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4 Monitoring Nursing Home Performance THE ISSUES The federal and state governments share responsibility for quality assurance in nursing homes. The performance criteria are federal, but the federal government has delegated to the states responsibility to inspect nursing homes using these criteria and to certify their eligi- bility to participate in the Medicaid program. For the Medicare program, state governments inspect the facilities on behalf of the federal government and make certification recommendations to the federal government; the certifi- cation decisions are made by the HCFA. The federal government has authority in both the Medicaid and Medicare programs to conduct independent inspections of certified nursing homes to audit the states' certification activi- ties. The federal government also can decertify subs- tandard facilities. The federal conditions and standards were designed for use by state surveyors in inspecting nursing homes. The survey process is supposed to identify and measure performance deficiencies that result in poor-quality care and should produce documentation of the deficiencies that will support the government's case in contested enforcement actions. 104

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MONITORING NURSING HOME PERFORMANCE / 105 State monitoring of the performance of nursing homes now includes three types of activities: 1. Nursing home inspections (surveys) are conducted at least once a year by staff of the state health facilities licensure and certification agency to determine the extent of compliance of facilities with federal conditions and standards. 2. "Inspection of care" (IOC) is conducted either by the state Medicaid agency, the state health facilities licensure and certification agency, or a professional review organization. By law, inspection of the care provided to every Medicaid recipient must be done annually. It is conducted for two purposes: (1) utili- zation review, to be certain that the resident is eligible for nursing home care and is placed in the right level of care; and (2) quality of care, to be sure each resident is receiving appropriate care of adequate quality. 3. Ad hoc complaints submitted by residents, their families, or ombudsmen or other third parties are also investigated. Complaints frequently concern possible violations of federal conditions and standards or other regulatory requirements. Monitoring the performance of thousands of nursing homes for quality assurance purposes has been difficult to carry out effectively and reliably. The first set of problems stems from the inadequacies of the criteria and of the survey process used to determine the quality of care being provided. The problems with the current criteria are discussed in Chapter 3 and major changes are recommended to make them more resident-centered and outcome-oriented. The first set of issues discussed in this chapter covers the inadequacies of the current survey process. Changes are recommended that follow from the new conditions and standards recommended in Chapter 3. A second set of issues concerns federal-state and intrastate role relationships. Four specific issues are discussed: the relationship of inspection of care to the survey process, the relationships of the survey process to

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106 / NURSING HOME CARE the long-term-care ombudsman program, the elimination of the differences in federal and state certification responsibilities for Medicare and Medicaid facilities, and shifts in the responsibility for surveying state-owned facilities. The third set of issues deals with both state and federal capacity for effectively carrying out their quality assurance responsibilities. These issues include funding of federal and state survey units and the numbers, qualifications, and training of surveyors. PROBLEMS WITH THE SURVEY PROCESS The survey process has several problems that should be addressed to make it more effective: predictability, inefficiency, emphasis on paper compliance, insensitivity to resident needs, inconsistency, isolation from related monitoring processes, and variable state regulatory capacity. Predictability If the operators of a substandard facility know when it will be surveyed, they not only can clean it up and bring the records up to date, but they also may stock up, improve the menus, bring in additional personnel, and take other actions to bring the facility into temporary compliance. The committee heard anecdotal accounts in the public meetings and in case-study interviews of facilities ~. _ being notified about impending survey visits. Prior notice, either formal or informal, was the policy in some states because it made the visit easier by ensuring the presence of key personnel in the facility. Prior notice was prohibited by the HCFA several years ago, but a few states apparently still follow this policy. Even without direct notice, however, providers often can predict the timing of an annual survey visit within several weeks because certification lasts exactly 12 months and an annual survey is required by the regulations

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MONITORING NURSING HOME PERFORMANCE / 107 at least 90 days before certification expires. The case studies found that some states routinely schedule visits during the same week each year. Others send in a team of auditors or the state fire marshal a specified number of weeks before the survey visit. Inefficiency All nursing homes are subjected to the same survey intensity regardless of their past record of compliance. Most state survey agencies have very limited budgets. They barely have enough staff to complete the round of annual required surveys and do not always have enough surveyors to follow up adequately on the major problem facilities. A more efficient survey process would permit them to spend more time in poor facilities and less time in good facilities. Paper Compliance Not only are the current standards focused on theoretical facility capability rather than actual per- formance, but compliance is often determined on the basis of record reviews rather than direct observation. Insensitivity to Resident Needs Nursing home residents have widely varying needs and some facilities specialize, either formally or informally, by accepting residents only of a particular type. The severely demented and those requiring active rehabili- tation are two groups of residents often cared for in separate facilities or on separate floors. The existing survey process makes no allowance for the observed diversity among patients and across facilities. At present, all SNFs are surveyed in the same manner; the same is true for all ICFs with the exception of

