Dr. WILENSKY. Yes.

Senator BUMPERS. And how many inspections a year does HCFA require of nursing homes?

Dr. WILENSKY. My understanding is that, typically, each nursing home gets surveyed on average once a year. There is a requirement that 100 percent of all nursing homes get surveyed. Nursing homes that are found to have problems may either have a compliance plan that does not result in a followup visit, or may have a compliance plan that, in fact, involves surveyors coming back to the nursing home in order to make sure the problems were corrected. An annual certification is provided on a rotating basis so that, throughout the course of the year, all nursing homes in Arkansas would come under inspection by these surveyors.

Senator BUMPERS. And how would you charge user fees for those inspections? Would you charge on a per patient or per bed basis? Dr. WILENSKY. No; the user fee is charged to the facility.

Senator BUMPERS. That would be a flat rate based on the number of licensed beds?

Dr. WILENSKY. We have not yet determined the exact nature of our proposed regulatory approach, but I think that facility size would be a key factor in our strategy.

Senator BUMPERS. What would it be for a 100-bed nursing home? What are you proposing to charge as a user fee for a 100-bed nursing home?

Dr. WILENSKY. Our estimate is that the charge would be somewhere between $15,000 and $17,000 for the average nursing home. Senator BUMPERS. You've got to be kidding. For one inspection a year maybe, $15,000 to $17,000? I am going into the inspection business.

Dr. WILENSKY. Well, this fee includes the costs of followup visits, and additional compliance determinations, something that usually is an involved process with a team of professionals-such as nurses and pharmacists. These teams go in and actually interview the nursing home residents. These activities are rather significant and involved as they should be in order to assure safety.

Senator BUMPERS. Well, typically how long would it take and how many people are involved?

Dr. WILENSKY. I believe the number is 1 week, and perhaps as many as 10 or 12 people would be involved.

Senator BUMPERS. 10 to 12 people a week?

Dr. WILENSKY. During that whole period.

Senator BUMPERS. It would take 10 to 12 people a week to inspect a 100-bed nursing home?

Dr. WILENSKY. I will get you the specific numbers. In response to being asked both how long the process takes and the size of the inspection group that goes into the facility, these figures represent our estimate of what is needed to look at all aspects of the facility. I do not specifically know how this estimate varies by bed size. I just have never asked how much variation would occur among a 50-bed, a 100-bed, a 250-bed nursing home. Though I do not know the amount, I expect there would be some variation according to size.

Senator BUMPERS. Send me some information on that, will you, Dr. Wilensky?

Dr. WILENSKY. I will be glad to. [The information follows:]

NURSING FACILITY INSPECTIONS

Surveys at nursing facilities require an average of 9 onsite person-weeks per facility, plus significant pre-survey preparation, post-survey documentation and evaluation, travel, and overhead. The size and composition of State agency facility survey teams require State discretion. In order to determine if Federal conditions of participation are met, the average standard nursing facility (NF) survey requires three to four surveyors for approximately four onsite days. The States employ staff representing a wide array of health care disciplines; the majority are registered nurses. Surveys of nursing facilities are conducted along the following guidelines: Initial certification surveys are conducted on all NF's requesting participation in the XVIII/ XIX program(s); recertification surveys are conducted on all NF's on the average of once a year (required by OBRA 87); extended surveys (required by OBRA 87) are conducted on approximately 30 percent of all NF's; historical data shows that an average of between 2 and 3 complaint and/or follow-up onsite surveys are required per NF per year; and additional time onsite is required for determinations of compliance with guidelines for nurse aide registries and nurse aide training and competency evaluation programs (required by OBRA 87).

We anticipate surveying approximately 15,400 NF's in fiscal year 1992 (i.e., both currently- and newly-participating). With all the requirements above, surveys at these NF's will each require an average of 344 hours, or approximately 9 personweeks. The hourly rate we must pay the State agency surveyors in fiscal year 1992 will be approximately $40. The average State cost, therefore, to survey such a NF in fiscal year 1992 will be approximately $13,760. This does not include Federal costs of the NF survey program.

OBRA 87 requirements have only recently been implemented. Accordingly, HCFA is not yet able to assess the impact of survey costs at the level of detail of facility size. Due to the distribution of NF's by size, however, we are comfortable addressing survey costs in terms of the "average" NF. Nearly 60 percent of NF's have 51 to 125 beds; only 17 percent have 50 or less beds, and about 25 percent have 126 or more beds.

