q136/random_k4/random_4.md

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The Nursing Home
Inspection Process

SUMMARY

Both the Minnesota Department of Health (MDH) and the U.S.
Department of Health and Human Services share responsibility for
ensuring that Minnesota’s nursing homes provide an acceptable level
of care for their residents.  Because the federal government dictates
the overall structure and content of the inspection program, the State
of Minnesota has few opportunities to make significant changes in
how it conducts nursing home inspections.  The federal government
mandates how often the state must inspect nursing homes, the steps
the state must follow when conducting inspections, and the standards
the state must apply.  Although MDH and other states have asked the
federal government for more flexibility in conducting inspections, the
federal government has not issued any waivers that allow states to
significantly change or implement an alternative inspection program.

The current nursing home inspection process emerged in the mid-1980s, as

Congress responded to reports of resident abuse and inadequate enforcement

of nursing home regulations.  In a 1986 report on nursing home quality, the
Institute of Medicine found “serious, even shocking inadequacies” in the
enforcement of regulations.1 As a result of this report and the efforts of advocacy
groups and professional organizations, Congress passed a major reform of nursing
home regulation as part of the Omnibus Budget Reconciliation Act of 1987.2

Since that time, Congress and the U.S. Department of Health and Human Services
have periodically modified inspection requirements in response to studies that
have shown continued weak and inconsistent enforcement of nursing home
regulations and quality of care problems.  Most significantly, the Nursing Home
Oversight Improvement Program was implemented in 1998, which, among other
things, enhanced federal review of state inspections and required the federal
government to terminate funding for states that fail to conduct adequate
inspections.

This chapter addresses the following question about how the Minnesota
Department of Health (MDH) inspects nursing homes:

• What are the respective roles of the Minnesota Department of Health
and U.S. Department of Health and Human Services in conducting
nursing home inspections?

Institute of Medicine, Committee on Nursing Home Regulation, Improving the Quality of Care

1
in Nursing Homes (Washington DC:  National Academy Press, 1986), 146.
2 Pub. L. 100-203, Dec. 22, 1987.

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NURSING HOME INSPECTIONS

The federal
government and
states share
responsibility
for ensuring that
nursing homes
provide an
acceptable level
of care to
residents.

To answer this question, we examined state and federal laws, rules, regulations,
and guidelines related to nursing homes inspections, as well as a wide variety of
research reports by state and federal agencies.  We also interviewed state
policymakers, nursing home inspectors and their supervisors, and a sample of
nursing home administrators from throughout the state.

FEDERAL REGULATION OF INSPECTIONS

State and federal laws define a nursing home as a facility (or that part of a facility)
that provides health evaluation and treatment services to five or more residents
who do not need an acute care facility (such as a hospital) but who require nursing
supervision or rehabilitation services on an inpatient basis.3 In lay terms, this
means a facility that provides a room, meals, recreational opportunities, and help
with daily living activities such as dressing, eating, bathing, walking, and using
the bathroom.  Residents generally have health problems that keep them from
living on their own and may require daily medical attention.

The federal
government and
states share
responsibility for
ensuring that
nursing homes
provide an
acceptable level of
care to residents.
The Centers for
Medicare and
Medicaid Services
(CMS) in the U. S.
Department of
Health and Human
Services oversees
the inspection
program for
nursing homes that
participate in the
federal Medicare and Medicaid programs.4 The agency sets nursing home
standards; interprets federal regulations, guidelines, and polices; and establishes
and monitors inspection procedures.  It contracts with MDH to conduct nursing
home inspections in Minnesota.5 In addition to conducting inspections, MDH
licenses nursing homes for state purposes and certifies their eligibility for
participation in the Medicare and Medicaid programs.  Finally, the department is

Nursing home residents generally need help with many activities of
daily living.