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108 / NURSING HOME CARE intermediate care facilities for the mentally retarded, which are subject to a different set of standards. Inconsistency The case studies and survey of state licensure and certification agencies conducted by the committee revealed great variations among the states in the way they carry out the survey process. HCFA data show wide variations in the numbers and types of deficiencies typically cited from state to state. For example, the proportion of a state's SNFs having more than 25 deficiencies in 1983 ranged from O in Delaware to 100 percent in Washington, D.C. (mean = 24 percent).3 Another study found that the most common deficiencies in SNFs were very different from state to state.4 Part of the variation in findings may reflect real differences in facility characteristics from state to state, but much of the variation is probably due to differences in state agency interpretation of conditions and standards and in survey processes. In addition to state-level variations, numerous anecdotes of inconsistencies from one surveyor to the next were cited in the public meetings and case-study interviews. These inconsistencies in surveyor judgments are evidently random and appear as "noise" in national survey statistics, but they are extremely annoying to providers and confound state agency efforts to manage the survey process effectively. Isolation from Related Monitoring Processes In some states, there is little or no sharing of information or coordinated effort between the survey process and the processes for monitoring and investigating complaints, even though complaints can be an important source of information about quality problems in nursing homes. Relationships between the state survey agencies and ombudsman programs are often undeveloped or even adversarial. In addition, only 17 states combine or

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MONITORING NURSING HOblE PERFORMANCE / 109 coordinate the inspection-of-care reviews with the survey process even though both involve annual inspections of resident care. Variable State Regulatory Capacity The survey results and case studies of the state survey and certification agencies revealed large differences in the level of funding and staffing and in the types and deployment of personnel relative to the number of facilities. These differences result in part from the absence of a federal formula for distributing survey and certification funds and the absence of guidelines for organizing and staffing the state agencies, but they also reflect differences in state budgeting contributions and inspection policies and practices. There also are differences in state regulatory standarcls, due-process rules, court interpretations, and availability of inter- mediate sanctions. REDESIGNING THE SURVEY PROCESS These problems can be dealt with effectively by redesigning the survey process to implement the resident-centered, outcome-oriented conditions and standards recommended in Chapter 3. The new conditions and standards will require surveyors to scrutinize the care being provided and its effects on residents, rather than emphasize reviews of records, forms, and written policies as is now the case. In conjunction with new survey protocols and scoring procedures based on empirical resident-outcome standards developed from standardized resident assessment data, the new conditions and standards should improve consistency of decision-making on deficiencies, although surveyor judgment will still play an important role. Development and use of a shorter inspection procedure and use of an outcome-orienteci survey protocol will permit surveyors to identify and concentrate their efforts on facilities with problems. Also, the

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1 10 / NURSING HOME CARE inspection-of-care reviews should be incorporated into the survey process, permitting more efficient use of regulatory capacity. Other problems, such as predictability, could be solved by making minor changes in standard operating procedures. The revised survey process should be resident-centered and outcome-oriented where appropriate, although it should not eliminate all concern for certain facility character- istics that relate to life safety, cleanliness, sanitary food service, basic capacity to provide proper care, or the process standards for therapeutic diets or drug administration. It should take into account the different mixes of resident characteristics and service needs (case mix) found in different facilities, spend less survey time in the better facilities and more in the poorer facilities, and decrease the predictability of survey timing. The new process outlined in this chapter would be more efficient because it would use a shorter standard survey that would permit survey agencies to spend less time on good facilities and more time on substandard providers. It would also relieve good providers from being subjected to unnecessarily intensive inspections. More important, the new survey process would be more effective because it would rely on more appropriate indicators of compliance with federal quality-of-care and quality-of-life conditions and standards than the structurally focused survey in use today. The main features of the new survey process are discussed in detail in the remainder of this chapter. The following points are covered: consolidation of Medicaid and Medicare survey procedures, ~ two-stage survey approach, ~ ~ case-mix ret erenclng, key indicators of quality, scoring and decision-making, survey data sources, coordination with complaint programs, consumer involvement,