We will assess survey costs by facility size as such data becomes available, and we will provide our findings to the Senator's office at the earliest opportunity.

INSPECTION FEES

Senator BUMPERS. I used to have an interest in a nursing home, and it seemed to me like every time we looked up, somebody was coming by to inspect us, and if we had to pay all of them it would be about-well, I know one year we counted something like 27 inspections. The State inspects. HCFA inspects. The State fire marshall comes by. Everybody comes by.

If we had to pay fees to all of them-I say "we." I am not in the business and I have not been in it for 20 years, but if nursing home operators had to pay fees like that to all of those people based on the fee you just quoted me, I think it would be a serious burden. The nursing home I was affiliated with had 73 beds, and I think two people were the most we ever saw to come by and inspect.

Dr. WILENSKY. Well, there has been a very major change in the kind of inspection that occurs as a result of the OBRA 87 nursing home reforms. Now, in addition to checking the facilities, the paper process, the laboratory, the pharmacy, and the food, there are actual interviews done with patients in nursing homes to make sure that patient abuse is not going on, and try to asses overall treatment more clearly.

There have been enormous increases in statutory requirements, particularly as a result of the OBRA 87, relating to the kinds of inspections that go on in nursing homes. We will be glad to give you more information on these requirements.

Senator BUMPERS. Please do. [The information follows:]

STATUTORY EXPANSIONS AND NURSING HOME SURVEYS

OBRA 87 brought significant, additional demands for the survey process. Although the most visible increase in HCFA's operating budget attributable to OBRA 87 expansions was seen in the fiscal year 1991 budget, when most of these demands were first implemented, OBRA 87's effects are carried throughout the fiscal year 1992 request.

For nursing facilities, these include:

Extended surveys for those NF's that have been cited as having a significant number of deficiencies.

New resident-centered, outcome-oriented survey requirements which focus more on the NF's actual provision of care rather than its administrative and technical capability to provide care.

Implementation of revised sanctions to impose when appropriate, including the appointment of temporary management; denial of payment for new admissions; civil money penalties, and others.

Revised guidelines to allow for the conversion of Medicaid-only facilities to duallyparticipating Medicare/Medicaid facilities. This restructuring caused the number of NF's to be surveyed under this appropriation to double from the pre-OBRA 87 facility count.

The evaluation of the NF's nurse aide training and competency evaluation programs and its nurse aide registry.

Enhanced training of all State agency surveyors to assure complete understanding of the complexities of the OBRA 87 requirements and uniform application of survey protocols.

RECOUPMENT OF INSPECTION FEES

Senator BUMPERS. Just to close by pursuing a line of questioning that Senator Harkin got into, and that was the fact that these nursing homes are going to recoup this money-now, I did not get that. A nursing home, if they had to pay a $15,000 inspection fee, obviously that would be an expenditure that they could deduct on their tax return, but how do they get this money back from HCFA? Dr. WILENSKY. Well, to the extent that there are Medicaid or Medicare patients, it would be part of the allocated costs to HCFA. Senator BUMPERS. You have a large role in determining a facility's rates, do you not?

Dr. WILENSKY. Yes.

Senator BUMPERS. Do you determine how much a nursing home can charge per patient, depending on the class of the patient, whether it is skilled or intermediate? You set those rates, and they are usually set based on a lot of criteria that a particular nursing home sends you about their expenditures, is that not correct?

Dr. WILENSKY. The State actually sets the rate, but we need to approve it to make sure

Senator BUMPERS. You have to approve it, though.

Dr. WILENSKY. Right.

Senator BUMPERS. So, what they will do, they will just put this $17,000, like a utility company, in their base rate, and as Senator Harkin said, they are going to recover it. They are going to recoup it, because it is going to go into their base rate, is that not a fact? Dr. WILENSKY. But this will not occur in a uniform way, because the number of Medicaid patients in a nursing home is not uniform. Senator BUMPERS. Well, I understand that, but what is going to happen, for example, in a nursing home with 100 beds, where 50 of them are Medicaid and 50 of them are private patients, is that

they are going to show that entire fee in their cost of doing busi

ness.

Dr. WILENSKY. Not if we can help it, they will not.
Senator BUMPERS. No?

Dr. WILENSKY. No; I say that facetiously, but I do not-I mean, the issue about how nursing homes allocate costs between their public and private pay patients is an issue that we already have to consider in determining whether or not a rate is a reasonable rate, based on nursing home costs and the allocation of these costs. It is not an uncommon problem.