3 Minn. Stat. (2004), §144A.01, subd. 5-6; and 42 U.S. Code, §1396r, (a) (2000).
4 CMS was formerly called the Health Care Financing Administration.
5 The Minnesota Department of Health contracts with the State Fire Marshall’s Office in the
Minnesota Department of Public Safety to determine facility compliance with the federal Life
Safety Code, which is necessary for participation in the Medicare and Medicaid programs.  State
Fire Marshall findings are included in the inspection reports issued by MDH.

THE NURSING HOME INSPECTION PROCESS

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responsible for explaining program participation requirements to providers to help
them comply with federal requirements.6

Overall, we found that:

• The federal government sets forth the overall structure and content of
the nursing home inspection program, and Minnesota has very few
opportunities to make significant changes in the program.

Federal regulations outline both the general parameters of the inspection process
as well as the specifics of how each inspection must be done.  They dictate:
(1) how frequently the state must inspect nursing homes, (2) the steps the state
must follow when conducting inspections, and (3) the standards that the state
must apply.  We discuss each of these areas in greater detail below.

Inspection Frequency

The federal government sets forth how often nursing homes must be inspected:

Federal law and regulations require that the Minnesota Department of
Health inspect nursing homes every 12 months, on average.

All nursing facilities must be inspected no later than once every 15 months, with
an average time statewide between inspections of 12 months.  Federal regulations
do not allow states to inspect nursing homes with “good” inspection records less
frequently than homes with “bad” records.  In addition, CMS requires that at least
10 percent of inspections be “staggered” (started outside of normal business
hours).  To meet this requirement, the state must begin some inspections on
weekends or holidays, some in the early morning (before 8:00 AM), and some in
the evening (after 6:00 PM).  Furthermore, the federal government requires that
all nursing home inspections be unannounced.

About 420 Minnesota nursing homes participated in the Medicare and Medicaid
programs during federal fiscal year 2003.7 The department inspected all of these
nursing homes within 14.7 months of their prior inspection, with an average time
between inspections of 12 months.8 In addition, 12 percent of the 403 inspections
conducted were staggered, with 21 inspections beginning before 8:00 AM, 16
inspections after 6:00 PM, and 10 beginning on a weekend or holiday.9

For the most part, nursing home providers, state policymakers, and nursing home
inspectors generally agree that requiring annual inspections of all nursing homes

6 The department has additional responsibilities related to nursing homes, such as investigating
complaints, which were outside the scope of our evaluation.  Nursing home inspectors also inspect
other types of health care facilities, such as hospitals and intermediate care facilities for the mentally
retarded.  These activities were likewise outside the scope of our evaluation.
7 The federal fiscal year runs from October 1 through September 30.
8 Centers for Medicare and Medicaid Services, Federal Fiscal Year 2003 State Performance
Standard Review Report (Washington, DC, March 15, 2004), 1.
9
Ibid., 2.  Because nursing homes may go up to 15 months between inspections, the number of
nursing homes that MDH inspected during federal fiscal year 2003 was less than the total number of
nursing homes in the state.

Nursing homes
must have a
“surprise”
inspection no
later than once
every 15 months.

(cid:127)
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NURSING HOME INSPECTIONS

Because of
federal
requirements,
MDH cannot
inspect nursing
homes with
“good”
inspection
records less
frequently than
those with "bad"
records.

is, at times, an inefficient use of staff resources.  The requirement does not permit
the state to focus efforts on the nursing homes that need oversight the most.  To
help increase the efficiency and effectiveness of the inspection process, the
Legislature has repeatedly required the Commissioner of Health to seek federal
permission to implement an alternative inspection process that would change how
often nursing homes must be inspected.10 In response, the department submitted a
proposal to CMS that would have increased the time between “full” inspections
up to 30 months for some homes with “good” compliance records.  Other states
have proposed similar approaches, including ones to conduct abbreviated annual
inspections for homes with “good” compliance records.