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MONITORING NURSING HOME PERFORMANCE / positive incentives, and continuous improvement of the survey process. Consolidation of Medicare and Medicaid Survey Procedures The procedures for certifying Medicaid and Medicare facilities are virtually identical. They should be consolidated. Recommendation 4-1: Medicare and Medicaid survey and certification process requirements should be consolidated in one place in the Code of Federal Regulations to promote consistency. Timing and Frequency of Surveys Although some states have experimented with flexible survey cycles, there is still no valid information on the optimum periodicity of inspections for detecting violations before they become serious. Even excellent facilities may fall out of compliance very quickly after key staff, ownership, or resident mix changes. The consensus among consumer, regulator, and provider groups is that annual surveys of nursing homes are both reasonable and necessary. The frequency and timing of standard surveys should be determined by each facility's performance history and should maximize the element of surprise. The objective is to encourage continuing compliance with the federal regulations. To ensure scheduling uncertainty, the actual interval between surveys for a particular facility might range from 9 to 15 months, depending upon past performance and its latest survey findings. Some facilities may need to be surveyed even more frequently if their performance has been exceptionally poor. This increased flexibility in the timing of surveys should not, however, lead to an effective lengthening of the average time between routine surveys across all

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1 12 / NURSING HOME CARE facilities in each state. That should remain constant at 12 months. As a general principle, surveys should be unannounced and unanticipated by facilities, with the exception of followup visits to determine whether satisfactory corrections have been made. Whatever their record, all facilities should be at risk for a random, full-scale extended survey at any time. Facilities also should be surveyed within a specified period of time after key events occur that are likely to affect the quality of care and quality of life in a facility, for example, change in ownership, administrator, or director of nursing. (Surveys after changes in ownership are already required by current regulations.) A high rate of nursing staff turnover or extensive use of nursing pools also might trigger an inspection. Similarly, multiple validated complaints about a facility should warrant an immediate survey. The introduction into the survey cycle of flexibility that is tied to performance and key events should enable survey resources to be targeted to those facilities most in need of attention: problem or marginal facilities and facilities where new circumstances could adversely affect residents. Facilities that are performing well would be rewarded for their good behavior by less-intense monitoring. That will allow survey agency staff to be used for more urgent tasks. The time-limited agreement requirement that was dropped in 1981 legislation, but is still required by regulation, should be eliminated to allow the annual survey to take place as late as 15 months after the previous annual survey. In practice, the time-limited agreement provisions have not made it easier to terminate facilities, because the courts have imposed the same due-process prior hearing requirements for ., . . ~ terminating facilities with expired agreements as apply to facilities with agreements in force. For this reason, a group of providers, consumers, and regulators convened by the HCFA in 1983 to develop a consensus on regulatory changes recommended elimination of mandatory time-limited agreements.

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MONITORING NURSING [IOME PERFORMANCE / 113 Recommendation 4-2: The timing of surveys should maximize the element o) surprise; the standard! annual survey should be conducted somewhere between 9 and 15 months after the previous annual survey, with the average , . , , ~ across all facilities within each state remaining at 12 months. Additional standard surveys also should take place whenever there are key events, such as a change in ownership. Independent of the survey cycle, all facilities should be required to pass rigorous life safety code and food inspections at regular intervals. Two-Stage Survey Approach After an initial audit of a sample of resident assessment records, each annual survey would begin with a short standard survey protocol. The standard survey would be designed to use "key indicators" of performance to identify facilities with poor resident outcomes that might have resulted from substandard nursing home performance. If a facility had problems on the key indicators (discussed below), it would be subjected to an extended survey protocol entailing observation and interview of additional residents to determine the extent to which staffing and other structural features of the facility, and the way care is being provided, may have caused the poor resident outcomes. The main purposes of the two-stage process are to relieve good facilities from the burden of a lengthy regular survey and to permit survey agencies to concentrate their efforts on poor and marginal facilities. The Resident Assessment Audit Surveyors would audit, by using the same resident assessment protocol the facilities are required to use, a sample of all residents to test the accuracy of the facility's assessment reports. A determination would then be made of whether the facility's resident assessment reports meet acceptable standards of accuracy. If

