# Medicare Program; Strengthening Oversight of Accrediting Organizations (AOs) and Preventing AO Conflict of Interest, and Related Provisions

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2024-02137

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** February 15, 2024
- **Citation:** 89 FR 11996

## Text

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 488 and 489
[CMS-3367-P]
RIN 0938-AU88
Medicare Program; Strengthening Oversight of Accrediting Organizations (AOs) and Preventing AO Conflict of Interest, and Related Provisions

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would set forth a number of provisions to strengthen the oversight of accrediting organizations (AOs) by addressing conflicts of interest, establishing consistent standards, processes and definitions, and updating the validation and performance standards systems. Additionally, this proposed rule would revise the psychiatric hospital survey process, add a limitation on terminated deemed providers and suppliers when reentering the program, and provides technical corrections for End-Stage Renal Disease facilities and Kidney Transplant Programs. This proposed rule also solicits comments from stakeholders and AOs to refine and revise the AO oversight standards and processes. In addition, this proposed rule includes a request for information on the timeframes and expectations for the submission of AO applications.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on April 15, 2024.

ADDRESSES:

In commenting, refer to file code CMS-3367-P.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

1.
Electronically.
You may submit electronic comments on this regulation to
https://www.regulations.gov.
Follow the “Submit a comment” instructions.

2.
By regular mail.
You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-3367-P, P.O. Box 8010, Baltimore, MD 21244-8010.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3.
By express or overnight mail.
You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-3367-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the
SUPPLEMENTARY INFORMATION
section.

FOR FURTHER INFORMATION CONTACT:

Caroline Gallaher, (410) 786-8705 or Beth Chalick-Kaplan, (410) 786-6550.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:
All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received:
https://www.regulations.gov.
Follow the search instructions on that website to view public comments. CMS will not post on
Regulations.gov
public comments that make threats to individuals or institutions or suggest that the commenter will take actions to harm an individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments.

Plain Language Summary:
In accordance with 5 U.S.C. 553(b)(4), a plain language summary of this rule may be found at
https://www.regulations.gov/.

Severability of Provisions

To the extent a court may enjoin any part of the rule as finalized, the Department intends that other provisions or parts of provisions should remain in effect. Any provision of the rule as finalized held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, shall be construed so as to continue to give maximum effect to the provision permitted by law, unless such holding shall be one of utter invalidity or unenforceability, in which event the provision shall be severable from this section and shall not affect the remainder thereof or the application of the provision to persons not similarly situated or to dissimilar circumstances.

Table of Contents

I. Executive Summary

A. Purpose

B. Summary of the Major Provisions

II. Background

A. Legislative History

B. Regulatory Overview of CMS's Rules Regarding AO Programs

C. Congressional Report on the Oversight of National AOs and CMS Approved Accreditation Programs

D. CMS Validation Survey Pilot

E. Overview of Transparency and Oversight of Accrediting Organizations

F. Prior Rulemaking—Accrediting Organizations Conflict of Interest Request for Information (RFI)

G. Conflict of Interest—The AO Owner's, Surveyor's and Other Employee's Interest in or Relationship With a Health Care Facility That the AO Accredits

III. Request for Public Comment on Whether It Is a Conflict of Interest for AO Board Members or Advisors To Have an Interest in or Relationship With a Health Care Facility That the AO Accredits

IV. Provisions of the Proposed Rule

A. Proposal To Add Definition of “Unannounced Surveys” to § 488.1

B. Conflict of Interest

C. Proposal To Require the AOs That Accredit Medicare-Certified Providers and Suppliers To Use the Medicare Conditions; and Strengthened Survey Process Comparability (Proposed § 488.4(a)(1) and (2))

D. Proposal To Revise the AO Crosswalk Requirements at § 488.5(a)(3)

E. Proposal To Strengthen the Comparability of the Survey Process Between the AOs and the States

F. Proposal To Revise the AO Application Documentation Requirements Related to the Survey Processes (§ 488.5(a)(4); § 488.5(a)(4)(iii); § 488.5(a)(4)(v); § 488.5(a)(4)(vii); § 488.5(a)(4)(xi); § 488.5(a)(5); § 488.5(a)(6); § 488.5(a)(12); § 488.5(a)(13))

G. Proposal To Require AOs To Provide CMS With Survey Findings (§ 488.5(a)(4)(viii))

H. Proposal To Require That AO Surveyors Must Take the CMS Online Surveyor Basic Training

(§ 488.5(a)(8)(ii)

I. Proposal To Establish Criteria for “National in Scope” to § 488.1

J. Proposal To Revise the Definition of “Rate of Disparity” and To Use the Process and Outcome Disparity Rates as Performance Measures (§ 488.1)

K. Proposal To Require AOs To Submit a Publicly Reportable Plan of Correction for Unacceptable Performance Measure Scores (§ 488.8(a)(2))

L. Proposal To Revise the AO Survey Validation Program (§ 489.9)

M. Proposal To Revise the Psychiatric Hospital Survey Process

N. Limitation on Terminated Deemed Providers/Suppliers Seeking Re-Entry Into Medicare/Medicaid (§ 489.57, § 488.4(b) & § 488.5(a)(21))

O. Proposal for Technical Correction for End-Stage Renal Disease (ESRD) Facilities and Kidney Transplant Programs (§ 488.4(a)(4))

V. Request for Information Regarding Timeframes and Expectation for the Submission of AO Applications

VI. Collection of Information Requirements

A. ICR Related to Conflict of Interest Proposals

B. ICRs Associated With the Requirement That AOs Incorporate the Medicare Conditions

C. ICRs Associated With the Requirement That AOs Use Survey Processes That Are Comparable to That Used by CMS and the SAs

D. ICR Related to Requirement That the AO Surveyors Take the CMS Online Surveyor Training

E. ICR Associated With the Establishment of a Definition for “National in Scope”

F. ICR Associated With the Proposed Revision of the AO Performance Measures and To Require a Publically Reportable Plan of Correction

G. ICR Associated With the Revision of the Definition of “Disparity Rate

H. Burden Reduction Associated With the Revision of the AO Validation Program

I. ICR Associated With the Revision of the Psychiatric Hospital Accreditation Process

J. Burden Associated With Limitations to Terminated Deemed Providers Seeking Re-Enrollment and Certification in Medicare/Medicaid Programs

K. Summary of Estimated Burden

VII. Response to Comments

VIII. Regulatory Impact Analysis

A. Statement of Need

B. Overall Impact

C. Detailed Economic Analysis

D. Alternatives Considered

E. Regulatory Flexibility Act (RFA)

F. Unfunded Mandates Reform Act (UMRA)

G. Federalism

Regulations Text

I. Executive Summary

A. Purpose

The Centers for Medicare & Medicaid Services (CMS) seeks to protect the health and safety of patients that receive services from Medicare and Medicaid-participating providers that are accredited by CMS-approved accrediting organizations (AOs). We continue to review and revise our health and safety requirements and survey processes to ensure that they are effective in driving quality of care for beneficiaries receiving services from these accredited providers and suppliers.

In 2015, we published a final rule in the
Federal Register
entitled, “Medicare and Medicaid Programs: Revisions to Deeming Authority Survey, Certification, and Enforcement Procedures” (80 FR 29795), hereinafter referred to as the “2015 AO final rule” to clarify and strengthen the oversight of AOs, specifically to provide additional criteria for AOs that apply for, and are granted, recognition and approval of an accreditation program (see section II “Background” of this proposed rule for additional background information). Over the past 5 years, CMS has continued to evaluate the effectiveness of these regulatory changes and the performance of AOs. This proposed rule proposes multiple provisions to further strengthen our oversight and enforcement capabilities of the AOs. The need for these provisions is based on multiple factors, which include: (1) direct observation and review of the AOs' accreditation programs for those AOs with CMS-approved deeming programs; (2) media reports and complaints against facilities that are deemed; (3) the CMS validation program and analysis of disparity rates between state survey agency (SAs) and the AOs; and (4) our performance evaluations of AOs. The preamble discusses each of the proposed provisions (see section IV “Provisions of the Proposed Rule”) in this proposed rule. More specifically, the preamble provides background and analysis of why CMS is proposing additional provisions and revisions to existing requirements. CMS is responsible for the oversight of the national AOs' Medicare accreditation programs, and for ensuring that providers or suppliers under CMS-approved deeming programs by the AOs meet the minimum quality and patient safety standards required by the Medicare conditions (refer to section II of this proposed rule for additional information). Based on several years' experience and data analysis, we are proposing the following provisions as described in the preamble to strengthen our oversight of AOs.

B. Summary of the Major Provisions

• We propose at § 488.1 to add the definitions of “geographic regions”, “national in scope,” “outcome disparity rate,” “process disparity rate,” and “unannounced survey”. In addition, we propose to revise the definition of “national accrediting organization,” and remove the definition of “rate of disparity.”

• We propose to establish a new requirement at § 488.4(a)(1) that would require the AOs that accredit Medicare-certified providers and suppliers to incorporate the language of the applicable Medicare Conditions of Participation (CoPs), Conditions for Coverage (CfCs), conditions for certification, or requirements (collectively referred to as “Medicare conditions”) set forth in the applicable CMS regulations for each provider and supplier type as their minimum accreditation requirements. However, the AOs would be free to establish additional accreditation requirements that exceed Medicare conditions, as permitted by section 1865(a)(1) of the Social Security Act (the Act).

• We propose to add language at § 488.4(a)(2) regarding use of a comparable survey process approved by CMS, as outlined and contemplated in § 488.5.

• We propose to add a new regulation at § 488.4(b) that would state that if Medicare terminates the participation agreement of a Medicare-certified provider or supplier, then CMS would no longer recognize the facility's AO accreditation for deemed compliance. At proposed § 488.4(b)(2), we would require a terminated provider or supplier to meet all requirements set forth at § 489.57 before their new agreement for participation in the Medicare/Medicaid program can be approved.

• We propose to require AOs to develop a crosswalk between their accreditation standards and the Medicare conditions, at proposed § 488.5(a)(3).

• We propose to revise the existing language at § 488.4(a)(4) to strengthen our process of evaluating the comparability of survey processes of AOs that accredit Medicare-certified providers and suppliers with the SAs' survey processes.

• We propose to strengthen the requirements at § 488.5(a)(4), § 488.5(a)(4)(iii), § 488.5(a)(4)(v), § 488.5(a)(4)(vii), § 488.5(a)(4)(xi), § 488.5(a)(5) and § 488.5(a)(6) related to the comparability of survey processes as mentioned above. We also propose changes under § 488.5(a)(5)(viii) related to survey reports. These strengthened requirements would be applicable to their initial and renewal applications provided to CMS one year after the effective date of the rule.

• We propose at § 488.5(a)(8)(i) through § 488.5(a)(8)(iv) to require AOs that accredit Medicare-certified providers and suppliers have their surveyors complete the CMS online surveyor training.

• We propose to add a requirement at § 488.5(a)(10) that the AOs must provide, as part of their initial and renewal applications, specific policies and procedures that would address how the AOs prevent and address conflicts of interest. We propose that AOs provide information on a number of specific policies and procedures.

• We propose to also revise requirements under § 488.5(a)(12) related to the AO procedures for investigating and responding to complaints against accredited facilities.