To date, CMS has not approved an alternative inspection program put forth by any
state, including Minnesota.  According to CMS, the social security law does not
allow states to obtain waivers to implement an alternative inspection program for
nursing homes participating in the Medicare program, although states could
implement an alternative inspection program for homes that only participate in the
Medicaid program.  However, because this would involve only a few nursing
homes, it is generally not feasible for states to do so.

For the last several years, CMS has been studying the feasibility of an alternative
inspection process.  Recently, the agency announced that it would be establishing
a few pilot sites around the country to implement a “revamped” inspection
process.  Designed to address concerns about inspection consistency and
efficiency, pilot sites will make greater use of computers to make initial
determinations of deficiencies rather than relying on the judgment of inspection
teams.  The alternative process will not result in less frequent inspections for
facilities, but may allow inspectors to spend somewhat less time in “good”
facilities and more time in “bad” ones.

Inspection Steps

In addition to requiring an inspection no later than once every 15 months:

•

Federal regulations require that each nursing home’s annual
inspection be a “standard” or full inspection consisting of seven
federally mandated steps.

Federal regulations do not allow states to do shorter or abbreviated inspections of
nursing homes with “good” records of compliance or to cut short an inspection
when inspectors do not detect any problems in a facility.  On the other hand, state
inspectors must extend the inspection if they suspect that a facility is providing
substandard care to its residents.

As shown in Table 1.1, the standard inspection consists of seven federally
mandated steps.  First, inspectors prepare off-site by reviewing information about
the nursing home and its residents to help identify areas of concern.  Immediately
upon arriving at the facility, the inspection team meets with the nursing home
administrator to explain the inspection process and request specific information;

10 Laws of Minnesota (2000), ch. 312, sec. 2, 5; Laws of Minnesota (1Sp2001), ch. 9, art. 5, sec. 38;
Laws of Minnesota (2002), ch. 379, art. 1, sec. 113; and Laws of Minnesota (2004), ch. 247,
sec. 6.

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Table 1.1: The Federal Nursing Home Inspection
Process

Step 1: Off-site preparation

Step 2: Entry conference and on-site preparation

Step 3:

Initial nursing home tour

Step 4: Resident sample selection

Step 5:

Information gathering

A. General observation of the facility
B. Kitchen/food service observation
C. Resident review
D. Quality of life assessment
E. Medication pass
F. Quality assessment and assurance review
G. Abuse prevention review

Step 6: Deficiency determination

A. Determination of substandard quality of care

Step 7: Exit conference

Likewise,
MDH cannot
do abbreviated
inspections in
nursing homes
with "good"
records.

SOURCE: Centers for Medicare and Medicaid Services, State Operations Manual (Washington, DC,
May 21, 2004), ch. 7, sec 7200.

this is followed by a facility tour.  Using the information provided by the facility
and what inspectors learned during the tour, the team then selects a sample of
residents to focus on during the information-gathering portion of the inspection.
During this phase, the team meets on a daily basis to compare notes, discuss new
areas of concern, and make adjustments to the inspection as deemed necessary.
Inspectors observe the care and services that facility staff provide to residents,
such as preparing and serving meals, administering medications, and helping, as
necessary, with activities such as bathing, toileting, walking, and grooming.
Inspection team members also interview residents and staff and review resident
records.  Once the team is satisfied that they have gathered enough information, it
meets to determine whether the facility has failed to meet any regulatory
requirements.  The team prepares a draft inspection report that discusses each
violation of federal regulations (commonly referred to as a deficiency) that the
team has identified, and then meets with nursing home personnel and interested
residents and family members to present its preliminary list of deficiencies.

After the inspection team leaves the facility, it finalizes the “Statement of
Deficiencies” and submits it to the team’s district supervisor who is responsible
for reviewing the document and submitting a final copy to the facility and CMS.
The facility must submit a “Plan of Correction” within ten days that indicates how
and when it will correct each of the deficiencies that it has received.11 Inspectors
normally conduct an unannounced revisit to verify that the plan of correction has
been implemented and that the deficiencies no longer exist.  For the most part,
MDH generally gives a facility 40 days from the end of the inspection to correct
deficiencies before MDH imposes any sanctions on the facility.

