Second of three parts
The creators of Medicare faced a problem. They were about to hand out millions -- eventually billions -- of dollars each year in tax money for hospitals to care for the nation's elderly. But how to make sure those hospitals were qualified?
Government bureaucrats had no experience overseeing the quality of health care, so in 1965 lawmakers turned instead to a private group -- a little-known organization that already was in the business of evaluating hospitals.
The responsibility as Medicare's gatekeeper came as a shock to the Joint Commission on the Accreditation of Healthcare Organizations, which never lobbied for it. "In fact, we woke up one morning and found some language in the legislation," said Dennis S. O'Leary, now president of the group. "It was a complete surprise."
Over the next 40 years, that surprise turned out to be a boon to the joint commission's prestige and finances. Today, the nonprofit is one of the nation's most influential health groups, evaluating thousands of medical facilities annually. It collects $113 million in annual revenue, mainly from the fees it charges hospitals.
Yet at the same time, the joint commission's practices raise questions about potential conflicts of interest and the rigor of its hospital surveys. It operates a thriving subsidiary that charges hospitals thousands of dollars for coaching on how to pass its reviews. About 99 percent of the hospitals reviewed by the joint commission win accreditation, and in recent years it has missed glaring examples of poor care in which patients have been injured or killed:
* The joint commission accredited California's Redding Medical Center in July 2002. A few months later, FBI agents raided the hospital amid charges that doctors had performed hundreds of unnecessary heart surgeries and tests from 1999 to 2002, allegedly resulting in some deaths.
* The joint commission gave Maryland General Hospital in Baltimore its seal of approval twice in four years. Yet even as the hospital was collecting plaudits, lab technicians complained that testing equipment didn't work and that hundreds of HIV tests were mishandled. Some patients who tested positive for the virus may have been told they were negative. State regulators found last year that the lab had been "rife with equipment failures and malfunctions" and had lost or mishandled specimens.
* Norwalk Hospital in Connecticut won accreditation from the joint commission in May 2004. Less than a month later, state regulators reported numerous violations at the hospital. One patient received 10 times the prescribed dosage of a painkiller, according to state records. Another had his left testicle mistakenly removed. Still another, experiencing suicidal thoughts, was given a taxi token and told to find a treatment center. He hanged himself hours later, according to a November 2004 consent agreement between the hospital and state. Norwalk officials agreed to pay the state a $50,000 fine without admitting wrongdoing.
* The group awarded accreditation in August 2000 to Florida's Palm Beach Gardens Medical Center even though the hospital received a less than satisfactory grade on infection control. It affirmed the accreditation in 2003, about the time that state and federal regulators were poring over more than 100 complaints of life-threatening infections in the heart unit. The hospital's owners were later fined by the state and paid $31 million to settle plaintiffs' allegations of poor care.
O'Leary said the group's surveys "are the most rigorous in the world," with safety and quality standards that exceed those of Medicare. He acknowledged that joint commission reviewers "still miss" problems, "but so do state agencies and others," he said. "I bet if we went in behind state regulators, we would find things, too."
Some state regulators and consumer advocates take a different view, saying that Medicare relies too heavily on the joint commission and other private groups, which are closely aligned with the health facilities they review.
Nelson J. Sabatini, Maryland's health commissioner during the troubles at Maryland General, said federal oversight of health care is "a fraud. A lot of what they call regulation is really self-regulation," he said. "They're being told to be partners. It doesn't work."
Under Medicare rules, any hospital meeting the joint commission's standards automatically is eligible to participate in the federal health program and receive government reimbursements. Over the years, to save money and avoid duplicating federal efforts, all but a handful of states have abandoned their separate procedures for licensing hospitals and now rely on the joint commission.
The group's role, O'Leary said, is to help hospitals and other facilities meet the standards, not to regulate or punish them.
"We can't fine you or close you," O'Leary said. "It's right in the articles of incorporation. Our role is to evaluate and educate."
The joint commission is one of three main legs in Medicare's oversight system. To ensure that the care it pays for meets quality standards, Medicare also allocates more than $250 million a year to state regulators to investigate complaints and inspect a wide range of health care facilities. And it awards nearly $300 million annually to private groups in each state called Quality Improvement Organizations, which work closely with hospitals and others to improve care and review patient concerns.
In recent years, Medicare officials have stressed a more collegial approach in which the private groups and even some state regulators work together with the hospitals and other groups they oversee. The focus of this approach is collaboration, not punishment.
The joint commission is a good example of the change. The idea is that collaboration and continual monitoring can result in broader improvements and better care than simply weeding out poor performers.
But some critics say the outsourcing and shifting focus of Medicare's oversight system puts patients at risk.
The relationship between Medicare and the joint commission is a large part of the problem, Sabatini said. "The fundamental structure of the joint commission doesn't make sense," he said. "It's one big built-in conflict, and the fact that Medicare allows it is appalling."
For their part, Medicare officials say they are required by law to accept the joint commission's congressionally mandated accreditation system.
"Legally we have no authority" over the commission, said Frank Sokolik, who directs hospital surveys for the Centers for Medicare and Medicaid Services, the agency that oversees the giant federal insurance program.