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1 14 / NURSING HOME CARE surveyors find that a facility's assessments of resident status differ from their own by more than a predetermined rate, they would conclude that the facility's misclassi- fication of residents reflects either professional incompetence or deliberate inaccuracy. In either case, a complete extended survey of the facility would be called for. For facilities that pass the audit, a standard survey would be conducted. The Standard Survey The standard survey would use a statistically valid, case-mix-stratified sample of the residents in a nursing home. (The case-mix definitions, sampling issues, and the key indicators are discussed more fully below.) It also would measure overall facility performance through such environmental indicators as the personal grooming of residents, cleanliness, and so on. To the extent possible, the standard survey would use a short protocol that would rely on "key indicators" of performance. Among the key indicators that may be used, depending on the availability of empirical evidence, are those elements in a standard that have been shown to be highly predictive of compliance with the other elements in that standard. Key indicators also may be specific negative (although sometimes unavoidable) or positive outcomes appropriate to ~ case-mix groupings. Use of the standard survey should enable surveyors to sort facilities into one of three categories: those that are superior or clearly adequate, those that are clearly inadequate or deficient in one or more areas of performance, and those whose performance Is ambiguous. Facilities in the superior/adequate group would normally be exempt from further review at that time, except for life safety code and sanitation inspections that will be required for all facilities and scheduled independently of the survey cycle. All other facilities will be required to undergo a partial or complete extended survey. ~.

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MONITORING NURSING HO3lE PERFORMANCE / 135 for nursing home licensure and certification surveys vary from $1,296 to $13,018 per nursing home (median = $4,700~. This variation apparently has more to do with the historical funding base provided by the HCFA and the willingness of a state to add state funds than to the current workload level (total number of facilities, adjusted by bed size), or mix (mostly skilled vs. mostly intermediate facilities, mostly large size vs. small, high vs. low Medicaid admission criteria, and so on). The recommendations made earlier in this report for a resident assessment system and a new survey process and procedures will require extensive training for all surveyors, training of nursing home staff, and improved and better supervision of surveyors by state licensure and certification agencies. This will require larger budgets for the state licensure and certification agencies. To facilitate cooperation by the states in introducing the new survey process and the resident assessment system and enhancing their survey staff supervisory capabilities, the Congress should once again authorize 100 percent federal support for state survey and certification activities (in nursing homes). This authority should be extended for 3 years to facilitate installation of the new system. After 3 years, the matching ratio should be reviewed and a permanent ratio involving some state participation reinstated. Recommendation 4-15: Title XIX of the Social Security Act should be amended to authorize 100 percent federal funding of costs of the nursing home survey and certification activities of the states. This authority should be extended for 3 years, after which time a federal-state matching ratio should be reestablished. The HCFA should develop a standard formula for distributing funds to the states under this authority so that each state is funded on an equal basis in proportion to its federal certification workload.

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136 / NURSING HO3lE CARE State Surveyor Qualifications Federal regulations and the State Operations Manual are very general regarding survey agency staffing levels and qualifications. In practice, there are significant variations in the experience and educational backgrounds of the surveyors and the composition of the survey teams in each state, for example, how many nurses, generalists or sanitarians, and other specialists such as pharmacists, nutritionists, physicians are on the teams. Nationally, about half are nurses, a fifth are sanitarians, and most of the rest are engineers, administrators, and generalists 23,24 Surveyors come from a variety of backgrounds, and few have previous nursing home or long-term-care experience. Federal guidelines for survey staff composition permit states a great deal of latitude, and the HCFA's data on surveyors indicate that some states are not staffed adequately to conduct surveys that are more oriented to resident care. For example, at least one state had no nurses on its survey staff in 1982.23 In 1983, eight states had only one or two licensed nurses on staff.24 Recommendation 4-16: The HCFA should revise its guidelines to make them more specific about the qualifications of surveyors and the composition and numbers of survey team staff necessary to conduct adequate resiclent-centeredt, outcome-orientecl inspections of nursing homes. At a minimum, every survey team should include at least one nurse. For use on extended surveys, the survey agency should have specialists on staff (or, in small states, as consultantsJ in the clisciplinary areas coverer! by the conditions and stanalarcis (for exur,~ple, pharmacy, nutrition, social services, and activitiesJ. Federal Training Support Federal training requirements are minimal and federal training programs were cut back substantially in 1980-1981 because of budget constraints. According to the case

