. We acknowledge that federal and state resources continue to be strained, although we continue to believe that it is difficult to determine the appropriate federal funding level for complaint investigations without a complete estimate of the complaint workload.

    Recommendation: To address significant shortcomings in the current system for financing and conducting surveys of Medicare and Medicaid facilities, and to ensure that Congress has adequate information on the impact of funding on facility oversight, the CMS Administrator should include information in the President's budget request on projected state complaints and the cost of completing the associated workload.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  5. Status: Closed - Implemented

    Comments: To ensure that health care facilities participating in the Medicare and Medicaid programs 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, among other activities. In general, 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 the Medicare Trust Funds, with the remaining 40 percent funded by the federal Medicaid share. Prior to each federal fiscal year, CMS notifies states of their projected Medicare budget allocations and later notifies states of any changes in their Medicare allocations. 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. In 2009, we reported that CMS had developed a new budget analysis tool in 2005, recognizing that its previous method for allocating Medicare funds for state survey activities resulted in over- and underfunding relative to state survey requirements. However, the tool has had a limited impact. First, CMS officials chose not to use the tool to recalculate states' baseline allocations to avoid shifts that could result in layoffs of trained staff. Second, the amount of funding to be redistributed to states at the end of the fiscal year has shrunk in recent years. We recommended that the CMS Administrator use available tools to adjust the annual baseline Medicare allocations provided to each state to help address state survey funding inequities. In response to our recommendation, CMS told us that it continues to provide proportionately more resources each year to those states that are less well funded given their workload. In addition, in fiscal year 2010, CMS instituted a policy of reducing a state's allocation if it underspends its allocation by 3 percent or $500,000 for two or more consecutive years; to date, CMS has reduced one state's allocation as a result of this policy and reallocated the funds to two other states that have consistently spent more than their allocations. CMS's recent policy and actions have resulted in more equitable funding for states relative to their survey workload.

    Recommendation: To address significant shortcomings in the current system for financing and conducting surveys of Medicare and Medicaid facilities, and to help address state survey funding inequities, the CMS Administrator should use available tools to adjust the annual baseline Medicare allocations provided to each state.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  6. Status: Closed - Implemented

    Comments: CMS officials told us that in FY 2012 they have undertaken a national Quality Assurance Efficiency and Effectiveness initiative. As part of this initiative, CMS modified the survey process for end-stage renal disease facilities to incorporate a risk-based approach. Specifically, the intensity of each survey would vary based on an initial onsite risk assessment of the facility. In July through September 2012, CMS pilot tested the new process in 11 states. Based on positive results of the pilot test, CMS began rolling out the new process nationwide in November 2012. These actions should help to ensure the efficiency and effectiveness, and thereby increase the overall quality, of state survey activities.

    Recommendation: To address significant shortcomings in the current system for financing and conducting surveys of Medicare and Medicaid facilities, and to improve CMS's ability to differentiate between funding and management issues and help ensure the quality of surveys, the CMS Administrator should 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.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  7. Status: Closed - Not Implemented

    Comments: In 2012, CMS officials told us that they have suspended further expansion of the Quality Indicator Survey (QIS), due to lower than expected funding for FY 2012 and variation in states' performance using QIS. Specifically, while the pilot states did not experience an increase in survey hours using QIS, the expansion states did. CMS is re-examining the QIS algorithms to determine if the survey hours can be brought back in line with the average hours for the traditional survey. The team will follow up next year. In June 2013, CMS officials told us they have suspended further expansion of the QIS to additional States until they are able to change the algorithms to reduce costs consistent with the exigencies of sequestration. They told us that given the challenges involved with QIS, together with an unstable federal financing environment, they are not undertaking plans to expand the QIS to additional States at the present time.

    Recommendation: To address significant shortcomings in the current system for financing and conducting surveys of Medicare and Medicaid facilities, and to improve CMS's ability to differentiate between funding and management issues and help ensure the quality of surveys, the CMS Administrator should provide Congress with an estimate of the cost of implementing, over 3 years, the Quality Indicator Survey methodology for nursing homes.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  8. Status: Closed - Implemented

    Comments: According to a CMS memo (Admin Info: 09-32), a CMS regional office workgroup developed a standard operating procedure to guide each region in conducting its review of states' cost allocations. Changes to cost allocations resulting from these reviews will become effective when the results for all states are known and have been analyzed for national impact, which may occur on a rolling basis by provider type. According to the schedule in the memo, ROs were to complete their reviews of nursing home cost allocations by June 30, 2009. Reviews of state cost allocations for the remaining providers and suppliers (e.g., home health agencies, end-stage renal disease facilities, and hospitals) are to be completed by July 31, 2010.

    Recommendation: To address significant shortcomings in the current system for financing and conducting surveys of Medicare and Medicaid facilities, and to improve the oversight of state expenditures, the CMS Administrator should collect information about current state shares, including the methodologies used to determine them and the date that they were last reviewed.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  9. Status: Closed - Implemented

    Comments: According to a CMS memo (Admin Info: 09-32), a CMS regional office workgroup developed a standard operating procedure to guide each region in conducting its review of states' cost allocations. Changes to cost allocations resulting from these reviews will become effective when the results for all states are known and have been analyzed for national impact, which may occur on a rolling basis by provider type. According to the schedule in the memo, ROs were to complete their reviews of nursing home cost allocations by June 30, 2009. Reviews of state cost allocations for the remaining providers and suppliers (e.g., home health agencies, end-stage renal disease facilities, and hospitals) are to be completed by July 31, 2010.

    Recommendation: To address significant shortcomings in the current system for financing and conducting surveys of Medicare and Medicaid facilities, and to improve the oversight of state expenditures, the CMS Administrator should 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.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  10. Status: Closed - Implemented

    Comments: In response to the first part of our recommendation, the President's Budget for fiscal year 2010 requested authority for CMS to charge user fees for revisits and a portion of recertification surveys. Specifically, $9.4 million was included in the budget for charging revisit user fees. Due to the time required to draft a regulation and implement the recertification fee, CMS did not expect to collect any such fees in fiscal year 2010 and, as such, did not include any funds for this purpose in the budget. If Congress provides CMS the authority to collect these fees, this could result in (1) Medicare Trust Fund savings and (2) somewhat more predictable funding to the extent the fees do not require annual appropriations. In response to second part of our recommendation and budgetary concerns, beginning in 2011, CMS expanded the use of contractors to either substitute for state surveys or to supplement or assist state or federal surveyors for several types of health care facilities. Overall, CMS's actions should help address states' staffing barriers by leveraging its own resources to ensure an adequate survey workforce to more efficiently and effectively survey facilities.

    Recommendation: Over the longer term, the CMS Administrator should 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.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

 

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