• We propose revisions to § 488.5(a)(13) related to the AO's accreditation status decision-making

process, in order to strengthen the comparability of the survey processes.

• We propose to add a new requirement at § 488.5(a)(21) that would require the AOs to submit a statement with its initial or renewal application certifying that, in response to a written notice from CMS notifying the AO that one of its accredited providers or suppliers has been involuntarily terminated from the Medicare/Medicaid program, the AO agrees to terminate or revoke its accreditation of the terminated provider or supplier within 5-business days from receipt of said written notice.

• We propose at § 488.5(a)(22) to require the AOs to submit a declaration from each surveyor disclosing any interests or relationships the surveyor may have in or with another survey agency or health care facility the AO accredits (as defined in § 488.5(a)(10)).

• We propose at § 488.8(a)(2) to expand the types of validation activities included in the performance review.

• We propose at § 488.8(a)(4) to require AOs to submit a plan of correction that would be subject to a public reporting requirement, when the AO's performance on survey activities identify disparity concerns, either through the outcome disparity rates or process disparity rates.

• We propose at new subsection § 488.8(i) to place restrictions on the fee-based consulting services provided by AOs to the health care providers and suppliers they accredit. At § 488.8(i)(1), we propose that an accrediting organization or its associated fee-based consulting division or company may not provide fee-based consulting services to any health care provider or supplier prior to an initial accreditation survey. At § 488.5(i)(2), we propose to prohibit AOs from providing fee-based consulting services to health care providers and suppliers they accredit within 12 months prior to the next scheduled re-accreditation survey of that provider or supplier. At § 488.5(i)(3), we propose that AOs may not provide fee-based consulting services to a health care provider or supplier in response to a complaint received by the AO regarding that provider or supplier.

• At § 488.8(i)(4), we set forth circumstances in which the restrictions to the provision of AO fee-based consulting services would not apply.

• We propose at § 488.8(i)(5) to require AOs to provide specific information to CMS on a bi-annual basis about the fee-based consulting services they provide.

• We propose at § 488.8(i)(6) to impose penalties on AOs for the provision of prohibited fee-based consulting services.

• We propose at § 488.8(k) that when an AO owner, surveyor, or other employee, currently or within the previous 2 years, has an interest in or relationship with a health care facility that the AO accredits, the AO would be required to take steps to prevent the surveyor from having any involvement with the survey of that facility, having input into the results of the survey and accreditation for that facility; having involvement with the pre and post survey activities for that facility; or having contact with or access to the records for the survey of that health care facility.

• We propose at § 488.9(b) to revise the types of validation programs by adding a new type of validation survey to be conducted by SA or CMS surveyors.

• We propose a new paragraph (z) at § 489.20 to require as a basic commitment of the provider if they are terminated and then seek a new provider agreement, they would follow the terms of proposed new § 489.57(b) noted below.

• We propose to add a new paragraph (b) at § 489.57, to require that Medicare-certified providers or suppliers that have been involuntarily terminated from the Medicare and/or Medicaid program must meet several requirements before their new agreement for Medicare participation will be approved. Proposed § 489.57(b)(1) would require the terminated provider or supplier to be under the oversight of the SA for a reasonable assurance period for a length of time to be determined by CMS for the purpose of demonstrating compliance with the Medicare conditions. Proposed § 489.57(b)(2) would require the provider or supplier to remain under the exclusive oversight of the SA until the SA has certified and/or CMS has determined its full compliance with all Medicare conditions and the new agreement for participation in the Medicare/Medicaid program has been approved. Proposed § 489.57(b)(3) would require that during the time period in which a provider or supplier is terminated from the Medicare program, is under the oversight of the SA, and during the time the new agreement for Medicare participation is pending, CMS will not accept or recognize deeming accreditation from a CMS-approved accrediting organization.

• We also propose to remove the reference at § 488.4(a)(4) that currently excludes ESRD facilities from the opportunity for accreditation, to reflect a change included in the Bipartisan Budget Act of 2018 (Pub. L. 115-123). Consistent with this same provision, we also propose to remove the reference restricting transplant programs from an accreditation option.

• We are soliciting comments on whether CMS should limit the number of times an AO can submit an incomplete initial application for a new accreditation program. We seek comment on this question because we recently received several incomplete applications which required multiple pass backs due to the applicant's failure to provide information about issues, such as their financial viability, survey processes which appeared not to be operationalized, or similar concerns.

II. Background

A. Legislative History

To participate in the Medicare program, providers and suppliers of health care services must, among other things, be in substantial compliance with the applicable statutory requirements of the Social Security Act (the Act), as well as CMS' regulatory requirements related to the health and safety of patients. These health and safety requirements are generally called Conditions of Participation (CoPs) for most providers; Requirements for Participation for skilled nursing facilities (SNFs) and Medicaid Nursing Facilities (NFs) (collectively, long-term care facilities); and Conditions for Coverage or Conditions for Certification (CfCs) for Ambulatory Surgical Centers (ASCs), Rural Health Clinics (RHCs), Federally Qualified Health Centers (FQHCs), dialysis facilities (or End-Stage Renal Disease [ESRD] facilities), and some types of suppliers (collectively referred herein as Medicare conditions). A Medicare-certified provider or supplier that does not comply with the Medicare conditions risks having its Medicare provider or supplier agreement terminated. Medicaid service providers or suppliers that are required by CMS or the State to have Medicare approval would also be affected.

In accordance with section 1864 of the Act, the SAs or other appropriate local agencies, under an agreement with the Secretary of the Department of Health and Human Services (the Secretary), perform surveys of health care providers and suppliers to assess their compliance with the applicable Medicare conditions for the purpose of certification for participation in the Medicare/Medicaid program. There are several types of surveys conducted, including initial certification, recertification, and complaint surveys. The SAs and CMS also perform surveys

in certain circumstances for the providers and suppliers that are accredited by an AO and deemed to meet Medicare requirements. For example, the SA performs complaint surveys for health care providers that are accredited by an AO, if the complaint was received by the SA directly. The SA also performs surveys of AO-accredited health care providers that have had their participation in the Medicare program terminated, that wish to be surveyed by the SA instead of an AO, and for the purpose of validation of the results of an AO's surveys. Rules, regulations, and guidance for the certification process performed by the Sas are discussed in the CMS State Operations Manual (SOM)
1

or communicated via Quality, Safety & Oversight (QSO) policy memorandums.
2

1
CMS Internet Only Manual, Pub. 100-07, available at
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Internet-Only-Manuals-IOMs-Items/CMS1201984.

2

https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Policy-and-Memos-to-States-and-Regions.

Some provider types may only be surveyed by the SA and cannot use AOs while others cannot be surveyed by SAs pursuant to statute but can only be accredited by a CMS-approved AO. We refer readers to section IV, “Provisions of this Proposed Rule” for additional information. Based on the SA's certification of a provider's compliance or noncompliance and recommendation, CMS determines whether the provider or supplier qualifies, or continues to qualify, for participation in the Medicare program. Additionally, section 1865(a) of the Act allows most health care facilities to demonstrate their compliance with the Medicare conditions through accreditation by a CMS-approved program of an AO, in lieu of being surveyed by SAs for certification. This is referred to as “deeming” accreditation. This is because CMS-approved AOs are recognized by the Secretary as having accreditation programs with accreditation standards that meet or exceed those of Medicare. Therefore, any provider or supplier that is accredited by an AO under a CMS approved accreditation program is deemed by CMS to have also complied with the applicable Medicare conditions or requirements. The AOs perform initial, re-accreditation, follow-up, and certain complaint surveys.

In December, 2020, Division CC, section 407 of the Consolidated Appropriations Act of 2021 (CAA 2021), amended Part A of Title XVIII of Act to add a new section 1822 to the Act, and amended sections 1864(a) and 1865(b) of the Act, establishing new hospice program survey and enforcement requirements. CMS issued implementing regulations for SAs and AOs in the CY 2022 Home Health Prospective Payment System Rate Update (HH PPS) final rule (86 FR 62240). The HH PPS rule finalized changes to increase and improve transparency, oversight, and enforcement for hospice programs under SA and AO oversight. Additionally, the HH PPS final rule in part requires hospice programs to measure and reduce inconsistency in the application of survey results among all surveyors. The HH PPS final rule requires: (1) AOs with CMS-approved hospice programs to use the same survey deficiency reports as the SAs (Form CMS-2567, “Statement of Deficiencies” or a successor form) to report survey findings; (2) comprehensive training and testing of SA and AO hospice program surveyors; and (3) prohibits SA and AO surveyors from surveying hospice programs for which they have worked in the last 2 years from which they would have a perceived or actual conflict of interest.

CMS is responsible for:
(1) providing ongoing oversight of the AOs' accreditation programs to ensure that providers or suppliers accredited by the AOs meet the required Medicare conditions; (2) ensuring that the AOs have formalized procedures to determine whether the health care facilities deemed under their accreditation programs meet the AO's accreditation standards (which must meet or exceed the applicable Medicare program requirements); and (3) ensuring that the AO's accreditation standards and practices for surveying providers and suppliers meet or exceed the Medicare conditions and practices for granting approval.

For some provider and supplier types, accreditation is voluntary and seeking deemed status through an accreditation organization is an option, not a requirement for these Medicare-certified providers and suppliers. A provider or supplier has the choice to seek deeming status and accreditation from an AO with a CMS-approved program or certification through the SA survey process. A nationally-recognized AO may have accreditation services which are not specifically related to Medicare-participation or Medicare conditions and an AO may offer accreditation services to a provider or supplier which Medicare does not recognize for deeming status, such as long-term care facilities. The AO may also provide accreditation with a deeming option, which is that their deemed program is recognized and approved by CMS to meet or exceed the Medicare program requirements. We refer readers to section IV.C “Proposal to Require the AOs that Accredit Medicare-Certified Providers and Suppliers to Use Medicare Conditions; and Strengthened Survey Process Comparability” of this proposed rule for additional context.

AOs typically charge health care facilities a fee for the accreditation services they provide. AOs generally offer at least two accreditation options, which include non-CMS approved accreditation, and accreditation for the purpose of participating in the Medicare program. By “non-CMS approved accreditation” we mean accreditation that is offered by the AOs with an accreditation program that is not approved by Medicare and which is not used for Medicare purposes. Such accreditation could be used for individual State accreditation purposes or additional professional accreditations that a provider or supplier seeks for business purposes, such as the Joint Commission's (TJC's) Nursing Care Center accreditation for skilled nursing facilities, which is not recognized by CMS as an option for deemed status.

This proposed rule would apply only to the AOs with CMS-approved programs that accredit Medicare-certified providers and suppliers and those entities they accredit. The provisions of this proposed rule would not apply to the following parties: (1) health care providers and suppliers that are not accredited by AOs, such as but not limited to, nursing homes and comprehensive outpatient rehabilitation facilities (CORFs); (2) health care providers and suppliers that are certified by the SAs, such as those who elect not to be deemed through an AO; (3) AOs that accredit non-certified suppliers; (4) non-certified suppliers; and (5) AOs that accredit laboratories (under the Clinical Laboratory Improvement Amendments of 1988 (CLIA)).

B. Regulatory Overview of CMS's Rules Regarding AO Programs

The current regulations at 42 CFR 488.4 set forth the general provisions for CMS approved accreditation programs for Medicare-certified providers and suppliers. Section 488.5 sets out application and re-application procedures for national AOs that seek to obtain CMS approval of their accreditation programs, often called “deeming authority.”