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MONITORING NURSING HOME PERFORMANCE / 137 studies, the states vary greatly in the scope of their training efforts. Three-quarters of the surveyors had at least 10 hours of in-service training in 1982, but one-quarter had less than 10 hours and, of those, a third had none.24 Recommendation 4-17: Federal training efforts and support of state-level training programs shout/ be increased, especially during the period! of transition to the new survey process, and cluring the implementation of the new resident assessment condition of participation. Dissemination of Research and Evaluation Results Information about survey operations and their results are inadequate at the state and federal levels.4 Evaluation of the new survey system will depend on the availability of performance data. At the same time, the federal government should continue to sponsor experiments in improving the survey process.~2~22~25 The federal government- should disseminate the results of experiments sponsored by it or the states to the other states. Recommendation 4-18: National data about survey operations anc! results, and from any experiments and demonstrations sponsored! by the HCFA or the states, should be collected, analyzed, and disseminated by the federal government to facilitate continued improvement in survey method s. Federal Oversight and Sanctioning Responsibilities The HCFA regional offices have not been able to carry out their monitoring responsibilities effectively in part because of inadequate resources and procedures. Regional office personnel devoted to certification work totals about 300, or about 30 per regional office.

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1 3 8 / NURSING HOME CARE The HCFA has three ways to judge state survey agency performance, other than paper reviews of survey documents. They are- 1. Validation surveys. Theoretically, the federal surveyors are supposed to conduct validation surveys of a 5 percent sample of nursing homes assess state survey performance. In practice, this goal rarely has been attained. After the number of federal surveyors was cut from 100 to 70 in 1981, the sample size was reduced to 3 percent. Moreover, the validation surveys are often not performed until several months after the state survey, making it difficult to prove that the state overlooked or misinterpreted deficiencies found by federal surveyors. The new outcome-oriented conditions and standards and the new survey process should make it possible to judge state performance in a more reliable and consistent way. This will undoubtedly require an increase in the number of federal surveyors. 2. Complaint investigations. Complaints pertaining to possible violations of federal requirements are usually referred to the appropriate state survey agency for investigation but they may be conducted directly by federal surveyors. In some cases, this should stimulate a "look behind" survey. 3. Look behind. The HCFA has long had the authority to review state survey and certification decisions and to deny federal Medicaid reimbursement to a facility that is improperly certified by a state survey agency. Technically, under this "old look-behind" provision, the HCFA did not have the authority to decertify Medicaid-only facilities, only the authority to recover from a state any federal funds paid to a certified facility on the grounds that the state had not followed correct procedures. In 1981 the Omnibus Budget Reconciliation Act gave the HCFA direct authority to cancel the agreement between the Medicaid agency and the facility for not meeting federal standards, as determined by an onsite survey by a federal team. This is called "new look-behind." However, it requires a full evidentiary hearing before an administrative law judge before the effective date of

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MONITORING NURSING HOME PERFORMANCE / 139 termination (if the deficiencies do not pose an immediate and serious threat to patient health and safety). Termination can be further delayed pending appeal to an appeals council, and judicial review. This requirement for a prior hearing before an administrative law judge, except in cases of immediate and serious threats to residents, is not now required for other termination procedures under Medicare and Medicaid law. In the view of HCFA officials, it lessens the effectiveness of the new procedure. There have been several problems with federal oversight. First, in recent years, insufficient numbers of federal surveyors have precluded surveys of 5 percent of nursing homes as called for in federal procedures. Second, the nursing homes surveyed in each state are not for the most part randomly selected; most are selected because there has been a complaint or a pattern of complaints about care in the homes. Third, the lack of timeliness of these surveys further reduces their value for evaluating state survey performance. They often take place weeks or months after the state visit and thus do not constitute a limited check on the reliability of the state's results. Fourth, the HCFA is very limited in what it can do to states that do not carry out their federal surveying responsibilities. It does not have effective sanctions, short of terminating its agreement with the state (which has never been done), to use against states that underenforce or wrongly interpret federal standards. An intermediate sanction, such as reducing the amount of Medicaid matching funds, is needed. Recommendation 4-19: The HCFA should increase its capabilities to oversee state survey and certification of nursing homes and to enforce federal requirements on states as well as facilities by adding enough additional federal surveyors to each regional office to ensure that the random sample of nursing homes surveyed each year in each state is large enough to allow reasonable inferences about the adequacy of the state's survey and certification activities;

