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Institute of Medicine (US) Committee on Nursing Home Regulation. Improving the Quality of Care in Nursing Homes. Washington (DC): National Academies Press (US); 1986.

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Improving the Quality of Care in Nursing Homes.

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Appendix AHistory of Federal Nursing Home Regulation

The federal government first became involved in nursing homes with the passage of the Social Security Act of 1935.1,2 The Act established a federal-state public assistance program for the elderly called Old Age Assistance (OAA). Because the drafters of the legislation opposed the use of the public poorhouse to care for the poor elderly, the act prohibited the payment of OAA funds to residents of public institutions. This stimulated the growth of voluntary and proprietary nursing homes. By the time of the first national survey of nursing homes in 1954, there were 9,000 homes classified as skilled nursing or personal care homes with skilled nursing facilities; 86 percent were proprietary, 10 percent were voluntary, and 4 percent were public.3

In 1950, amendments to the Social Security Act authorized payments to beneficiaries in public institutions and enabled direct payments to health care providers. The 1950 legislation also required that participating states establish programs for licensing nursing homes, but it did not specify what the standards or enforcement procedures should be. Although most states licensed hospitals (it was a requirement of the 1946 Hill-Burton hospital construction program), few of them licensed nursing homes until after 1950.

Federal involvement in nursing homes accelerated after that. Studies showed that there were few nursing homes providing skilled nursing services,4,5 and a consensus began to develop that the federal government should promote their development. In 1954 the Hill-Burton Act was amended to provide funds to nonprofit organizations for the construction of skilled nursing facilities that met certain definitions and hospital-like building standards. In 1956, amendments to the Social Security Act increased the level of federal funding of OAA payments and created a separate, matching program for medical services to public assistance recipients, including nursing home services; payments for OAA jumped from $35.9 million in 1950 to $280.3 million in 1960.6 In 1960 the latter program was replaced by the Kerr-Mills Act with a more extensive program called Medical Assistance for the Aged (MAA). This covered the "medically needy" for the first time. By 1965, 47 states had MAA programs, with a total outlay of $1.3 billion a year. There were about 300,000 recipients.

In the meantime, legislation in 1958 and 1959 authorized the Small Business and Federal Housing administrations to aid proprietary nursing home construction and operation.7

Various studies in the 1950s found that between 30 and 60 percent of the residents in private nursing homes were public assistance recipients.8 A Public Health Service survey of nursing home residents in 13 states during 1953-1954 found that 51.3 percent were public assistance recipients.5 Another study of expenditures for nursing and convalescent homes found that, in 1957, even before the 1956 amendments took effect, 53 percent of the expenditures for nursing and convalescent homes were from federal, state, and local governments.9 In 1965, 60 percent of the residents of nursing and convalescent homes were supported by welfare.10

With this increasing federal financial involvement in nursing home services and construction, federal attention began to focus on quality issues. In 1956, the Commission on Chronic Illness called attention to problems with the quality of care in nursing homes.11 The states themselves began to report problems.12 A 1955 study by the Council of State Governments reported that the majority of nursing homes were functioning with low standards of service and relatively untrained personnel.13

There were concerns about the adequacy of state licensing standards and the variability of state enforcement efforts throughout the period leading up to the passage of the Medicare and Medicaid acts in 1965. The 1950 "standard-setting amendment" to the Social Security Act did not specify minimum state licensure standards or procedures, and there was no mechanism for assuring that states enforced licensure standards. The Public Health Service found in 1958 that few states had adequate numbers of survey staff and that the qualifications of survey personnel varied widely.14 About 44 percent of 308,000 skilled nursing beds did not meet Hill-Burton fire and health standards in 1960.15

A special Senate Subcommittee on Problems of the Aged and Aging was established in 1959. It reported that only a few nursing homes were of high quality. Most facilities were substandard, had poorly trained or untrained staff, and provided few services. But, the subcommittee concluded, "because of the shortage of nursing home beds, many states have not fully enforced the existing regulations, failure to do so reflecting the policy of the states to give ample time to the nursing home owners and operators to bring the facilities up to the standards. Many states report that strict enforcement of the regulations would close the majority of the homes."16

As a result of concerns about the quality of care and safety of conditions in nursing homes, the chronic disease program of the Public Health Service began to study state licensing programs in 1957. The program began to work with the states and the industry to develop federal -guidelines for nursing home licensure programs.17 The final product, the Nursing Home Standards Guide, was issued in 1963. It was mostly concerned with standards, but also made some recommendations for regulatory organization and procedures.18

The Senate created the Special Committee on Aging in 1961, and began to hold hearings on nursing home problems in 1963, chaired by Senator Frank Moss. The Moss Committee hearings in 1965 documented great variations in state nursing home standards and enforcement efforts on the eve of the Medicare and Medicaid programs. The 1974 report of the Moss Committee restated the reasons for these variations:19


Enforcement meant the closure of facilities, already in short supply, with no place to put the dispossessed patients.