The AO application and re-application procedures set forth at § 488.5 for Medicare-certified providers and suppliers task CMS with the

responsibilities of approval and oversight of the AOs' accreditation programs while ensuring that the accredited providers and suppliers meet or exceed the Medicare conditions.

CMS conducts a thorough review of each accreditation program application that is submitted by an AO for CMS approval. This review establishes the “comparability” of the AOs accreditation standards with Medicare, to determine whether the AO's standards meet or exceed the Medicare conditions. The application review process also includes a review of the AO's survey processes and procedures, the AO's surveyor training, and their policies and procedures for the oversight and enforcement of provider or supplier entities they accredit. The application review team also reviews the qualifications of the AO surveyor staff. In addition, CMS reviews the AO's financial status, to determine their solvency and potential for longevity of operations.

Section 488.5(e)(1) requires that we publish a notice in the
Federal Register
when we receive a complete initial or renewal application from a national AO seeking CMS approval of its accreditation program. The
Federal Register
notice identifies the organization and the type of providers or suppliers to be covered by the accreditation program and provides a 30-day public comment period. CMS has 210 days from the receipt of a complete application to publish notice of approval or denial of the application. Upon approval, any provider or supplier subsequently accredited by the AO's approved program would be deemed by CMS to have met the applicable Medicare conditions and would be referred to as having “deemed status.”

C. Congressional Report on the Oversight of National AOs and CMS Approved Accreditation Programs

We are required by section 1875(b) of the Act to submit an annual Report to Congress
3

on CMS' oversight of national AOs and their CMS-approved accreditation programs. This report contains information related to the AOs' activities in a fiscal year (FY) and provides a comparison of these activities to the activities of previous years. Within this report, we also measure the “disparity rate,” which is a comparison rate based on AO findings of non-compliance during an accreditation survey and the SA findings of non-compliance for the same facilities found during a look-back validation survey.

3
The most recent Report to Congress may be accessed at:
https://www.cms.gov/files/document/qso-22-06-ao-clia.pdf.

There are three levels of adverse findings on a SA survey, which include immediate jeopardy (IJ), condition-level and standard-level deficiencies. Sections 488.1 and 489.3 define immediate jeopardy as a situation in which the provider's or supplier's non-compliance with one or more of Medicare requirements, conditions of participation, conditions of coverage or certification “has caused or is likely to cause, serious injury, harm, impairment, or death to a resident or patient.” When investigating a potential immediate jeopardy situation, surveyors must find that there is non-compliance by the provider or supplier, that serious harm has occurred or is likely to occur, and that immediate action needs to be taken by the provider/supplier. (See Appendix Q of the SOM for additional guidance.) A condition-level deficiency means that for that particular Medicare condition of participation, also known as a CoP, the facility's noncompliance is such that it substantially limits the provider or supplier's capacity to furnish adequate care or which adversely affects the health and safety of patients (§ 488.24). There can be noncompliance with a Medicare condition at a regulatory standard level that does not rise to the level of noncompliance with the condition. For example, a hospital may fail to have written policies and procedures regarding the evacuation of patients during an emergency (as required at § 482.15(b)(3)) but complies with the remaining standards set forth at § 482.15 (a) through (f) such as having policies and procedures for alternate source power, provisions, tracking of patients and staff and has a communication plan and training and testing program. In this situation, the hospital generally would not be cited at a condition-level deficiency for the entire Emergency Preparedness Medicare condition (at § 482.15). The manner and degree of the noncompliance is considered to determine whether there is substantial compliance or not. A standard-level deficiency means that the provider may be out of compliance with one or more aspects of a regulatory condition or requirement, but is considered less severe than a condition-level deficiency. A condition-level deficiency, however, is considered more serious in nature and could lead to a facility being terminated from the Medicare and Medicaid programs for non-compliance. Immediate jeopardy citations are condition-level deficiencies that pose immediate jeopardy to patient health and safety.

On a validation survey, when the SA cites a condition-level deficiency for which the AO has not cited a comparable deficiency, the deficiency is considered by CMS to have been missed by the AO and is a factor in determining the AO's “disparity rate” for each facility type. The identification of one missed condition-level deficiency by the AO results in the entire survey being counted toward the disparity rate. The number of disparate surveys is divided by the total number of validation surveys performed with respect to that AO by various States' SAs, in order to determine the AO's disparity rate.

According to the most recent report, the FY 2020 Report to Congress,
4

disparity rates for all CMS approved AO programs for the following facility types for the most recent year in the report (FY 2019) are: Hospitals (42 percent); Psychiatric hospitals (45 percent); Critical Access Hospitals (46 percent); Home Health Agencies (8 percent); Hospices (19 percent) and Ambulatory Surgical Centers (34 percent). From FY 2018 to FY 2019, hospitals, HHAs and ASCs had the only decreases in disparity rates, with a decrease of 5-percentage points, 11-percentage points, and 7-percentage points, respectively. The disparity rates for psychiatric hospitals increased by seven percentage points from FY 2018 to FY 2019. The disparity rates for CAHs and hospices increased by five percentage points and three percentage points respectively from FY 2018 to FY 2019. The findings and other information are consistent with previous reports, and no notable changes were observed in the FY 2020 RTC covering the FY 2019 period of activities.

4

https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/QSO-19-17-AO-CLIA.pdf.

D. CMS Validation Survey Pilot

As part of our ongoing efforts to enhance transparency and our oversight of the AOs, in 2018, CMS began a pilot for integrated validation surveys for accredited hospitals, known as the Validation Redesign Program (VRP) pilot. In a VRP pilot survey, the SA teams accompany the AO survey teams on a reaccreditation survey for an accredited facility for the purpose of evaluating the AO surveyors' competency at performing surveys and overall effectiveness during the survey process. The initial findings of the VRP pilot will be discussed further later in this preamble at sections IV.J and IV.L.3. CMS plans to continue to refine the

validation process over the next several years in an effort to enhance AO oversight, and verify that providers/suppliers under deemed status are in compliance with the Medicare conditions, and focus surveys on key quality concerns while reducing provider burden.

A national AO seeking approval of its accreditation programs in accordance with section 1865(a) of the Act must apply for and be approved by CMS for a period not to exceed 6 years. (See § 488.5(e)(2)(i)). An AO must submit a renewal application seeking re-approval of its accreditation program(s) before the expiration date of its current CMS approval. Review of the AO's renewal application in a timely manner allows CMS to ensure that there would not be a lapse in accreditation for the providers and suppliers accredited by the AO. Requiring the AO to submit a renewal application periodically allows CMS to ensure that the accreditation provided by the AO continues to ensure that the providers or suppliers accredited by that AO meet or exceed the Medicare conditions.

E. Overview of Transparency and Oversight of Accrediting Organizations

In September 2017, an article in the Wall Street Journal
5

raised concerns regarding the performance and transparency of AO surveys, and noted potential conflicts of interest between an AO's accreditation services and its consulting services. As a result of this article, CMS initiated an investigation into these allegations.

5
The Wall Street Journal, “Watchdog Awards Hospitals Seal of Approval Even After Problems Emerge” Stephanie Armour (September 8, 2017)
https://www.wsj.com/articles/watchdog-awards-hospitals-seal-of-approval-even-after-problems-emerge-1504889146.

F. Prior Rulemaking—Accrediting Organizations Conflict of Interest Request for Information (RFI)

CMS is aware, from the information submitted with their applications, that some AOs with CMS-approved accreditation programs are also providing fee-based consultative services to Medicare-participating health care facilities. Our understanding is that typical AO fee-based consultative services include, but are not limited to the following:

• Assistance for clinical and non-clinical leaders (including administrators) in understanding the AO and Medicare conditions for compliance;

• Review of facility standards and promised early intervention and action through simulation of a real survey, such as a mock survey with comprehensive written reports of findings;

• Review of a facility's processes, policies and functions;

• Identification of and technical assistance for changing and sustaining areas in need of improvement; and,

• Educational consultative services.

CMS acknowledges that independent fee-based consulting is a valuable resource that can help providers and suppliers improve the quality and safety of the care they provide. This does not mean that the providers or suppliers who elect not to receive fee-based consulting from an AO that offers it, or that providers or suppliers that are accredited by an AO that does not offer this service would not provide safe, quality care.

There are many third-party consultants that offer fee-based consulting across all provider and supplier types. The availability of third-party fee-based consultants give providers and suppliers access to this educational service, if their AO does not provide fee-based consulting. If a provider's/supplier's AO already offers fee-based consulting, third-party consultants can offer such providers and suppliers, with an alternative, allowing providers and suppliers to compare the effectiveness and quality of consultants to address their needs within their cost limitations. The provider or supplier may also be able to negotiate a price for educational services provided by a third-party consultant, while this may not be an option with the AOs that offer fee-based consulting. It is important to note there would be no conflict of interest associated with the use of third-party fee-based consultants because these consultants do not also make compliance determinations about the provider or supplier.

Fee-based consulting services are not prohibited by law or regulation. However, CMS is concerned that an AO's provision of such fee-based consulting results in perceived or actual conflicts of interests because of the contractual and financial relationship that exists between the health care provider and the AO, which is a private entity that profits from the performance of the inherently governmental function of regulating health care providers through accreditation.

Because of this, on December 20, 2018, we published a Request for Information (RFI) in the
Federal Register
entitled, “Medicare Program: Accrediting Organizations Conflict of Interest and Consulting Services; Request for Information” (83 FR 65331) hereinafter referred to as “2018 AO Conflict of Interest RFI”, in response to increasing concern about potential conflicts of interest created by the accreditation and consultative activities of the AOs. Specifically, we solicited public comments to determine whether offering consultative services to the same entities an AO accredits may create actual or perceived conflicts of interest between an AO's accreditation program and its consultative program. We stated that this dual function may undermine, or appear to undermine, the integrity of the accreditation programs and could erode public trust in the safety of providers and suppliers that have been accredited by CMS-approved AOs. We further acknowledged that certain consulting services offered by some of the AOs, such as quality improvement work and training of facility staff, may be beneficial to some facilities and result in improvements in operations or the quality of care furnished and may be provided with the best of intentions. We stated that circumstances could arise where an AO has recommended a facility for deemed status through their accreditation service, while the consultancy service of the AO was generating revenue assisting the same facility in passing the AO's own accreditation surveys. Some AOs have indicated that they establish firewalls between the arms of their businesses, but we stated that these firewalls may not be sufficient to ensure that no conflicts of interest result from these activities.

We further stated that, similar to quality improvement organization (QIO) and external quality review organization (EQRO) programs, any AO with a Medicare-approved accreditation program has assumed a position of public trust and is responsible for acting on behalf of the public, because the AO is performing a function that assists in the federal government's enforcement programs. We also expressed our view that AOs voluntarily take on this position and responsibility when they seek accreditation approval from CMS to accredit providers and suppliers for participation in Medicare. Because of the responsibility to maintain public trust and public health, we continually ensure that all entities and programs, including AOs and their accreditation programs that require CMS approval, be held to high standards of ethical conduct so that everyone can have complete confidence in the integrity of federal government certification. We stated that the AOs' decisions to accredit facilities must be made without regard to any additional services that a Medicare provider or supplier might

obtain through the AO or its subsidiaries. We stated that this policy would ensure and maintain public trust in the Medicare certification program.

