Lack of Funds Reduces Frequency of Health Inspections
Many U.S. Surgery Centers Are Overdue for Review

By Gilbert M. Gaul
Washington Post Staff Writer
Monday, July 25, 2005

To understand the gaps in public health inspections in America, consider the taco trucks parked along Harrison Street in San Francisco's Mission District. City inspectors check them at least twice a year.

San Francisco has far fewer outpatient surgery centers than taco vendors. Yet under federal rules, surgical centers have to be inspected only once every six years. In California, even that minimum usually is missed. Inspectors say they get out to the state's 428 surgical centers an average of once every 12 years.

"Would I like to do more inspections? Of course," said Brenda G. Klutz, the state's top health regulator. "The kinds of complicated surgeries that are now being done in ambulatory surgery centers . . . we'd certainly feel better if we were in there more often."

Klutz quickly explains that she can't do more because she doesn't have the money. Unlike cities and counties that rely on user fees and local tax dollars to pay for restaurant inspectors, California and the rest of the states rely on Medicare for most of the money they use to monitor hospitals and other health facilities. And those funds are limited.

Last year, Medicare's budget for policing more than 50,000 facilities -- from big teaching hospitals to tiny hospices -- was $259 million, less than one-third of what it spends in a single day on medical bills.

State regulators say that because federal funding is inadequate and comes with restrictions, they are forced to employ a form of triage. Under rules imposed by Congress, nursing homes must be inspected annually, a requirement that gobbles up about 70 percent of their oversight funds. The result is that thousands of facilities, including outpatient surgery and kidney dialysis centers, go years without review.

Dialysis is one of Medicare's fastest-growing services. It spends about $15 billion a year to rinse deadly toxins from the bloodstreams of patients with failing kidneys. In a report earlier this year, federal officials called the health and safety risks of dialysis "extraordinary" and "life-threatening." Yet centers are supposed to be inspected just once every three years -- and only half of all states are able to meet that minimal standard.

Some state regulators note that mortality rates in American dialysis facilities are 15 to 30 percent higher than those for patients in Europe and Japan.

Thomas E. Hamilton, director of the oversight program for Medicare, acknowledged gaps in inspections but said federal officials are doing "the best that they can with constrained resources. Our job is to ensure that we get the maximum benefits for the dollars that are appropriated."

Hamilton said Medicare officials have prioritized inspections into four tiers, with nursing homes in the first tier and outpatient surgery centers at the bottom. The system is set up so that if states find they don't have enough funds, "they cut back on the lowest priorities first."

He added that Medicare officials are making adjustments because of concerns that some facilities aren't being inspected. As part of that effort, they plan to target a small number of dialysis centers for more frequent visits. "The idea is that it isn't all or nothing based on the tiers," he said.

The flaws in the inspection system don't stop at funding. When state regulators do turn up problems, they often run into obstacles trying to get them corrected.

State inspectors who check nursing homes for federal regulators say they are hampered by a lack of precise federal definitions when writing up violations. Thus, the same problem may be written up differently in two states and may generate two very different fines. Medicare officials also often downgrade penalties recommended by the states, inspectors said, and any nursing home agreeing to forgo an appeal automatically gets a 35 percent discount.

Since 1995, Medicare has levied more than $100 million in penalties against the nation's 17,000 nursing homes based on deficiencies identified by state inspectors. But there are striking variations in those fines around the country, according to a Washington Post analysis of a federal database containing 10 years of records. Facilities in the Midwest and Southeast were most likely to be fined, and homes in California and the Pacific Northwest were the least likely. The average fine varied nearly 13-fold, from a high of $33,650 in California to $2,445 in the Pacific Northwest.

In dealing with troubled hospitals, Medicare has no authority to levy fines even when patients are harmed or killed. That leaves them with only one real weapon: threatening to kick the hospital out of the federal program. Medicare officials are reluctant to use that tool, regulators say, because of political pressure and fears that patients will go without care -- even if it's bad care.

Medicare does send out lots of warnings to hospitals threatening to terminate them: 157 between 2000 and 2002, records show. But since 1998, the federal insurer has cut off only seven small hospitals, each with 55 or fewer beds.

Meanwhile, Medicare continues to pay many large, troubled hospitals.

Last year, Medicare officials threatened to terminate Martin Luther King/Drew Medical Center on three separate occasions. The Los Angeles hospital has repeatedly been cited by state and federal regulators for injuring patients and finally lost its accreditation earlier this year.

Nonetheless, the hospital remained eligible for Medicare reimbursements so long as it promised to fix its problems. "They filed plans of correction," said Jeff Flick, administrator in charge of Medicare's regional office in San Francisco "and we went out and verified they were doing what they said they were."

But even with the government watching closely, problems continued. In April, county officials reported five suspicious deaths at the hospital. And in late June, a federal inspection found a series of "unusual events," according to Flick, including a patient who had been left unattended in the emergency department for 13 hours and later died of an aneurysm.

Flick said federal officials were once again pondering possible punishments. "I don't know what the results will be," he said. "Right now they're still being paid by Medicare."

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