States have few weapons other than the threat of license revocation to bring a home into compliance.


The license revocation itself was of very little use because of protracted administrative or legal procedures required.


Even if the revocation procedure was implemented, judges were reluctant to close a facility when the operator claimed that the deficiencies were being corrected.


Nursing home inspections were geared to surveying the physical plant rather than assessing the quality of care.

The Advent of Medicare and Medicaid

The next major event was the enactment of the Medicare and Medicaid programs in 1965. This greatly expanded federal funding of nursing home services and gave the U.S. Department of Health, Education, and Welfare (HEW) the authority to set standards for nursing homes choosing to participate. The Medicare Act provided funding for beneficiaries needing post-hospital convalescence in what was called an ''extended care facility'' (ECF). Medicaid paid for skilled nursing services.

The Medicare ECF program had immediate problems. Few nursing homes could meet the health and safety standards or provide the level of services envisioned under the program. Of 6,000 applicants, only 740 could be fully certified the first year. More than 3,000 nursing homes that could not otherwise comply were certified as being in "substantial compliance."20

Meanwhile, given the fact that thousands of Kerr-Mills recipients were in nursing homes that could not meet Medicare standards, the Medicaid program had to give up the idea of using ECF standards for its skilled nursing facilities and essentially left it to the states to decide on nursing home participation. Amendments made in 1967 to the Medicaid program included those sponsored by Senator Moss authorizing HEW to develop standards and regulations to be applied uniformly by the states. The Moss amendments included a statutory definition of a skilled nursing facility (SNF) and specified standards for participating homes. They also provided HEW with the authority to withhold federal funds from nursing homes not meeting the standards.

The new Medicaid SNF regulations were supposed to be implemented at the beginning of 1969, but a lengthy battle over their scope and substance ensued. The outgoing Johnson administration went through several drafts, and interim regulations were finally issued by the Nixon administration later in the year.

The 1967 amendments also resulted in the establishment of intermediate care facilities (ICFs). They were intended to care for residents who did not need the 24-hour nursing services provided in skilled nursing homes, but who needed more than custodial care.2 The committee report said that ICFs would lower the overall costs of long-term care and allow many nursing homes to participate that could not meet SNF or ECF requirements. ICFs were established under Title XVI (OAA). This left federal standard-setting authority ambiguous. HEW withdrew proposed ICF regulations in 1969 when states protested.

Pressure to increase the standards for nursing homes participating in Medicare and, especially, Medicaid, and to improve their enforcement, began to build in the early 1970s. The Moss Committee began a series of hearings in 1969 that lasted until 1973 and resulted in 3,000 pages of testimony and, in 1974, a series of well-publicized reports critical of federal regulatory efforts. In 1970 and 1971, nursing home problems became front-page news with a fire that killed 32 residents in Ohio, a case of food-poisoning in Maryland that killed 36, and Congressman David Pryor reporting on the floor of the House his experiences as a nursing home orderly.2

Meanwhile, a Senate Finance Committee staff study found that some states were reclassifying nursing homes as ICFs "wholesale."20 (ICFs were not brought into the Medicaid program, where they would be subject to federal regulation, until 1971.) HEW discovered that the states were certifying Medicaid SNFs merely on the basis of licensure requirements and that Medicaid was making vendor payments to homes that did not comply with federal standards.21 The U.S. General Accounting Office (GAO) audited skilled nursing homes in three states and found that half were in violation of Medicaid standards for nurse staffing, physician visits, or fire safety.22

The Senate Finance Committee staff study of Medicare and Medicaid in 1970 was very critical of Medicare certification.20 Congress forced HEW to stop using "substantial compliance" as a basis for certifying nursing homes. The department instead adopted the procedure of certifying nursing homes with deficiencies that were not considered an immediate hazard to patient health or safety. The undersecretary of HEW testified at a Moss Committee hearing in 1971 that 74 percent of the nursing homes participating in Medicare were certified with deficiencies and more than 70 percent of them had had deficiencies from 1968 through 1971. He concluded that "reliance on state enforcement machinery had led to widespread nonenforcement of federal standards."23 Secretary of Health, Education, and Welfare Elliot Richardson told the White House Conference on Aging that 39 states had not been complying with federal procedural requirements.