In the 2018 AO Conflict of Interest RFI, we solicited public comments to gather information for potential future rulemaking and to obtain insight on mechanisms to address this potential conflict of interest. We were specifically interested in ways to potentially modify § 488.5(a), which sets out the required information to be submitted with an AO's application. For example, § 488.5(a)(10) states that the application information from the AO include the organization's policies and procedures to avoid conflicts of interest, including the appearance of conflicts of interest, involving individuals who conduct surveys or participate in accreditation decisions.

We stated that potentially expanding § 488.5(a)(10) by adding provisions that would require the AOs to disclose information about any consultative services they offer to facilities could further enhance our oversight of AOs.

In addition, we solicited comments on the following issues:

• With respect to fee-based consultative services provided by AOs to the facilities they accredit—

++ How are these services provided and communicated to the facilities?

++ Are potential conflicts of interest disclosed?

• Are there other entities that could provide this training besides the AOs?

• Whether commenters perceive a conflict of interest in AOs providing fee-based consultative services to the facilities they accredit.

• Whether the ability of an AO to collect fees for consultation services from entities they accredit could degrade the public trust inherent in an AO's CMS approved accreditation programs.

• What the appropriate consequences or impacts should be, if a conflict does exist.

• What firewalls may exist within an AO between accreditation and consultation services, or what firewalls would be prudent, to avoid potential and actual conflicts of interest.

• Examples of positive and negative effects which may be as a result of a conflict of interest.

• What the potential impact, financially and overall would be if CMS were to finalize rulemaking which would restrict certain activities that might give rise to a real or perceived conflict of interest.

• When and/or under what circumstances it would be appropriate for AOs to provide fee-based consultative services to the facilities which they accredit.

• Whether, and if so, under what specific circumstances CMS should review a potential conflict of interest, and what factors CMS should look at to determine if a conflict of interest exists.

• A list describing under what circumstances the AOs or stakeholders would believe there to be a conflict; and under which circumstances conflict does not exist.

• The type of information which would be considered necessary, useful and/or appropriate in proving or refuting our hypothesis of a connection between the use of consultative services and preferential treatment of accredited providers and suppliers. (See 83 FR 65336.)

We received approximately 128 public comments in response to the 2018 AO Conflict of Interest RFI. Approximately half of the commenters, (consisting primarily of AOs and health care facilities that use consulting services) supported the use of AO consulting services and stated that there is no conflict of interest associated with fee-based consulting. The other half of commenters (consisting of individuals, provider associations, medical advocacy groups and one AO) stated that the provision of fee-based consulting by the AOs creates a conflict of interest.

Several commenters stated that the benefits derived from AO fee-based consulting far outweighs any potential or actual conflict of interest that may result. Many commenters believe that AO consulting services allow the facility to seek information and guidance that helps them understand, interpret and comply with the Medicare conditions and regulatory requirements. These commenters stated that use of the AO's fee-based consulting services helped to improve the safety and quality of the care provided by the health care facility.

Many commenters stated that there are already-implemented checks and balances between CMS and the AOs that are sufficient to ensure that no conflicts of interest occur between the AOs and their accredited facilities. These commenters stated that the AOs have robust firewall policies and procedures in place to prevent conflicts of interest related to fee-based consulting. Many commenters also stated that CMS has a specific AO fee-based consulting firewall policy in place and that this policy is adequate to prevent any conflicts of interest. However, CMS does not currently have such a policy.
6

6
In section IV.B.6 of this rule, we propose to require any AO that provides fee-based consulting services or its associated fee-based consulting division or company to have written fee-based consulting “firewall” policies and procedures.

Several commenters stated that AOs are commissioned to ensure compliance with the Medicare conditions. These commenters stated that a big part of compliance is not only being punitive but informational/educational. One commenter suggested that AOs are in a unique position to provide this education and technical assistance because they understand the complexity of the Medicare conditions. One commenter stated that if AO fee-based consulting services were not provided, facilities could see additional deficiencies cited due to misinterpretation of requirements and multiple rounds of surveys, generating still more cost to the facility.

Several commenters stated that the financial benefit derived by the AOs from providing fee-based education is not significant. Some of these commenters also stated that the AOs gained no benefit from the success or results of accreditation whether they had assisted the provider to deliver better services or not.

One commenter stated that they were are not aware of other organizations who would be capable of educating and advising health care providers in a similar fashion as the AOs' consulting services. Several other commenters expressed concern about having fee-based consulting services provided by an independent third-party. These commenters stated that, while there are other entities beside the AOs, such as QIOs that could provide training, the focus would solely be on quality rather than the outcome of an accreditation.

Many commenters stated that the integrity of the accreditation process is of utmost concern for regulators, providers and patients alike and that AOs should position themselves to be above reproach in regard to overseeing patient care and quality of services that health care facilities provide, so as to retain the trust of patients and the public. Several commenters suggested that anything that may undermine the integrity of accreditation programs or the public trust in CMS accredited providers and suppliers be considered and addressed. One commenter stated that the ability of AOs to provide both survey services and consulting services is a conflict of interest, which results in a decreased level of trust among providers, Medicare, and the public.

Many commenters expressed concern about the financial and contractual relationship that exists between AOs and the health care facilities they accredit. These commenters expressed

concern that the existence of a financial relationship between AOs and health care providers casts a veil of doubt over the entire CMS hospital accreditation process, eroding the public trust in CMS to maintain the standard of care at our nation's hospitals and to ensure that Medicare patients are receiving safe, therapeutic care. One commenter stated the belief that the business connection between the provider and the AO creates a relationship that the AO could have an incentive to manipulate.

In addition, several commenters expressed concern about the significant financial interest the AOs have in the provision of fee-based consulting. One commenter stated that since AOs are being paid by the health care facilities for both accreditation services as well as consulting services, it is obviously in their financial interest to keep the health care facilities accredited and not to create too much dissatisfaction to incite the organization to seek another AO. Several commenters expressed concern that this financial relationship might provide the incentive for the AOs to ignore or downplay deficiencies during the survey of a consultative client in order to increase the apparent efficacy of its consulting services. Or, perhaps more undetectably, an AO could exaggerate the deficiencies on surveys in order to increase the apparent value of the consulting services to providers. Because of the above-stated concerns, several commenters suggested that CMS prohibit the AOs from providing fee-based consulting to the health care providers and suppliers they accredit.

G. Conflict of Interest—The AO Owner's, Surveyor's and Other Employee's Interest in or Relationship With a Health Care Facility That the AO Accredits

It is typical for an individual health care professional, such as a physician or nurse, to have concurrent employment relationships with more than one health care provider. Many health care professionals, such as physicians, physician assistants, and nurse practitioners have multi-setting practices or are employed at more than one health care facility. For example, a registered nurse (RN) may work on staff at a hospital but also work at other hospitals through a medical staffing agency. In addition, as employees of a health care facility, these health care professionals could possibly gain a financial interest in the health care facility through means such as being a contributor to the construction costs of a new wing of the facility or buying stock in the facility or its parent corporation. Management employees could be awarded stock or stock options for the facility or its parent corporation as part of their compensation and benefits package.

AOs frequently hire surveyors that are also employed at one or more outside health care settings because the professional associations, expertise, knowledge and skills held by these health care practitioners make them an asset as a surveyor. This might include, for example, a RN who is employed by a hospital and also works as a surveyor for an AO. This employment scenario does not generally violate CMS policy or regulations. Furthermore, an AO surveyor having other employment does not, in and of itself, necessarily create a conflict of interest. However, if the AO provides accreditation services to the health care facility that employs the AO surveyor, this would cause a conflict of interest if that surveyor is permitted to have any involvement in the survey process for that health care facility.

CMS has recently encountered two situations in which an AO's surveyor was also employed by the health care facility that was being accredited by the AO. In one of these situations, an AO surveyor was also employed in an administrative position at a rehabilitation facility that was being surveyed by the AO. This situation was not disclosed to CMS by the AO. Currently CMS has no specific regulations that would prohibit a conflict of interest related to an AO surveyor's relationship with a health care facility that the AO accredits, except for home health agencies and hospice programs.

Section 488.5(a)(10) of our regulations requires that an AO provide, with its application seeking CMS approval of its accreditation program, “the organization's policies and procedures to avoid conflicts of interest, including the appearance of conflicts of interest, involving individuals who conduct surveys or participate in accreditation decisions.” However, § 488.5(a)(10) does not provide requirements for specific types of information or requirements that should be contained in the AO's conflict of interest policy and procedures. This regulation does not specifically prohibit or define conflicts of interest and, based on the comments to the 2018 AO Conflict of Interest RFI, CMS proposes to revise this regulation to more specifically address situations that should be included in the AO's conflict of interest policy.

As noted above, the SAs and AOs perform similar work. Section 4008 of the SOM describes examples of scenarios that would be conflicts of interest for SA surveyors who have an outside relationship with a facility that is surveyed by the SA.
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Currently, section 4008 of the SOM applies only to the SA surveyors and not AO surveyors.

7

https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c04pdf.pdf.

Scenarios in which an AO surveyor has a relationship with a health care facility that their AO accredits could represent a conflict of interest. As CMS has no specific regulations that would proactively address such conflicts of interest for AOs that accredit healthcare providers other than home health agencies and hospice programs, we propose to establish several requirements to help mitigate such conflicts of interest in section IV.B.7 of this proposed rule.

III. Request for Public Comment on Whether It Is a Conflict of Interest for AO Board Members or Advisors To Have an Interest in or Relationship With a Health Care Facility That the AO Accredits

As previously stated, it could be a conflict of interest when an AO surveyor is involved with the survey of a facility with which that surveyor has an employment, financial, business or other interest or relationship. We note that in most cases, the AO board members do have interests in or relationships with the health care facilities the AO accredits. In many cases, the board members of the AOs frequently hold upper management positions of a health care facility the AO accredits, such as chief executive officer (CEO), director, or President. In an article published in the Wall Street Journal on September 8, 2017,
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it was stated that “[t]wenty of the Joint Commission's 32 board members are executives at health systems it accredits or else work at parent organizations of such health systems. Some other board members are named by healthcare lobbying groups, such as the American Hospital Association and the American Medical Association. This article compared this situation to “Big Pharma setting up its own accrediting organization” and stated that “if you look beneath the surface, there are conflicts and problems.”

8
S. Armour, Hospital Watchdog Gives Seal of Approval, Even After Problems Emerge,
Wall Street Journal,
September 8, 2017.

We seek public comment as to whether it would be a conflict of interest for an AO board member, AO advisor, or CEO or other executive team members to also have a relationship with a health care organization accredited by such AO. An AO advisor

would be an advisory committee member, advisor to the CEO, or an advisor to the board of directors. We refer readers to proposals related to an AO owner's, surveyor's, or other employee's interest in or relationship with a health care facility the AO accredits in section IV.B.7 of this proposed rule.