11 Facilities may also dispute a deficiency and request a hearing before MDH or an administrative
law judge within this ten-day period.  Chapter 2 discusses how often this happens and the outcome
of such hearings.

Inspectors spend
much of their
time observing
and talking with
residents and
staff.

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NURSING HOME INSPECTIONS

State law
requires
inspectors to
leave a draft
inspection report
with facilities
when they leave.

While the state is unable to make significant changes in how inspections are done:

• Minnesota has expanded the federal nursing home inspection process

in several ways.

The state goes beyond federal inspection requirements by adding other tasks,
including requirements to:  (1) interview family council members; (2) expand the
number of evening observations nursing home inspectors must make each month;
(3) conduct a “verify and clarify” session with the provider to discuss possible
areas of concern prior to the exit conference; and (4) leave a draft inspection
report with nursing homes after the inspection, with the final report due within
15 days.  Some of these activities were added to make the inspection process more
“user friendly” for providers.  Others, such as expanding the inspection to include
final interviews with family council members, were at the urging of advocacy
groups.

For the year ending
September 30, 2004,
MDH inspectors,
working in teams of
three to five
registered nurses,
spent an average of
about 150 hours per
facility to complete
the state and
federally mandated
inspection tasks.12
As would be
expected, it took
longer to inspect
larger nursing homes
than smaller ones.
For example, a
facility with 40 or
fewer beds averaged about 72 hours per inspection while a facility with 116 to
160 beds averaged 176 hours.13

Nursing home inspectors must meet with each facility's resident
council.

Inspection Standards

The federal State Operations Manual (SOM) sets forth the federal standards that
inspectors must apply during an inspection as well as guidelines to help them
apply those standards.14 As currently written:

12 Minnesota Department of Health analysis of data from the Online Survey and Certification
Reporting System, December 2, 2004.  State inspectors spent an additional 54 hours per facility, on
average, conducting follow-up inspections to ensure that facilities corrected deficiencies.
13 Minnesota Department of Health, Federal Fiscal Year 2005 Initial Budget Request (St. Paul,
July 15, 2004), unnumbered.
14 Centers for Medicare and Medicaid Services, State Operations Manual (Washington, DC,
May 21, 2004).

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Inspectors grade
the seriousness of
each deficiency
by assigning it a
letter code.

• The federal standards and guidelines that state inspection teams must

use to inspect nursing homes are prescriptive and complex.

The SOM covers hundreds of pages and contains 274 regulatory standards that
nursing homes must meet at all times.  The standards cover 16 different categories
of operation, including administration, dietary services, infection control, life
safety, physical environment, quality of care, quality of life, resident assessment,
and resident rights.  Some requirements must be met for each resident and any
violation of these requirements, even for one resident, is a deficiency.  For
example, each resident must have a comprehensive care plan.  Other requirements
focus on facility systems and are evaluated comprehensively rather than in terms
of a single incident.  For example, a facility must have a medication error rate
below 5 percent.15

For each deficiency, inspectors must use professional judgment to assess how
many residents or staff are affected by or involved in the deficient practice (scope)
and the amount of actual or potential discomfort or harm involved for residents
(severity).  As shown in Table 1.2, these two determinations result in the
inspection team assigning a letter code (A through L) to each deficiency, with
level “A” deficiencies being the least serious.

Table 1.2: Deficiency Scope and Severity Grid

Severity

Scope
Isolated Pattern Widespread

Level 4: A situation that has caused or is likely to cause
serious resident injury, harm, impairment, or death.

Level 3: A situation that has caused resident harm.

Level 2: A situation that has caused minimal discomfort to
a resident OR has the potential to cause resident harm.