The issue of how you measure costs in any facility, part of which covers public patients and part of which covers private patients, and allocate those costs, is something that nursing homes need to be able to demonstrate. They would clearly have to demonstrate that they are allocating a reasonable share, and not the total costs, to Medicaid as they would for any other expense.

Senator BUMPERS. When I was involved in this business, Dr. Wilensky, we had-oh, 250 licensed nursing homes in the State, and do you know how many of them were licensed to take Medicare patients? Do you know why?

Dr. WILENSKY. Why is that?

Senator BUMPERS. It just was not worth it.

Dr. WILENSKY. Medicare or Medicaid?

Senator BUMPERS. Medicare. Oh, no, everybody took Medicaid patients. That is where they make their money, I guess. All of them charge private patients more than Medicaid pays, but the reason nobody wanted to take Medicare patients, first of all, back then-I do not know what it is now-90 days was the longest you could stay in a nursing home under Medicare, and the paperwork was just staggering.

That is all.

Dr. WILENSKY. Medicare is a very minor payer. Medicare is clearly intended to be primarily an acute-care payer.

USER FEE EFFECTIVENESS

Senator HARKIN. I want to get back to user fees again. You just raised another point, Senator Bumpers, and that is that now, if you are going to have to get in there and allocate reimbursement to each specific nursing home between private payers and the Medicaid payment and Medicare patients, you are going to have to hire several hundred more people.

You cannot do it with the personnel you have got right now, and so it is going to cost us even more money. That is why I say, this whole concept of user fees, I do not know that we are going to save a dime out of it.

Senator BUMPERS. Incidentally, one question I wanted to ask you, how much do you think you are going to get from user fees under your projections?

Dr. WILENSKY. Well, our estimate was that the net amount, after offsets, would be $286 million. That included nursing homes, home health care agencies, and other facilities.

Senator BUMPERS. Have you done any projections on how much of that you are going to get back?

Dr. WILENSKY. How much is going to come back?

Senator BUMPERS. To the nursing home under their base rate? Mr. MOSEDALE. Yes; we think that about 9 percent of the money will go back into Medicare, and about 46 percent or so will come back to Medicaid. Of the $333 million in total user fees, more than $46 million would be offset as passthrough costs, for a net total of $286 million.

Senator BUMPERS. So you think you will be able to keep about one-half of it?

Mr. MOSEDALE. That is a fair assessment in Medicaid, yes. Senator HARKIN. Then you use that to go out and hire more inspectors to go out and decide whether or not they are allocating it correctly.

Dr. WILENSKY. I think it is fair to say we have a difference in terms of the philosophical desirability of employing user fees. I do not think that this allocation of inspection costs, given all of the other allocations of expenses that go on in nursing homes, is going to impose a substantial burden. I could be wrong, but I do not regard this as a controversial issue. But the question of whether some of the costs of inspections come back, or whether user fees are an appropriate way to finance inspections, I think is an issue worthy of further debate.

REEXAMINING USER FEE AMOUNTS

Mr. MOSEDALE. Senator, I think one of the frustrating things from a bean counter's standpoint is, it is amazing how much attention we get when we bring up a user fee concept, but these requirements for inspection are statutory. Requirements have been increasing over the last 15 years, including new specialty requirements like psychiatric review and facility review, that have forced inspection teams to grow from a size of 2 people to perhaps as many as 10. Now we are seeing how much these additional survey requirements really cost. When these costs are put in plain view, they do become real targets. Whether user fees are paying for inspections or not, it will cost the taxpayer $17,000 to do a survey. Dr. WILENSKY. It really is the only question of who pays; $17,000 represents our estimate of what it will cost to do, on average, the survey, all the hearings and followup that are involved with the survey and certification process.

Senator HARKIN. $17,000, you said, for what?

Dr. WILENSKY. For the average nursing home.

Senator HARKIN. I thought I had heard it was perhaps, $16,000 to $17,000. I thought $17,000 was the top.

Mr. MOSEDALE. That is true.

Senator HARKIN. How can that be the average?

Mr. MOSEDALE. We have projected user fees by looking at average costs. Some nursing homes are going to cost far more than $16,000, or $17,000, others will cost less, so we are trying to come up with an average. The regulation has not been developed, Senator, because this is a proposed law item. Once the law goes into effect, of course, we will go through the rulemaking process and determine what the fee scale should be. What we are trying to give you is an idea of what the average fee would be.

Dr. WILENSKY. The number I was giving was for another type of facility. It was $5,800, on average, we estimated as fees for home