IV. Provisions of the Proposed Rule

We establish health and safety standards, known as the Conditions of Participation, Conditions for Coverage, or Requirements for Participation for different types of health care providers and suppliers, and these standards are based on specific statutory authorities for the different provider and supplier types. Pursuant to such authorities, each specific type of Medicare-certified provider and supplier must meet our health and safety standards. As part of the CMS certification process, compliance with these standards is evaluated by SAs under agreement at section 1864 of the Act, through the survey and certification process. However, CMS makes the final Medicare certification determination. In the alternative, we can deem these providers and suppliers to have met those standards if they are accredited by the CMS-approved AOs that are the subject of this proposed rule.

CMS is using the authority established by Congress under section 1865 of the Act to establish certain requirements for AOs in this proposed rule. Section 1865(a)(2) of the Act establishes a process for the Secretary to make a finding with respect to approval of an accrediting organization. In making this finding, the Secretary must consider, among other factors, the AO's requirements for accreditation, its survey procedures, its ability to provide adequate resources for conducting required surveys and supplying information for use in enforcement activities, its monitoring procedures for provider entities found out of compliance with the conditions or requirements, and its ability to provide the Secretary with necessary data for validation.

In addition, “Non-certified” suppliers are a statutory category for which CMS does not set health and safety standards, even though they must obtain accreditation in accordance with statute. Because we have not set health and safety standards for these facility types, we are not applying these provisions to non-certified supplier types at this time. These suppliers include (1) Advanced Diagnostic Imaging (ADI) suppliers; (2) home infusion therapy (HIT) suppliers; (3) diabetes self-management training (DSMT) suppliers; and (4) durable medical equipment prosthetics, orthotics supplies (DMEPOS). We are also not proposing to extend any of the provisions set forth in this proposed rule to AOs that accredit non-certified suppliers.

Non-certified suppliers are those suppliers that are required to be accredited by a CMS-approved AO for Medicare payment, do not enter into a Medicare agreement but are enrolled in the Medicare program, and do not receive a CMS certification number (CCN). These non-certified suppliers are a smaller, discrete group that are not under the jurisdiction of the SAs and do not undergo validation surveys. For example, there are no health and safety regulations for advanced diagnostic imaging (ADI) suppliers and only minimal such standards for DMST suppliers. Also, many ADI suppliers are physician's practices that provide an ADI service, such as computerized tomography (CT) scans in their office. CMS has not yet developed a survey process and health and safety requirements for these supplier types, however we reserve the right to do so in the future. CMS does a review of the applications for AOs that accredit non-certified programs. The provisions proposed in this rule would not align to these programs at this time.

As stated in section I “Executive Summary” and section II “Background” of this proposed rule, since issuing the 2015 AO final rule, there are several provisions related to oversight of AOs that require strengthening. Throughout the last several years, we have worked closely with the AOs, provided guidance and instituted an AO Liaison program in which CMS meets with each AO at least on a quarterly basis. These meetings and discussions have provided an avenue for CMS to also receive feedback on existing Medicare conditions, our interpretive guidelines and allowed for an opportunity for CMS to clarify expectations for the AOs. This experience has helped us to identify areas of our regulations in need of revision to more clearly articulate the requirements for all AOs with a CMS-approved accreditation program. Furthermore, as we have taken actions to exercise more oversight of existing CMS-approved AO programs, we have become aware of the need to clarify, reorganize, and amend our regulations to support a more efficient and effective oversight process.

The below proposal outlines the background behind each proposal and what led to CMS' development of this proposed rule.

A. Proposal To Add Definition of “Unannounced Survey” to § 488.1

We propose to add a new definition of “unannounced survey” to § 488.1. The definition of “unannounced survey” would be consistent with the definition of “unannounced” contained in the Merriam-Webster dictionary, which is “without previous notice or arrangement and therefore unexpected.” Adding this definition of “unannounced survey” would support the existing requirements set out at § 488.5(a)(4)(i) and in our sub-regulatory guidance. This proposal clarifies and codifies existing requirements under § 488.5(a)(4)(i), which requires that surveys must be unannounced, which means that the facility must be unaware of the survey until the time that the survey team arrives, and that the provider or supplier would not receive notice of the survey until the survey team arrives at the facility. Our long standing policy behind the term “unannounced survey” has been within section 2700A, chapter 2 of the SOM, outlining the expectation that all surveys of providers and suppliers (other than clinical laboratories) must be unannounced to the provider or supplier being surveyed. This means that the provider or supplier to be surveyed would not receive notice of the survey until the survey team arrived at the facility for the survey, as is also currently the AO's process for complaint surveys. The proposed definition for “unannounced survey” would also state that unannounced surveys must be scheduled by the AO in a manner so that their timing and occurance will not be predictable to the healthcare facility being surveyed.

One of the primary reasons surveys conducted by either the SA or the AO are required to be unannounced is to prevent the provider or supplier from making unusual preparations for the survey that would not represent the ongoing typical condition of the provider and true nature and quality of care provided. Examples of these activities would include unusual cleaning activities, painting, clearing obstructions from halls and entrances, denying leave to staff during that time or calling staff back to inflate staffing availability, and re-reviewing medical records outside of what is normally done. If a provider or supplier knows the exact time a surveyor will be onsite, it may temporarily adjust its typical practices such as staffing, which would provide an unrepresentative picture to surveyors of the quality of care typically provided to patients or residents. A notice to facility leadership via

organizational websites, emails, or phone calls prior to surveyors arriving onsite is considered a violation with CMS regulations.

In 2009, CMS clarified this expectation in the Survey & Certification Policy Memorandum 09-41,
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to advise that announcing of surveys was in conflict with CMS regulations. In the effort to align AO survey processes with CMS survey processes (which are followed by the SA surveyors), as outlined in section IV.C of this proposed rule, additional clarity regarding this prohibition is needed. Defining the term “unannounced survey” within the regulation as opposed to our SOM (subregulatory guidance) would provide clarity regarding our expectations, and would mirror the processes used by our SAs, who do not announce their surveys (except for clinical laboratories); as noted, any AO practice of announcing surveys could undermine the integrity of the survey process. While we recognize AOs may have provided up to a 60-minute advance notice of the survey team arriving onsite for initial and reaccreditation survey activities, this is inconsistent with the processes followed by our SAs, and is inconsistent with the AOs' own survey processes for complaint surveys (which are always unannounced).

9

https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Policy-and-Memos-to-States-and-Regions-Items/CMS1223113.

Therefore, in accordance with § 488.5(a)(4)(i), which requires unannounced surveys, as well as our long-standing policy in section 2700A, chapter 2 of the SOM, we propose that all surveys of providers and suppliers (other than clinical laboratories) must be unannounced and any advance notice to facilities would be prohibited. This proposed requirement would apply to AOs as well as SAs and further support our initiative to bring consistency to survey practices as outlined in section IV.C of this proposed rule.

Furthermore, the definition of “unannounced survey” must ensure that the recertification surveys are unpredictable. AOs generally complete comprehensive re-accreditation surveys of their client providers and suppliers every 32 to 36 months. However, some providers or suppliers have informed us that they know when an AO is scheduled to survey the facility—the AO may schedule the facility for survey within the same week or month every survey cycle, or has narrowed its schedule via the use of blackout days, or informed the facility close to the time of the survey via administrative contact from the AO, such as payment collection, confirmation or change of address notification or other facility-AO specific information. All of these practices undermine the integrity of the unannounced survey process.

B. Conflict of Interest

1. Proposal for Information To Be Submitted With the AOs' Conflict of Interest Policies and Procedures (Proposed Revisions to § 488.5(a)(10))

Section 488.5(a)(10) currently requires that the AO submit “the organization's policies and procedures to avoid conflicts of interest, including the appearance of conflicts of interest, involving individuals who conduct surveys or participate in decisions.” This requirement does not require the AO to address any specific areas or issues in their conflict of interest policies and procedures. In addition, the AOs only need to submit this information to CMS with their initial and renewal applications, which is currently every 6 years or less, as established by CMS.

We propose to revise § 488.5(a)(10) by adding a requirement that AOs must provide CMS with more specific conflict of interest policies and procedures. We propose at § 488.5(a)(10)(i) to require the AOs to provide CMS with their policies and procedures for separation of their fee-based consulting services from their accreditation services (that is, fee-based consulting “firewall” policies and procedures). We propose at § 488.5(a)(10)(ii) to require the AOs to provide their policies and procedures for protecting the integrity of the AOs' accreditation program, including the requirements of proposed § 488.8(i) and (j) noted below. Section 488.8(i) pertains to restrictions on certain fee-based consulting services provided by AOs, and § 488.8(k) pertains to conflicts of interest which arise due to AO owners, surveyors, and other employees having a business, employment, financial or other type of relationship with a health care facility accredited by the AO.

At § 488.5(a)(10)(iii), we propose to require the AOs to provide policies and procedures for the prevention and handling potential or actual conflicts of interest that could arise from situations in which an AO owner, surveyor, or other employee has a business, employment or financial interest in or relationship with another survey agency or health care facility to which the AO provides accreditation services.

Proposed § 488.5(a)(10)(iii) would further state that such interests or relationships would include but not be limited to: (1) being employed as a SA surveyor; (2) being employed in a health care facility that is accredited by the AO; (3) having an ownership, financial or investment interest in a health care facility that is accredited by the AO; (4) serving as a director of or trustee for a health care facility that is accredited by the AO; (5) serving on a utilization review committee of a health care facility that is accredited by the AO; (6) accepting fees or payments from a health facility or group of health facilities that is/are accredited by the AO; (7) accepting fees for personal services, contract services, referral services, or for furnishing supplies to a health care facility that is accredited by the AO; (8) providing consulting services to a health care facility that the AO accredits; (9) having members of their immediate family engaged in any of the stated activities, other than being a non-managerial employee of a health facility that is accredited by the AO; and (10) engaging in any activities during the course of the survey of the facility that would be or cause a conflict of interest.

In proposed § 488.5(a)(10)(iii)(I), we have defined the term “immediate family member” as a husband or wife, birth or adoptive parent, child, or sibling; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild. This is also consistent with the definition of “immediate family member” used for the hospice program conflict of interest regulations at § 488.1115.

We further propose at § 488.5(a)(10)(iv) to require AOs to provide policies and procedures for providing notification to CMS when such a conflict of interest is discovered.

We propose at § 488.5(a)(10)(v) to define “conflict of interest” as a situation in which an AO, its owner(s), surveyors, or other employees, or the AO's successors, transferees, or assigns, or the immediate family members of the AO owners(s), surveyors and other employees have an employment, business, financial or other type of interest in or relationship with a health care facility the AO accredits. We would deem a conflict of interest to have occurred if one of the above-stated parties either knowingly or unknowingly exploited their interest in or relationship with that provider or supplier. We remind readers that in the CY 2022 Home Health Prospective Payment System Rate Update (86 FR 62368) that we finalized similar conflict of interest regulations for hospice

programs at § 488.1115(b). The proposed requirements of this rule for accrediting organizations are consistent with, and build upon, the current conflict of interest regulation for hospice programs at § 488.1115(b). For additional discussion on the Hospice final rule see 86 FR 62368.

We are proposing changes to § 488.5(a)(10) to require the AO to have policies and procedures for the prevention, handling of and notification of CMS when conflicts of interest arise, because on several occasions, AOs have failed to notify CMS of such conflicts of interest. These changes would broaden our oversight of the AOs' handling and reporting of conflicts of interests. Additionally, by requiring the AOs to provide CMS with more specific information about their conflict-of-interest policies and procedures, CMS would be afforded a more comprehensive look at how the AOs plan to handle specific scenarios that CMS would deem to be conflicts of interest. These proposed requirements would require those AOs that did not have policies and procedures to prevent, address and handle conflicts of interests to develop and use them.