In June 1971, with the White House Conference on Aging pending, President Nixon made a major speech deploring conditions in nursing homes and pledging to end federal payments to substandard facilities. In a second speech 2 months later, Nixon announced an eight-point plan to improve nursing home regulation. Among the points were initiatives to centralize Medicare and Medicaid enforcement activities and to expand HEW's enforcement staff, to increase funding for training state surveyors, to provide full federal reimbursement for the costs of state nursing home inspection programs, and a promise to decertify substandard facilities. The president also proposed training programs for nursing home staff, experimental funding of state nursing home ombudsmen, and the creation of an Office of Nursing Home Affairs in HEW to coordinate the new enforcement efforts and conduct a "comprehensive study" of federal long-term-care policies.

During 1972 Congress passed the remnants of Nixon's comprehensive welfare reform bill, which still contained many changes in the social security, Medicare, and Medicaid programs. The law included full federal funding of state survey and certification activities, redefined Medicare ECFs and Medicaid skilled facilities as "skilled nursing facilities" (SNFs), and directed HEW to develop a single set of standards for Medicare and Medicaid SNFs. Although the Senate Finance Committee's report said the provision to unify Medicare and Medicaid standards for SNFs was "not intended to result in any dilution or weakening of standards for skilled nursing facilities," the law itself reduced some Medicare provisions, such as eliminating social workers in SNFs, reducing RN coverage in rural SNFs from 7 to 5 days a week, and extending indefinitely the grandfathering from state licensure requirements of nursing home administrators with 3 years of practical experience.

Work began in earnest to develop the regulations for SNFs and ICFs in 1972. But interim regulations were not issued until 1973 and the final regulations were promulgated in January 1974. Senator Moss criticized the interim SNF regulations as being significantly weaker than those for ECFs, and some requirements, such as those for medical direction, residents' rights, and 7-day RN staffing were reinstated later in 1974. But the final ICF regulations were less stringent than the interim regulations in several areas, such as nurse staffing requirements, and waivers for life safety code provisions were allowed. The department defended the increased generality of some of the requirements on the ground that they were "performance standards," which could be more flexibly applied by skilled health professional surveyors.24

Meanwhile, until 1974, states were able to use their discretion in allocating Medicaid funds to support residents in facilities not meeting the ICF level of care or that could not meet new requirements for federal reimbursement, such as the most recent life safety code (LSC).25 The 1974 regulations made official the inclusion of ICFs in the Medicaid program and applied to them SNF certification procedures (but not the standards) and left approvals of LSC and RN staffing waivers to the states. A study by the Office of, Nursing Home Affairs (ONHA) in January 1974, just prior to the promulgation of the ICF standards, found that 59 percent of SNFs were being certified with life safety code deficiencies.26 The new standards triggered another wave of conversions from SNF to ICF.25

Finally, in 1974, "as a result of an increasing awareness on the part of the federal government that many nursing home facilities which were receiving Medicare (Title XVIII) and Medicaid (Title XIX) funds were not meeting standards," HEW established offices of long-term care standards enforcement in the federal regional offices.25 Its regional directors were delegated the authority to approve provider agreements with Medicare and Medicare/Medicaid SNFs and to monitor state agency certifications and agreements with Medicaid-only providers.

Post-1974 Efforts to Revise Federal Regulations

Since 1974 there has been a series of attempts to revise the federal nursing home certification regulations.27 In 1974 the Office of Nursing Home Affairs began a study of the quality of care in nursing homes. Teams of health professionals made surprise visits to 288 SNFs to assess their management, structural, and staffing characteristics. They also investigated the quality of patient care by looking at a sample of 3,454 residents with a standardized patient assessment form. The study found that "the extent to which nursing homes comply with the federal standards of care and safety varies widely."28 The ONHA also found that the surveys and certification regulations only looked at whether facilities had the capacity to deliver required services, not whether services of adequate quality were actually being delivered.

This finding, that the certification process focused on the institutional framework within which care is provided, rather than on the patient, led to an effort to develop a patient assessment instrument based on outcome measures, called Patient Appraisal and Care Evaluation, or PACE. The ONHA's original intention was to test PACE and, after evaluation and modification, to use it in a national study of nursing homes. The ONHA then planned to use it to develop a survey process based on the quality of care and, ultimately, as the basis for reimbursement.25,29 As it turned out, the PACE form and process became too unwieldy and complex for use as a regulatory instrument. In the end, the Health Care Financing Administration (HCFA) merely published it for voluntary use by nursing homes in patient assessment.