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140 / NURSING HO3IE CARE scheduling "look-behind" surveys so that valid con~pc~risons can be node of the findings of federal anc! state surveys; arid amending Title XIX of the Social Security Act to authorize the HCFA to withhold a portion of Medicaid matching funcis front states that perform inadequately in their survey and certification of nursing homes. ORGANIZATIONAL CHANGES Incorporation of Inspection of Care in the Survey Process Federal law and regulations currently require each state Medicaid agency to conduct at least one "inspection-of- care" (IOC) review of all patients annually to determine the appropriateness and quality of care given to recipients. The inspection of care involves a look at the care given to every Medicaid resident. It is done by a team of nurses and social workers, often with access to physician consultants. Traditionally, this inspection-of- care process has been performed independently of the facility surveys in all but a few states. Federal guidelines for IOC are general, and inspection-of-care programs differ widely in the way they are conducted, the size and qualifications of the inspection teams, and the scope of the review. Many focus on level-of-care determinations rather than quality-of-care problems and do not have resident assessment tools and techniques adequate to determine quality of care for regulatory purposes. In the past few years, some states have combined their inspection-of-care and survey staffs, usually for budgetary reasons. In some states, the processes are fully integrated--done by the same team on the same visit. In others, they are done separately, but the information derived from the two processes is shared. The responsible agencies regularly take joint action in some states. In most states, however, the two processes operate in isolation from each other.26~27

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MONITORING NURSING HOME PERFORMANCE / 141 In the 47 states responding to the committee's survey, 17 licensure and certification agencies were also responsible for inspection-of-care reviews. In nine of the states, the same team conducted both IOC and the certification surveys on the same visit; in the other eight states, IOC was conducted by a different team or on a different visit? or both. Of the 46 states answering the question of whether IOC should be integrated with the survey process, 32 said they should be done by the same team or at the same visit or both. Another seven thought they should be separate functions under the same supervisor. Only seven advocated keeping them as separately administered functions. Inspection of care, as it is currently conducted in most states, provides resident-centered quality-of-care information that is not always available to or used by the certification surveyors. The survey and IOC should be combined because they are somewhat duplicative and IOC findings would help in the assessment of compliance with resident care standards. Combining IOC with the recommended new survey process would require a statutory change to permit reviews of a sample rather than of all residents. The transfer of IOC also will affect utilization review and control responsibilities. Currently, the regulations governing IOC are included under the general subject of utilization control. These regulations require each state Medicaid program to have a surveillance and utilization control program to (1) guard against unnecessary or inappropriate use of services, (2) minimize excess payments, and (3) assess the quality of those services. Utilization control must include for each recipient a physician's certification and periodic recertification of the need for nursing home care, a medical evaluation and a rehabilitation plan for admission, and a discharge plan. In addition, there must be a utilization review (UR) plan for each facility that includes periodic reviews of each recipient's need for continuing stay in a nursing home, medical care evaluation studies, and discharge plan reviews. The state cannot receive the full federal share of payments for Medicaid services provided in a facility that does not have a proper utilization review program.

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142 / NURSING HOME CARE In most states, utilization reviews, including the continuing stay reviews, are done by facility-based UR committees. The annual IOC visit, with its 100 percent review of Medicaid recipients, is the means by which the Medicaid agency monitors the performance of the UR committees. With consolidation of ICFs and SNFs, UR committees will be required to determine the need for continued nursing home care. The annual IOC has been used for this purpose. Accordingly, if IOC is transferred, the survey agency would need to perform this audit function for the Medicaid agency. The effort should be directed at a sample of residents most likely to be discharged. This function would be greatly facilitated by the availability of the standard resident assessment data. The placement of residents in the nursing home could be checked at the time of the standard survey and reported to the Medicaid agency. If the placement decisions for the sample are wrong in too many cases, a review of all residents could be triggered. Recommendation 4-20: The inspection-of-care function s1~o''1d be carried out as part of the new resiclent-centered, outcome-oriented survey process. But individual resident reviews should be required for a sample of residents (private-pay as well as Medticaid) rather than for all residents (although individual states may elect to continue 100 percent reviews). Restructuring of State and Federal Roles and Responsibilities The federal and state role relationships in nursing home regulation must be clear and workable, because the two levels of government share the responsibility for maintaining the federal quality standards in nursing homes participating in the Medicare and Medicaid programs. In the past, federal statutes have given principal responsibility to the states for determining whether participating nursing homes comply with federal health and safety standards. The states do this by conducting onsite inspections and complaint investigations in all facilities