The proposed requirements at § 488.5(a)(10)(iii), for the conflict of interest and information that must be submitted with the AOs' conflict of interest policies and procedures, are more detailed than the requirements currently set forth in section 4008 of the SOM, which provide examples of possible scenarios that could be conflicts of interest for the SA surveyors. Section 4008 of the SOM leaves it to the discretion of the SA management to decide how to identify and address these conflicts of interest.

A more detailed conflict of interest requirement is not necessary for the SA surveyors because SA surveyors, who are state employees, are generally required to report incidences of conflicts of interest to the SA management, who is tasked with taking the appropriate action.

Unlike the SAs, the AOs are more likely to encounter scenarios with conflicts of interest. For example, AO owners, board members, surveyors and other employees might also be employed by health care facilities that are surveyed and accredited by that AO. Therefore, the proposed requirements for AOs must be more detailed and prescriptive than SAs because of the likelihood of them encountering conflicts of interest.

2. Proposal To Require AOs To Obtain and Submit Surveyor Declarations of Any Interest in and Relationships With Health Care Providers the AO Accredits to CMS on an Annual Basis (Proposed § 488.5(a)(22))

A conflict of interest may exist when an AO surveyor has interest(s) in or relationship(s) with a health care facility the AO accredits. Requiring AOs to obtain and submit declarations detailing such interests and relationships would ensure that CMS is notified of potential or actual conflicts of interest AO surveyors might have with the providers and suppliers the AO accredits. Such notice would allow CMS to be aware of the existence of these potential or actual conflicts of interest, some of which would preclude a surveyor from participating in survey activities (see § 488.8(j) discussion at section IV.B.6 of this proposed rule) and some of which would not.

We propose to add a new provision at § 488.5(a)(22) that would require the AO to obtain declarations from all surveyors employed or contracted to the AO regarding any employment, business, financial or other interests in or relationships they have with the health care facilities the AO accredits. We propose that AOs would initially be required to submit the surveyor declarations with their initial application for CMS approval of their accreditation programs. We further propose to require the AOs to update the surveyor declarations on an annual basis, and that the information from the annual updated surveyor declarations be submitted to CMS no later than December 31st each year. Annual updates would be necessary because a surveyor's interests in and relationships with health care facilities the AO accredits could change over time. This requirement would ensure that the information contained in the surveyor declarations remains up-to-date and accurate. This provision at paragraph (a)(22) would be implemented 1 year after the effective date of the final rule (which would be 60 days after publication of the final rule). We further propose to require the AOs to begin submitting their surveyor declaration information on or before the December 31st that occurs after the implementation date of this requirement.

3. Proposal To Place Restrictions on Fee-Based Consulting Services Provided by AOs to the Medicare-Certified Providers and Suppliers They Accredit (Proposed § 488.8(i))

CMS recognizes the value of fee-based consulting by independent, third-party consultants who provide insight or expertise to assist facilities in achieving or maintaining compliance with AO and/or Medicare's health and safety standards. These interventions are beneficial and often tailored to meet a facility's specific compliance needs. Consulting services also may assist a provider or supplier in identifying quality concerns, whether based on a Medicare requirement or standards of practice, and therefore these services may improve the safety of patient care. AO fee-based consulting activities are not prohibited by federal law and there are no current CMS regulations prohibiting AOs from providing fee-based consulting services.

However, AOs assume a public trust role when voluntarily applying to CMS for deeming authority. This authority, once granted, conveys Medicare certification for those entities accredited by the AO and it is essential that the integrity of their oversight process be above question. A number of AOs with CMS-approved accreditation programs currently provide AO fee-based consulting services to the Medicare-participating health care facilities they accredit. When an AO provides fee-based consulting services to a provider or supplier it accredits it could create a conflict of interest for several reasons.

First, AOs provide deeming surveys to providers or suppliers on behalf of CMS. AOs are required to use accreditation standards that are comparable to or exceed the Medicare standards and survey processes in the performance of deeming surveys. A potential or actual conflict of interest arises from allowing a CMS-approved AO with deeming authority, the ability to charge a provider or supplier to conduct a deeming survey to identify non-compliance (for Medicare participation), and also charge for providing AO fee-based consulting services to help the provider meet Medicare requirements.

Second, providers and suppliers often choose AO fee-based consulting specifically for the additional resources and assistance provided. Some AOs publicly advertise the ability of their fee-based consulting to simulate what to expect from the actual AO survey. It is possible that Providers and suppliers found to be non-compliant by their AO may assume that the most direct path to compliance is to hire the AO's fee-based

consulting services. Such an assumption would provide AOs with fee-based consulting services with an unfair advantage over other, third-party consulting services.

Finally, by charging for accreditation services (for example, deeming surveys) and also for the subsequent fee-based consulting services, for the purpose of remediating deficiencies identified by the same AO, there may be an expectation from providers and suppliers that the AO demonstrate the effectiveness their consulting services on subsequent compliance surveys. In other words, the provider or supplier may expect to receive a favorable survey report because they have paid the AO not only for accreditation but also for fee-based consulting services which are promoted by the AOs to help the provider or supplier do well on their survey. In addition, this expectation may push AOs to ignore significant deficiencies found during survey of its fee-based consulting clients in order to demonstrate the efficacy of its fee-based consulting and promote these services.

In short, an AO's business model is geared toward retention of its accredited providers and suppliers. AOs that provide both regulatory oversight through Medicare deeming surveys and also fee-based consulting services, which are geared towards assisting clients comply with the requirements required to pass the surveys, invites concerns about the integrity of their final compliance determinations.

CMS issued an AO Conflict of Interest RFI (83 FR 65331) in 2018 to gather feedback related to AO conflict of interest practices. We received 128 public comments in response to the RFI. Many commenters stated that fee-based consulting provided by an AO or its associated consulting division or company to the health care facilities it accredits is a conflict of interest. These commenters stated that this conflict of interest arises from granting the inherently governmental function of monitoring patient safety, by regulating health care providers through accreditation, to a private entity, especially when that private entity profits from those who are regulated.

Several commenters alleged that AOs that provide fee-based consulting may have the incentive to ignore deficiencies detected during the accreditation survey, in order to provide a “good” survey report to demonstrate the apparent efficacy of their AO fee-based consulting services and also to keep the paying customer(s) happy. Many commenters also suggested that if an AO provides poor survey results to a health care facility that has paid a significant fee for accreditation, it is unlikely that the facility would continue to retain that AO as a service provider.

After careful review and analysis of the public comments received in response to the RFI, we agree that a conflict of interest arises from the contractual and financial relationship between the health care provider and the AO, which is a private entity that profits from the performance of regulating health care providers through accreditation. AOs that provide fee-based consulting services generate additional revenue beyond the fees realized for accreditation services by providing fee-based consulting services to the same facilities they accredit.

We propose at § 488.8(i) several restrictions on fee-based consulting provided by these AOs, their consulting divisions, or separate business entities. By “fee-based consulting division,” we mean a separate division within the AO that provides fee-based consulting services. This division of the AO would have a separate manager and staff. By “separate business entity,” we mean a business entity, such as a company or corporation, that is separate and apart from the AO and that has been established by the AO, either under a similar or different name, for the purpose of the providing fee-based consulting services.

The proposed regulation at § 488.5(i) would still allow AOs to provide fee-based consulting services to the providers and suppliers they accredit with restrictions that address the conflict of interest issues associated with this service.

We propose at § 488.8(i)(1) that, unless excepted under proposed § 488.8(i)(4), AOs and their associated consulting divisions or companies would be prohibited from providing fee-based consulting services to any health care provider or supplier to which the AO provides accreditation services prior to an initial accreditation survey. However, the health care provider or supplier may seek fee-based consulting services from an entity entirely uninvolved in that provider or supplier's accreditation process. This option allows these providers and suppliers support they may believe necessary to meet Medicare standards and requirements prior to serving patients while eliminating any conflict of interest for their AO.

For purposes of proposed § 488.8(i)(1), the term “initial survey” would mean the first accreditation survey of a health care provider or supplier performed by an AO. The term “prior to the initial accreditation survey” would mean the time period beginning on the day the provider or supplier enters into a contract with the AO to provide accreditation services and continuing until the date that the initial accreditation survey is completed. The survey completion date would include the completion of any required plans of correction by the provider or supplier. In addition, if a health care provider or supplier was terminated or withdrew from the AO's accreditation and later retained the services of that AO, the first survey of the returning health care provider or supplier performed by the AO would be considered an initial accreditation survey.

The requirement of proposed § 488.8(i)(1), which would prohibit an AO from providing fee-based consulting or coaching to a health care provider or supplier prior to the initial accreditation survey, would provide a more accurate assessment of the provider's or supplier's baseline operating conditions and deficiencies on the initial survey. Such a raw assessment would not be possible if the provider or supplier receives AO fee-based consulting prior to the initial accreditation survey.

In addition, such a baseline assessment of deficiencies would be useful to the AO in assessing areas needing improvement, developing a plan of correction and areas of focus for the fee-based consulting. This proposed restriction would also remove the financial incentive on the part of the AO to ignore deficiencies during the initial survey of providers and suppliers that paid for fee-based consulting prior to an initial survey.

We note that this proposal only restricts an AO with deeming authority and a fee-based consulting practice from providing fee-based consulting services to its accredited providers and suppliers prior to the initial accreditation survey. It does not prohibit providers and suppliers from hiring third-party fee-based consulting services prior to their initial AO survey, in other words, this proposal does not prohibit other consulting services from being used during this period.

We do not anticipate that this proposal would cause a negative impact on the patient care provided by the provider or supplier for several reasons. First, providers or suppliers would be able to obtain AO fee-based consulting during the first 24 months of the 36-month reaccreditation cycle which occurs after the initial survey. This education could be tailored to address the deficiencies found during the initial survey. If the AO were to provide fee-based consulting prior to the initial survey, the AO would not know what

deficiencies exist and would only be able to provide generalized fee-based education to the provider or supplier. Second, the provider and supplier could always seek fee-based education prior to the initial survey from a third -party consultant. The purpose of our proposal to prohibit AO fee-based consulting prior to the initial survey and during the 12-month period prior to each reaccreditation survey is to reduce or remove any potential or actual conflict of interest. However, if a provider or supplier were to seek fee-based consulting from a third-party consultant, that has no relationship to the AO that accredits that provider or supplier, no conflict of interest would exist.

We also propose at § 488.8(i)(2) to prohibit AOs from providing fee-based consulting services to a health care provider or supplier it accredits within 12 months prior to the next scheduled re-accreditation survey of that provider or supplier. For purposes of proposed § 488.8(i)(2), the term “re-accreditation survey” would mean any subsequent accreditation surveys performed by the AO after the initial survey.