Level 1: A situation that has the potential of causing no

more than minimal discomfort to a resident.

J

G

D

A

K

H

E

B

L

I

F

C

NOTE: Harm is defined as a situation that compromises a resident’s ability to maintain or reach his or
her highest practicable physical, mental, or psychosocial well being, as defined by an accurate and
comprehensive assessment, care plan, and provision of services. A nursing home with one or more
quality of life, quality of care, or resident behavior and facility practices deficiencies issued at level “F”
or “H” or above (the shaded area of the grid) is considered to be providing “substandard” care to its
residents.

SOURCE: Centers for Medicare and Medicaid Services, State Operations Manual (Washington, DC,
May 21, 2004), Appendix P, V, B-C.

To determine a deficiency’s scope, inspectors must classify each deficiency in one
of three ways:  isolated, pattern, or widespread.  Federal guidelines say that a
deficiency is isolated when one or a very limited number of residents or staff are
affected or the situation has occurred only occasionally or in a very limited
number of locations in the facility.  For example, if 60 of 70 residents in a facility
are incontinent and the facility failed to provide adequate care or services to
restore or improve bladder function for 2 of these residents, the deficiency should
be classified as isolated.  A deficiency represents a pattern when it affects more

15 However, a single medication error that is considered severe enough may result in a deficiency.

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NURSING HOME INSPECTIONS

than a very limited number of residents or staff, occurs in several locations, or the
same resident has been affected by repeated occurrences of the same deficient
practice.  If the above facility did not provide adequate care or services to 10 of its
60 incontinent residents, the resulting deficiency should be issued as a pattern.  A
deficiency is identified as widespread when it refers to the entire facility or when
a system failure has affected or has the potential to affect a large number of
residents.  For example, a facility failing to provide adequate care or services to
improve or restore bladder function to 30 of its 60 incontinent residents should be
issued a deficiency classified as widespread.

Inspectors must also determine the severity of a deficiency on a scale from one to
four.  Level one refers to deficiencies that have the potential for causing no more
than a minor negative impact on, or minimal physical, mental, or psychosocial
discomfort to, a resident.  For example, a facility should receive a level one
deficiency if it failed to post its inspection results or only made them available
upon request.  Level two deficiencies are those that have resulted in resident
discomfort or have the potential to harm residents.  Federal regulations define
harmful situations as those that compromise residents’ ability to maintain or reach
their highest practicable physical, mental, and psychosocial well being, excluding
situations that are of a “limited consequence” to residents.  For example, a nursing
home should receive a level two deficiency if inspectors observed staff failing to
wash their hands properly between caring for residents but no one became
seriously ill as a result.  Level three deficiencies are those that have actually
resulted in resident harm.  The hand-washing example should be a level three
deficiency if there was evidence that a resident caught a contagious disease as a
result of staff failing to wash their hands properly after providing resident care.
Level four represents immediate jeopardy situations whereby the facility must
undertake immediate corrective action to address problems that have resulted in or
are likely to cause serious injury, harm, impairment, or death to a resident.  For
example, if a resident with dementia was found outside during an inspection
heading toward a busy highway and the nursing home did not have a working
system in place to monitor residents with dementia, the facility should be issued a
level four deficiency.

The “seriousness” of a facility’s deficiencies (their scope and severity) helps
determine the sanctions for nursing homes that fail to correct deficiencies within
an allowable time frame.  As shown in Table 1.3, there are three categories of
required sanctions.  Generally, nursing homes do not face sanctions for
deficiencies issued at levels “A” through “C.”16 Category 1 sanctions are reserved
for deficiencies issued at levels “D” and “E” and require that facilities implement
a plan of correction developed by the state, have their staff attend a specific
training program, or be subject to state monitoring.  Conversely, category 3
sanctions are reserved for the most serious deficiencies and include the state
assuming management of the facility, terminating the facility’s participation in the
Medicare and Medicaid programs, or closing the facility.  Except in instances of
immediate jeopardy to residents (a deficiency issued at level “J” or above) or
when facilities receive level “G” or higher deficiencies in two consecutive
inspections, facilities are generally given an opportunity to correct deficiencies
before any sanctions are imposed—usually 40 days.  MDH must deny Medicare

16 Although the federal government does not require that sanctions be imposed on facilities
for low-level deficiencies (levels “B” and “C”), the state may choose to impose sanctions from
category 1 when facilities fail to correct their deficiencies.