"We work together," Sokolik said, "but there is no requirement they do anything."
The $98 Banner
The joint commission, which is based outside Chicago, boasts that its imprimatur represents a "Gold Seal of Approval." And to advertise that, it suggests that the 15,000 groups it oversees purchase banners, decals, coffee mugs and enamel pins to tout their accomplishments.
" 'We Are Accredited' products are available exclusively to Joint Commission accredited organizations," the group's Internet site proclaims. The cost of a 5-by-2-foot blue and burgundy banner: only $98. "No one who walks into your reception areas or waiting rooms can miss the message," the Web site says.
The money from these vanity sales is pocket change for the group, which takes in millions from its accreditation surveys, consulting services and educational materials. Still, it helps to drive home a message that the joint commission has been selling in one way or another for more than half a century: If you have our stamp of approval, you are the best.
The "best," it turns out, includes almost every institution that pays the joint commission's fees, which for a large hospital average $26,000 per survey. The nonprofit inspects hospitals once every three years.
Some critics point to the approval rate as evidence that the joint commission is captive to hospitals. The joint commission notes in its literature that the group wants to work together with the facilities it accredits, referring to them as "customers" and "clients." The commission still tells hospitals in advance when its survey teams are coming but says it will switch to surprise reviews next year.
The board of directors of the joint commission is dominated by representatives of the American Hospital Association and the American Medical Association.
"I agree that on the surface if you look at our board, you'd have those concerns and you would probably wonder how in the hell it even works," O'Leary said. "But I would say you have to look at what we have done and not how we look. I think our record speaks for itself."
The joint commission serves as more than just a gatekeeper for Medicare, O'Leary said. It collects and analyzes data on medical mistakes, works to improve patient safety and has won praise for lifting the overall performance of hospitals.
One initiative of the joint commission is relatively new. Its subsidiary, Joint Commission Resources, was established in the 1990s to consult with hospitals on how to gain accreditation and improve their performance. It also operates the nonprofit's busy publishing and conference business.
JCR solicits hospitals so that they can "achieve peak performance on their next survey," one brochure notes, and also sells its services to state hospital associations.
The average bill for one of its 300 annual consultations runs about $10,000, said Karen H. Timmons, JCR's president and chief executive. Directly or indirectly, most of JCR's nearly $33 million in revenue comes from helping hospitals win the joint commission's seal of approval.
Timmons said that there is a firewall between the subsidiary and the joint commission, and no inspection information is exchanged. "The joint commission would have no knowledge who we're dealing with," she said. "We're in a separate building several miles away" from the commission's Oakbrook Terrace, Ill., headquarters.
While officials say no information flows between the two groups, tax returns show that a substantial amount of money does change hands.
In the past three years, JCR has paid its parent about $10.5 million in management fees and $867,000 in royalties. And according to its 2003 tax return, JCR owes the joint commission nearly $8.4 million. In addition, the affiliate helps to underwrite two money-losing joint ventures of the commission.
O'Leary said the joint commission has been careful to properly isolate its potentially conflicting missions.
"From a technical standpoint, I don't believe we can be much purer," O'Leary said. "But we still have to deal with perception issues and it's problematic."
States Pull Out
Medicare performs some spot checks on the joint commission's work to make sure the accredited hospitals meet federal standards. But the number of validation surveys has dwindled in recent years because of a lack of funding.
Medicare used to review 5 percent of all hospital accreditation surveys annually, but that was slashed to 1 percent in 2003. This year, Medicare had again hoped to check 5 percent but was forced to scale back to 2 percent because of budget constraints.
A few states have opted out of the commission's accreditation program in recent years because of concerns about accountability. In 2001, Pennsylvania regulators decided to survey their own hospitals again after relying for years on the private group.
Dick Lee, state deputy secretary of health for quality assurance, said his department "found serious problems" with the commission's inspections.
"It was true across hospitals," he said. "We got a complaint one week after [the joint commission] had gone into a hospital and done an inspection."
Maryland regulators used to conduct their own hospital inspections until a wave of deregulation swept the state in the 1980s and state legislators agreed to accept joint commission accreditation for licensing purposes. According to Carol Benner, director of the state Office of Health Care Quality, Maryland "had no authority" over the joint commission: "We couldn't tell them what to look for in their surveys, and they didn't consult us."
The flaws in the state's inspection program were exposed by the massive problems in the laboratory at Maryland General Hospital last year.
The joint commission had given the hospital its approval in 2001 and 2004. Another private group -- the College of American Pathologists, or CAP -- had also awarded the hospital's laboratory its highest distinction in 2003, shortly before allegations of faulty equipment and shoddy testing became public. (Maryland General has since made numerous changes and is once again fully accredited.)
The state regulators and private accrediting groups blamed one another for missing the problems. The joint commission said it relied on CAP to inspect the laboratory. CAP officials said whistle-blowers at the hospital didn't share critical information with them. Benner said CAP didn't give the state copies of its surveys.
"There was no relationship between CAP and this office. That's just the way it was," Benner said.
"Everyone in this case failed: the state, the federal government, the joint commission and CAP," she said. "It's not pretty."