The accreditation cycle for most Medicare-certified providers and suppliers is 36 months (3 years), which means that the AOs perform an accreditation survey of these providers and suppliers no less than every 36 months. The proposed language at § 488.8(i)(2) would allow AOs to provide fee-based consulting during the first 24 months (2 years) of the accreditation cycle, but not during the 12-month (1-year) period preceding the re-accreditation survey. For example, with this proposal, if the initial survey was completed on June 1, 2025, the provider's or supplier's reaccreditation survey would be due by June 2, 2028. The AO could provide fee-based consulting to the provider or supplier from June 2, 2025, to June 2, 2027. The AO would be prohibited from providing AO fee-based consulting to the provider or supplier from June 2, 2027, to June 2, 2028. An accredited provider or supplier would retain the ability to use consultants not affiliated with their AO at any time, including any timeframe prior to or after an accreditation survey for Medicare compliance.

The proposed requirement would provide the accredited provider or supplier ample time to obtain the education they need in order to understand the CMS requirement, the AO's accreditation standards and survey process, and 1-year period, prior to their next accreditation survey, in which to implement the AO's accreditation standards and CMS standards (CoPs) in their facility and rectify any deficiencies found during the initial survey.

The proposed requirement at § 488.8(i)(2) would address the actual or potential conflicts of interest associated with AO fee-based consulting because it creates a 1-year time period prior to the re-accreditation survey in which the AO is prohibited from providing any type of additional teaching or “coaching” that would help the provider or supplier “pass” or obtain better scores on the upcoming accreditation survey.

We further propose at § 488.8(i)(3) that the AOs or their associated consulting divisions or companies be prohibited from providing fee-based consulting services to a health care provider or supplier in response to a complaint received by the AO regarding that provider or supplier. Our rationale for this requirement is that AOs are required by CMS regulation to investigate and resolve complaints received regarding their accredited providers and suppliers (that is, 42 CFR 488.5(a)(4)(ix); 42 CFR 488.5(a)(12)). This regulatory requirement includes investigating the complaint and working with the accredited provider or supplier to help them resolve any deficient practices identified in the complaint. AOs charge a significant fee for their fee-based consulting. AOs should not profit by providing fee-based consulting to a provider and supplier in response to a complaint that they are regulatorily required to investigate and resolve. This proposed regulation would prevent this from occurring.

We propose at § 488.8(i)(4)(i) to (iv) that the restrictions upon AO fee-based consulting would not apply to the following situations: (1) AO fee-based consulting services provided during the 24-month period after the date the initial or re-accreditation survey is performed (proposed § 488.8(i)(4)(i)); (2) AO fee-based consulting services provided to address complaints received and investigated by the SA regarding an AO's accredited provider or supplier in which one or more condition-level or immediate jeopardy deficiencies are identified, provided however that, the fee-based consulting must occur after the complaint investigation and survey has been completed and must only address those issues identified by the complaint survey (proposed § 488.8(i)(4)(ii)); (3) AO fee-based consulting services provided to health care providers or suppliers to which the AO has never provided accreditation services (proposed § 488.8(i)(4)(iii)); and (4) no-cost consulting or general education provided by the AO about their accreditation program (proposed § 488.8(i)(4)(iv)).

Proposed § 488.8(i)(4)(ii) would allow AOs to provide AO fee-based consulting services in response to complaints received by the SA regarding an AO's accredited provider or supplier. However, this fee-based consulting must be provided by the AO after completion of the SA investigation and complaint survey. We would permit AO fee-based consulting services after a complaint is received by the SA, because the SA, not the AO, would perform an investigational survey. Therefore, the affected provider or supplier should be permitted to seek fee-based consulting from its AO, in accordance with the restrictions stated above, to address the issues identified in the SA complaint and complaint survey, if appropriate.

It is important to note that AO fee-based consulting should only be provided when serious deficiencies have been identified in the SAs complaint investigation report. By serious deficiencies, we mean deficiencies that would be considered condition level by the SA and the AO. However, the AO should first work directly with the provider or supplier, as part of their accreditation services package, to resolve the issues identified in the SAs complaint investigation report and only provide AO fee-based consulting if these issues cannot be resolved successfully, through other methods. It has always been the duty of the AOs to address and resolve complaints received regarding its accredited providers and suppliers, whether said complaint is received by the AO or the SA. An AO receives a significant fee for the accreditation services provided. We believe that the investigation and resolution of complaints falls squarely under these paid accreditation services. We do not believe it appropriate for AOs to offer fee-based consulting/educational services in response to each and every complaint received regarding one of its accredited providers or suppliers. In other words, the AOs should not realize additional profit from its paying customers, when it has already been paid to perform the task at hand.

More specifically, we would expect that an AO not offer fee-based consulting to an accredited provider or supplier in response to a complaint, unless the deficiency(ies) identified in the complaint are substantiated by the investigation, and found to be systemic, widespread, and ingrained in the culture of the organization. We would also expect to find that the AO first attempted to work with the provider or supplier, as part of the accreditation services provided, to resolve the deficiencies identified in the complaint,

before resorting to fee-based consulting. Finally, we would expect to find that if an AO offers fee-based consulting/educational services to the provider or supplier, they do so after trying all non-cost options available, and that the fee-based consulting/education was reasonably expected to resolve the deficiencies identified in the compliant.

Proposed § 488.8(i)(4)(ii) requires that the AO fee-based consulting cannot be provided until after completion of the SA's investigation and complaint survey. By “completion of the SA's investigation”, we mean the date upon which the SA has completed all work required to investigate the complaint and has issued its findings. This restriction is necessary because if the affected provider or supplier were to receive fee-based consulting from the AO prior to the completion of the SA's investigation and complaint survey, the affected provider or supplier potentially could alter processes, operations or documentation, all of which could compromise the SAs investigation of the complaint. In such a scenario, the investigation and complaint survey report would not be an accurate reflection of the issues identified in the complaint. While it may seem counter-productive for the affected provider or supplier to obtain AO-fee-based consulting after completion of the SA's investigation and complaint survey, we believe that it would actually be helpful to the affected provider or supplier. After completion of the SA's complaint survey and investigation, the affected provider or supplier will receive a complaint investigation report, which will allow the AO to tailor the fee-based consulting services or other educational activities to address any deficiencies identified in said report. Also, through AO fee-based consulting services, the AO could work with the affected provider or supplier, at their own pace, to implement long-lasting and sustainable changes that address the deficiencies identified, as opposed to the implementation of quick temporary solutions or corrective action prior to completion of the complaint investigation. A quick temporary solution would be one that the provider or supplier implements on a short-term basis, typically only during the time that the surveyors are present. By contrast, a long-lasting and sustainable solution would be one in which the provider or supplier implements the solution, orients the staff to its requirements, regularly monitors for compliance with the requirements and corrects non-compliance on a continual basis.

Proposed § 488.8(i)(4)(iii) would further allow AOs to provide fee-based consulting services to health care providers or suppliers the AO does not accredit at the time the consulting services are furnished. If the AO has not provided accreditation services to a provider or supplier at the time fee-based consulting services are provided, the AO would not have a preexisting financial relationship with that provider or supplier. Thus, no conflict of interest would exist.

Proposed § 488.8(i)(5) would require AOs to report information about the fee-based consulting provided to the providers and suppliers they accredit to CMS. See section IV.B.4 for information about this proposed rule.

Proposed § 488.8(i)(6) provides for penalties for AOs that provide fee-based consulting in violation of the restrictions set forth on proposed § 488.8(i)(1) to § 488.8(i)(3). See section IV.B.5 of this proposed rule for a discussion of this proposed section.

We propose at § 488.8(i)(7) that the requirements at § 488.8(i) would become applicable 1 year from the effective date of the final rule to allow for an appropriate time of transition. We believe that this would provide ample time for the AOs to prepare for and implement the proposed requirements at § 488.8(i).

The conflict inherent in AO fee-based consulting on accreditation standards while an AO is also performing surveys to determine compliance with those same standards is what the proposed restrictions on AO fee-based consulting seek to address. An entity that collects fees to remedy findings or prepare for a survey performed by another arm of the same entity creates a perceived conflict of interest that undermines the integrity of the health and safety oversight process. These proposals seek to allow continuance of independent consulting activities while addressing concerns related to fee-based consulting performed by the AOs, themselves.

We note that this proposed restriction on AO fee-based consulting services at §§ 488.8(i)(1), 488.8(i)(2), and § 488.8(i)(3) would not prohibit the AOs from providing no-cost education, such as general education about the AO's accreditation and survey process and mock surveys. The restrictions on AO fee-based consulting would also not prohibit AOs from providing education about the Medicare conditions, AO standards, or survey process, to its accredited health care providers and suppliers, as long as this education is provided completely free of charge. This means that the AO would not be allowed to raise the price of their accreditation services because of the provision of this education, or do anything else that would cause the provider or supplier to incur any additional costs for the education provided by the AO, its consulting division or separate consulting company to the providers or suppliers it has contracted with to provide accreditation services. We believe that it is important that health care providers and suppliers receive education that would assist them in compliance, so long as it is not provided on a fee basis, which would introduce another financial relationship between the AO and the provider or supplier that could cause a conflict of interest.

We also note that other CMS programs have established similar conflict of interest and independence provisions for organizations that have a public trust role in assessing the quality of services provided. For example, in the Medicaid program, CMS has established regulatory standards with respect to the independent judgment of any External Quality Review Organization that reviews the quality of the Medicaid managed care organization for the state (42 CFR 438.354). These regulations establish, among other requirements, that an External Quality Review Organization may not review any managed care entity for which that organization has also conducted a private accreditation review within the previous 3 years.

Our proposal to place restrictions on the provision of fee-based consulting by AOs to their current accredited providers and suppliers is authorized by section 1865(a)(2) of the Act, which gives CMS the broad power of oversight over the activities of AOs. The provision of AO fee-based consulting is one of the factors in section 1865(a)(2) of the Act that should be considered in determining whether a national accreditation body demonstrates that all of the applicable conditions or requirements of this title are met or exceeded.

4. Proposal To Require AOs To Provide CMS With Information About the Fee-Based Consulting They Provide (Proposed § 488.8(i)(5))

We proposed at § 488.8(i)(1), § 488.8(i)(2), and § 488.8(i)(3) to place restrictions on the fee-based consulting services provided by AOs. In order to enforce our proposals, we propose at § 488.8(i)(5) to require the AOs that provide fee-based consulting services to submit information to CMS, on a calendar year bi-annual basis, about the fee-based consulting services they provide.

We propose to add a requirement at § 488.8(i)(5) that would require the AOs

that accredit Medicare-certified providers and suppliers to provide CMS with information regarding the fee-based consulting services no later than 15 days after the end of each calendar year bi-annual (6-month) period.

More specifically, this proposal would require these AOs to submit a document which contains the following information to CMS:

• Whether the AO or an associated consulting division or company established by the AO provides fee-based consulting services.

• The names and CMS Certification Number (CCN) numbers of all health care providers and suppliers to which the AO or its associated consulting division or company has provided fee-based consulting services during the previous calendar year quarter.

• The dates the AO fee-based consulting services were provided to each provider and supplier listed.

• Whether the accrediting organization has, at any time in the past provided, or is currently providing accreditation services to each health care provider or supplier listed in said document, and if so, the date the accreditation services were provided.

• The date of the most recent accreditation survey performed, and the date the next re-accreditation survey is due to be performed for each health care provider and supplier listed in said document.

• A description of the AO fee-based consulting services provided to each health care provider or supplier listed in said document.