A deficiency's
letter code helps
determine what
sanctions MDH
could impose on
the facility.

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Table 1.3: Required Sanctions for Noncompliance

Category 1: Deficiencies issued at levels “D” and “E”

Directed plan of correction;
State monitoring; and/or
Directed in-service training.

Category 2: Deficiencies issued at levels “F” through “I”

Denial of payment for new Medicare and Medicaid admissionsa;
Denial of payment for all Medicare and Medicaid residents;
Civil money penalties of $50-$3,000 per day of noncompliance; and/or
Civil money penalties of $1,000-$10,000 per incident of noncompliance.

Category 3: Deficiencies issued at levels “J” and above

Temporary management;
Termination from the Medicare/Medicaid programs; and/orb
Facility closure.

NOTE: The Minnesota Department of Health may impose a category 2 sanction to supplement a
category 1 sanction for deficiencies issued at levels “D” and “E.” In general, a category 1 or 2 sanction
can also be imposed whenever a category 3 sanction is required, and a category 1 sanction may also
be imposed when a category 2 sanction is required. Civil penalties increase to $3,050-$10,000 per
day when they are imposed in addition to a category 3 sanction. The state may also assume
temporary management (a category 3 sanction) when a facility has been issued a level “I” deficiency.
Also, a facility cited for providing substandard care cannot operate a nurse aide training and
competency evaluation program for two years.

aThe state must deny Medicare and Medicaid payments for new admissions when a facility is not in
substantial compliance within three months of the inspection and when a facility has been cited for
substandard care on three consecutive annual inspections. In the latter situation, state monitoring
must also be imposed.

bThe state must recommend termination from the Medicare and Medicaid programs when a facility is
not in substantial compliance within six months of the inspection.

SOURCE: Centers for Medicare and Medicaid Services, State Operations Manual (Washington, DC,
May 21, 2004), ch. 7, sec. 7210G and 7400.

and Medicaid reimbursements for new admissions when facilities have not
corrected their deficiencies within three months of the department’s inspection.
Facilities must be terminated from the program if deficiencies are not corrected
within 6 months.

FUNDING

In keeping with the high degree of federal involvement in the nursing home
inspection program:

•

State funds cover less than 10 percent of the total cost of nursing home
inspections and complaint investigations.

The federal government is the major source of funding for the inspection
program, with the state contributing less than 10 percent of the total cost for
nursing homes.  In fiscal year 2004, MDH spent about $12 million from state and

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NURSING HOME INSPECTIONS

federal sources on activities related to nursing home inspections, including costs
related to investigating complaints against nursing homes.17 The state’s share
(about $1.1 million) is the result of state negotiations with CMS and has
historically been low when compared with that of other states.  According to a
2000 analysis of costs by the Health Care Financing Administration, Minnesota
was the only state in the Chicago region that paid less than 10 percent of total
inspection costs.18 Other states paid at least 16 percent, with one state paying
almost 25 percent of total costs.

17 Cecelia Jackson, “Re:  FFY 2004 Nursing Home Expenditures” (December 23, 2004), electronic
mail to jo.vos@state.mn.us.
18 Health Care Financing Administration, “Nursing Home Survey, State Licensure Cost Shares”
(Chicago, May 2000).  Minnesota is part of the Chicago region, which also includes Illinois,
Indiana, Michigan, Ohio, and Wisconsin.