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MONITORING NURSING HOME PERFORMANCE / 143 participating in Medicare and Medicaid. They certify th compliance or noncompliance of these facilities. In the case of Medicaid-only facilities, which account for 61 percent of the participating facilities and 53 percent of the beds,28 the state Medicaid agency makes the final decision to enter into a provider agreement with a certified facility. In the case of Medicare-only or Medicare and Medicaid facilities, however, it is the HCFA regional offices that make this decision. In both instances, the federal government's primary responsibility should be to monitor and assist the states in the performance of their jobs. One result of this difference in certification responsibilities for Medicare and Medicaid facilities has been federal preoccupation with Medicare SNFs and relative state autonomy over Medicaid-only facilities. Another result is state Medicaid certification of state-owned nursing homes and hospitals. It is a potential conflict of interest for a state to survey its own institutions. It puts the survey agency in the position of criticizing the performance of a sister agency (often in the same department) and, if it requires major state expenditures, it may come under pressure from the governor's office to modify its findings. Moreover, the survey agency is put at a disadvantage in taking a tough line with private facilities when it is widely believed that state facilities are borderline or worse. The respective roles of the federal and state govern- ments would be clarified and strengthened if the states assumed responsibility for approving certification of all (Medicare as well as Medicaid) facilities except state-owned institutions. The latter should be certified by the federal regional offices on the basis of inspec- tions by federal surveyors. The primary role of the regional offices would still be to monitor the activities of the state survey agencies and to take steps, including the use of the sanctions referred to in the previous recommendation, to ensure adequate performance. This recommendation concerning certification authority should be implemented by overhauling the so-called "1864 agreement"--the contract between the Secretary of Health and Human Services and each state health department to Le

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144 / NURSING HOME CARE carry out Medicare surveys--assuming the following other recommendations of the committee are implemented: (1) the development and adoption of more outcome-orienteci conditions and standards anti of a new survey process to implement them, (2) provision of adequate resources and training to the states to carry out their certification responsibilities, (3) increased and improved federal monitoring of state survey performance, and (4) the adoption of federal sanctions to use against states that do not adequately apply or enforce federal requirements. Section 1864 of the Social Security Act directs the Secretary of Health and Human Services to make agreements with any "able and willing" state under which the state health department or other appropriate state agency surveys health facilities wishing to participate in Medicare and certifies whether or not they meet federal definitions, standards of care, and other requirements. In return, the secretary agrees to pay for the reasonable costs of the survey and certification activities of the state agency. Currently, 1864 agreements are open-ended in duration, but they may be terminated under certain conditions by either party. Although the HCFA has been dissatisfied with the performance of some states from time to time, it has never terminated an 1864 agreement. Because section 1864 compels the secretary to enter into agreement with any state that wants to, and does not provide for alternative sponsorship of survey activities, the HCFA has not had much leverage with states that do not strictly comply with federal requirements. The HCFA implemented a revised 1864 agreement on July 1, 1985, in an attempt to hold the states more accountable. It should continue this effort to clarify the respective roles of the federal and state levels in conjunction with the other major recommendations cited above, that is, implementation of a resident-centered, outcome-oriented standards and survey process and increased resources at the federal and state levels. It should be noted that the federal cost savings resulting from the elimination of the paper reviews of the certification packages in the regional offices should

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MONITORING NURSING HOlIE PERFORMANCE / 145 offset in part the higher costs of the expanded federal oversight function called for in the last recommendation. Recommendation 4-21: The respective roles and responsibilities of the federal anc! state governments should be realigned as follows: The states should be responsible for certifying all Med. icare and Med. icaid f acilities (exce pt state institutions) according to federal requirements. ~ The HCFA should monitor state performance more actively and be responsible for conducting surveys of, and certifying, state-owned institutions directly.