We are further proposing that the two bi-annual reporting periods would consist of January 1st to June 30th and July 1st to December 31st each year. The submission deadline for the first period would be July 15th each year. The submission deadline for the second period would be January 15th each year. This would ensure that AOs are not providing fee-based consulting services to providers and suppliers prior to an initial survey, within 12 months prior to a re-accreditation survey, or in response to a complaint received regarding an accredited provider or supplier. In addition, this information would also allow CMS to see the number of providers and suppliers to which the AOs are providing fee-based consulting services.

We propose that these provisions would become applicable 1 year from the effective date of final rule to allow for an appropriate time of transition. We believe that this would provide the AOs with ample time to prepare for and implement this requirement.

5. Proposal for Penalties for AOs Found To Be Providing AO Fee-Based Consulting Services to the Health Care Providers or Suppliers They Accredit in Violation of the Restrictions in 42 CFR 488.5(i)(1) Through § 488.5(i)(3) (Proposed § 488.8(i)(6))

In section IV.B.3 of this proposed rule, we propose to implement regulations that place restrictions on the fee-based consulting services AOs provide to the health care providers and suppliers that they accredit. In order to enforce these regulations, we propose at § 488.8(i)(6) to implement penalties for the violation of the restrictions on AO fee-based consulting.

We propose at § 488.8(i)(6)(i) that if an AO is found to be in violation of the restrictions set forth in paragraphs § 488.8(i)(1), (2) and (3), CMS may initiate penalties against the AO. These penalties are set forth in proposed § 488.8(i)(6)(i) and § 488.8(i)(6)(ii) and include placing the AO on a program review, and involuntary termination of the CMS-approved AO's accreditation program(s).

Whether or not we impose the penalties provided in § 488.8(i)(6)(i) and (ii) would depend on the severity of the violation and the facts and circumstances surrounding the violation. Such facts might include the number of providers and suppliers that contracted for prohibited AO fee-based consulting services, the number of times the AO violated the restrictions of § 488.8(i).

The purpose of these proposed provisions is to discourage AOs from violating the proposed restrictions on the provision of fee-based consulting to the providers and suppliers they accredit.

We propose that these provisions would become applicable 1 year from the effective date of the final rule. We believe that this would provide ample time for the AOs to prepare for the implementation of the requirements of this rule.

6. Proposal To Require Accrediting Organizations To Have Written Fee-Based Consulting Firewall Policies and Procedures (§ 488.8(j))

We propose at § 488.8(j) to require any AO that provides fee-based consulting services or its associated fee-based consulting division or company to have written fee-based consulting “firewall” policies and procedures. We have defined the terms “consulting division” and “associated company” in section IX.B.3 of this proposed rule. We define the term “firewall” as the complete and total separation between the AO's accreditation activities and its fee-based consulting services.

We propose that these firewall policies and procedures must, at a minimum, include the following provisions: at paragraph (j)(1)(i) the AO's fee-based consulting services must be provided by a separate division of the AO or separate business entity (that is company or corporation) from the AO; at paragraph (j)(1)(ii) the AO's fee-based consulting division or separate company must maintain separate staff from that of the AO's accreditation division(s) to ensure that the fee-based consulting division staff do not perform AO's accreditation division functions and that the AO's accreditation division staff do not perform fee-based consulting division functions; and at paragraph (j)(1)(iii), the AO's accreditation staff and surveyors would be prohibited from marketing the AO's fee-based consulting services to the AO's accreditation clients.

The purpose of the provisions of proposed § 488.8(j) is to ensure that the AO maintains a complete division between their fee-based consulting program and their accreditation program. In other words, we seek to require the AOs to prevent any co-mingling of fee-based consulting activities and staff with their accreditation activities and staff. These requirements are necessary because several commenters to our 2018 AO Conflict of Interest RFI, noted concern that while some AOs that provide fee-based consulting have such firewall policies in place, they have been breached. For example, one commenter stated that one AO's accreditation staff aggressively marketed that AO's fee-based consulting services to his health care facility. In addition, during a CMS validation pilot joint survey with an AO, a SA surveyor witnessed the AO's surveyors providing detailed education about the survey process to the healthcare facility staff prior to the start of the survey. This is inappropriate because surveys are to be unannounced to prevent the facility from preparing for the survey. At the beginning of a survey, a brief entrance conference is held for the purpose of introducing the survey team, providing the survey agenda to the facility staff, and telling the facility what records the surveyors will be reviewing during the survey. However, providing detailed information about the survey process and what areas the AO is going to focus on during the survey gives the facility an advantage and time to prepare for the survey. This negates the purpose of requiring surveys to be unannounced and could allow the facility staff time to clean up and

remove deficiencies that would normally be present. In addition, providing such education to a health care facility prior to a survey could assist that facility in getting a better survey report.

We do not currently have any regulations that provide oversight of the fee-based consulting services provided by AOs or their separate divisions or companies. Likewise, we do not currently have any regulations that specifically require AOs that provide fee-based consulting services to have written firewall policies or regulations that provide requirements for such policies. Regulations are needed so that CMS may ensure that an AO's fee-based consulting remains separate from an AO's accreditation activities. This division is necessary to reduce the conflict on interest associated with the provision of AO fee-based consulting services.

7. Proposal To Prohibit AO Owners, Surveyors, and Other Employees From Involvement With the Survey and Accreditation Process for Health Care Facilities With Which They Have an Interest or Relationship (Proposed § 488.8(k))

Surveyors must rely on their professional judgment, in addition to federal rules and guidelines, to determine compliance. An AO surveyor, owner, or other employees' interest in or relationship with a health care facility that the AO accredits could present a conflict of interest that could affect the results of a survey in several ways. For example, an AO owner, surveyor, or other AO employee involved in the survey of a healthcare facility with which the individual has an interest or relationship could have compromised judgment, consciously or unconsciously, regarding that facility. For example, a surveyor with an interest in or relationship with the health care facility being surveyed could be inclined to minimize or ignore deficiencies, possibly because he or she believes these deficiencies are not representative of the facility. A surveyor who has an interest in or relationship with the facility being surveyed could possibly influence the findings made by other members of the survey team by asking them to give the facility credit for things not observed, since he or she can “vouch” for the facility.

Even if the AO employee with the interest in or relationship with the facility being surveyed is not part of the survey team for the facility, he or she could still potentially influence the members of the survey team prior to or after the survey. For example, attempting to influence the survey decision making process, or the AO's survey follow-up activities by attempting to discuss the facility with the survey team, such as explaining the facility's policies and procedures to the survey team, or even actively advocating on the facility's behalf, potentially influencing their analysis of observed survey results.

An AO surveyor, owner, or other employee that has an interest in or relationship with a health care facility the AO accredits might have additional motivation to improperly give that health care facility notice about the survey ahead of the scheduled survey date. Surveys are required to be unannounced to prevent the facility from preparing for the survey by activities such as unusual cleaning activities, painting, clearing obstructions from halls and entrances, covering up and hiding deficiencies, coaching staff, and otherwise preparing in advance for the survey. If the survey is unannounced, the health care facility is not able to make advance preparations so that the survey team is able to assess the facility in its usual condition and observe the typical standard of care provided.

We propose to add a new requirement at § 488.8(k)(1) to prohibit AOs from allowing AO owners, surveyors, or other employees from participating in the survey and accreditation process for health care facilities with which they have had an interest or relationship within the previous 2 years. At proposed § 488.8(k)(1) we would require that if an AO owner, surveyor or other employee has an interest in or relationship with a health care facility accredited by the AO, they would be prohibited from: (1) participating in the survey of that health care facility (proposed § 488.8(k)(1)(i)); (2) having input into the results of the survey and accreditation for that health care facility (proposed § 488.8(k)(1)(ii)); (3) having involvement with the pre- or post-survey activities for that health care facility (proposed § 488.8(k)(1)(iii)); or (4) having contact with or access to the records for the survey and accreditation of that health care facility (proposed § 488.8(k)(iv)). Proposed § 488.5(a)(10)(iii) lists proposed prohibited interests in or relationships with a health care facility accredited by the AO, which would include, but not be limited to, the following situations: (1) being employed as a SA surveyor; (2) being employed in a health care facility that is accredited by the AO; (3) having an ownership interest in a health care facility that is accredited by the AO; (4) serving as a director of or trustee for a health care facility that is accredited by the AO; (5) serving on a utilization review committee of a health care facility that is accredited by the AO; (6) accepting any fees or payments from a health care facility or group of health care facilities that is/are accredited by the AO; (7) accepting fees for personal services, contract services, referral services, or for furnishing supplies to a health care facility that is accredited by the AO; (8) providing consulting services to a health care facility that the AO accredits; (9) having members of an immediate family engaged in any of the above activities; or (10) engaging in any activities during the course of the survey of the facility that would be or cause a conflict of interest.

We propose at § 488.8(k)(2) to define the term “immediate family member” as any person that has a lineal familial or marital relationship with the AO owner, surveyor or other employee. Immediate family members would include a husband or wife, birth or adoptive parent, child, or sibling; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild. This definition is consistent with the definition used for the home health and hospice conflict of interest requirements. This definition is required for the purposes of § 488.8(k)(1), which states that a conflict of interest can also exist when an AO owner, surveyor or other employee has an interest in or relationship with a health care facility the AO accredits.

Allowing an AO owner, surveyor or other employee that has an interest in or relationship with a health care facility the AO accredits would not only be inappropriate but could result in inaccurate survey results and/or preferential treatment of the facility.

C. Proposal To Require the AOs That Accredit Medicare-Certified Providers and Suppliers To Use Medicare Conditions; and Strengthened Survey Process Comparability (Proposed § 488.4(a)(1) and (2))

Section 1865(a)(1) of the Act requires that if the Secretary finds that the requirements for accreditation from an accreditation organization demonstrates that a provider entity meets or exceeds all applicable conditions, the Secretary must deem such requirements to be met by the provider entity. However, the statutory language of “meets or exceeds” currently allows AOs to develop standards that are more stringent than those of Medicare. When an AO applies for “deeming authority”,

we determine whether those standards meet or exceed ours. In accordance with § 488.5(e), CMS publishes a proposed rule when CMS receives a complete application from a national accrediting organization seeking CMS's approval of an accreditation program. The proposed notice identifies the organization and the type of providers or suppliers to be covered by the accreditation program and provides 30 calendar days for the public to submit comments to CMS. CMS subsequently publishes a final notice, rendering its decision to either approve or disapprove a national accrediting organization's application, within 210 calendar days from the date CMS determines the AO's application was complete. The final notice outlines a summary of the findings of CMS's review and any corrective action which was required to be taken by the AO in order to be considered to meet or exceed our standards, or comparable survey processes. When CMS approves or reapproves an accrediting organization for deemed status, the approval may not exceed 6 years.

We are concerned that the current application review processes under § 488.5 does not go far enough. Some of our concerns with the efficacy of the AO application review process are based on the results of the initial and renewal applications and the SA findings, as noted below:

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AO Application Reviews:
Between 2017 to September 2021, we received a total of 22 AO applications for review. After review of these applications, we returned all 22 applications to the AOs because we found that the AOs' standards were not comparable to ours. AO most common standards requiring revisions to meet or exceed Medicare conditions included: governing body, physical environment, emergency preparedness patient rights, medical/clinica

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2024-02137. Public record. Not legal advice.