OIG to Audit CMS Oversight of Nursing Home Surveys by Third-Party Contractors

The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG), a top federal watchdog tasked with overseeing Medicare, Medicaid and other HHS programs, recently announced that it will audit the Centers for Medicare & Medicaid Services' (CMS) nursing home survey practices, with a report expected to be issued in 2025.

The short report issued by OIG recognized that prior OIG reviews of nursing homes "identified multiple issues related to the backlog of required nursing home surveys conducted by state survey agencies."

Federal Survey Requirements

Federal standard survey requirements call for a skilled nursing facility (SNF) to receive a routine survey at least every 15 months. While CMS is responsible for the certification and oversight of most of America's nearly 16,000 nursing homes, including compliance with requirements for participation in Medicare and Medicaid, CMS has entered into agreements with states under Section 1864 of the Social Security Act, referred to as "1864 Agreements," which include delegating survey responsibilities to individual states.

Annual surveys are a key tool in evaluating nursing home quality of care, including fire and safety policies, distribution of medications, patient care, nursing home records, infection control, environmental conditions, dietary practices in the nursing home and more. Surveyor work is guided by a complex set of regulations that requires significant training. Survey teams are required to arrive unannounced, and a typical survey will be conducted over three to five days, depending on the size of the facility. The survey team may conduct an extended survey if substandard quality of care is suspected and additional information is required to confirm or refute that finding.

Survey Backlogs

Despite the 15-month requirement, survey backlogs have plagued the skilled nursing sector for years. A May 2023 report (May Report) from the U.S. Senate Special Committee on Aging confirmed that nursing home inspection agencies are "severely understaffed," noting that 32 state survey agencies report job vacancy rates of 20 percent or more. High turnover rates, driven largely by the inability to offer competitive salaries, present another major hurdle, especially given the significant time required to train a new surveyor. According to the May Report, "[m]ultiple states have noted it can take one to two years for surveyors to become fully independent." The survey backlog was further exacerbated by the COVID-19 pandemic, which included shutdowns as well as a temporary shift toward Focused Infection Control (FIC) surveys over standard routine surveys. Data from 2021 indicated that more than 70 percent of U.S. nursing homes went at least 16 months without a standard survey, with additional 2022 data indicating that more than 34 percent of facilities had gone more than two years without a standard survey.

The implications of missed surveys are far-reaching. Operators rely on regular surveys to help identify and correct potential issues at their facilities. Operators also count on a timely resurvey to show that identified problems have been corrected. Consumers rely on regular surveys when making decisions about where they or a loved one might receive care, and lenders rely on surveys as part of underwriting financing transactions. Finally, providers that are unable to get resurveyed after making necessary facility corrections could face higher financing costs while waiting for updated survey results.

Third-Party Contractors

To combat the survey backlog, state agencies have increasingly relied on third-party contractors to conduct surveys. CMS itself uses contractors to conduct its comparative state surveys to ensure compliance with the 1864 Agreements. The new OIG report questions whether CMS provides adequate oversight of the third-party contractors used by states in conducting these surveys in accordance with federal requirements. Although the report does not go into further detail, it is expected that OIG will be looking at third-party surveyors' training and qualifications, among other factors.

Conclusion

The new CMS regulations for SNFs, including expected staffing mandates and ownership disclosure requirements, will likely already place additional strain on surveyors, whether state employed or third-party contracted. (See Holland & Knight's previous alerts "CMS Proposes Minimum Staffing Standards for Long-Term Care Facilities," Sept. 7, 2023, and "CMS Issues Final Rule on Ownership Transparency," Nov. 20, 2023.) A negative finding by OIG into third-party contractors would only add greater pressure to an already strained situation.

For additional information, please contact the authors or a member of Holland & Knight's Long-Term Care Facilities Team.

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