The ONHA, now called the Office of Long-Term Care, was overseeing a substantial revision of the SNF standards by an interagency work group as early as 1976. HEW began another effort to revise the nursing home survey program as part of President Carter's regulatory reform effort, "Operation Common Sense." The HCFA announced plans to revise the SNF conditions of participation and ICF standards.30 The announcement was followed by public hearings in five cities31 and numerous written comments and meetings with interested parties. Commentators criticized certain features of the regulations: their medical orientation, focus on input and process rather than outcomes, costs imposed on providers not related to better outcomes, and emphasis on paperwork and paper review.

While most of the comments focused on quality-of-care issues, it was evident that there were enforcement problems in the survey process. From this came the idea of elevating certain requirements to the condition level, to make them more enforceable. The HCFA also concluded that revisions of the certification procedures contained in Subpart S of the regulations were necessary (42 CFR Part 405), and began work on them in 1980 (internal HCFA documents).

After 2 years of work and three drafts, the HCFA published its proposed new rules in 1980.32 From the beginning, and in line with the PACE effort, the HCFA had planned to shift the focus of the regulations from paper reviews of facility capability to an evaluation of patients and the care they were actually receiving. The new regulations would have33


consolidated all patient care planning requirements into a single condition, and required a patient care management system that called for interdisciplinary teams to assess patients and plan their care;


deemphasized the medical model by increasing the minimum time required between attending physician visits, reducing the medical director requirements, and making consultant services discretionary after I year;


elevated the residents' rights standard to the status of a condition of participation; and


combined the SNF and ICF regulations into a single set in the Code of Federal Regulations.

The nursing home industry disputed the HCFA's estimates of the costs the new regulations would impose. The HCFA said, in its regulatory impact analysis, that the changes would cost about $80 million a year (revised in 1981 to $135 million), but consultants engaged by the industry estimated first-year costs of $586 million and annual costs thereafter of $435 million.34,35 The proposed rules stayed in limbo until the final hours of the Carter administration, when the rule elevating residents' rights to the condition level was published.

The new regulation was immediately rescinded by the new administration, which began a new regulatory reform effort. The HCFA established a Task Force on Regulatory Reform that reevaluated the regulations according to a detailed protocol. Although the task force decided to retain major elements of the 1980 proposed regulations, including the patient care management system and the elevation of residents' rights to a condition, it also proposed the deletion or revision of many other conditions and standards or made them effective only if there were no applicable state laws. The reaction from consumer groups, state regulators, the Congress, and providers was so strong that Secretary of Health and Human Services Richard Schweiker announced that the draft regulations would be dropped, leaving the 1974 rules in effect.

Finding it impossible to change the standards, the HCFA turned to an attempt to change the procedures for applying the standards. Many of the changes proposed had long been considered desirable within the HCFA, such as combining Medicare and Medicaid procedural requirements (Subpart S of 42 CFR Part 405 and Subpart C of 42 CFR Part 442), allowing more flexible survey cycles, and eliminating a number of requirements that had proved unworkable or ineffective. But the proposed regulations also would have permitted states to accept accreditation of a nursing home by the Joint Commission on Accreditation of Hospitals (JCAH) as sufficient evidence that facilities met federal requirements for Medicare and Medicaid participation. Taken together, these changes were viewed as another attempt to reduce federal protection of the health and safety of nursing home residents by Congress, which promptly imposed a moratorium on them.

In the summer of 1983, the HCFA and Congress agreed to postpone virtually all changes in the regulations until a committee appointed by the Institute of Medicine studied the issues and reported its recommendations for changes, except for certain minor changes agreed to by all members of a group of consumer, provider, and state regulatory representatives. The latter group, called the Subpart S Consensus Group, met until January 1984, and agreed to some of the 1982 procedural changes (consolidation of Medicare and Medicaid rules, elimination of the 90-day resurvey rule but requiring 120-day resurveys of significant deficiencies, and elimination of quarterly staffing reports except for problem facilities (internal HCFA documents). It rejected some of the proposals ("deemed status" for JCAH-accredited nursing homes and less-than-annual surveys), and suggested that others be optional, at the discretion of the state in the case of a Medicaid-only facility or according to a joint federal-state agreement in the case of a Medicare or a Medicare/ Medicaid facility (elimination of time-limited agreements, automatic cancellation clauses, and the repeat deficiency requirements). But the Consensus Group changes have not been implemented.

In the meantime, the HCFA has begun to develop a modified survey instrument, called Patient Care and Services (PaCS), that is based primarily on direct patient assessments and outcome-oriented indicators of care. Conceptually, PaCS is a lineal descendant of PACE. It is also based in part on the results of a series of HCFA-sponsored demonstrations and experiments with modified survey instruments and processes. Currently (1985), the new instrument is being tested extensively in three states and every state is experimenting with it in a few facilities.


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