History of SSA During the Johnson Administration 1963-1968


In establishing health and safety standards for participating providers under the provisions of the law and in applying these standards, the Department took into account both the nature and event of health services available to beneficiaries in various parts of the country and the need to support contemporary standards of quality and provide maximum impetus to the upgrading of these standards. Excessively high standards would limit beneficiary access to needed care. However, relatively low standards could not have been accepted under a program of so vast a scope as Medicare without undesirable effects on the quality of health services provided to people of all ages throughout the country.

Conditions of Participation

The formulation of the conditions of participation for hospitals, extended care facilities, home health agencies, and independent laboratories was begun by a joint task force drawn from the Public Health Service, the Social Security Administration, and the Social and Rehabilitation Service (formerly the Welfare Administration). This task force studied State licensing requirements for health institutions and, where they existed, standards in use by national organizations such as the American Hospital Association, Joint Commission on Accreditation of Hospitals, American Osteopathic Association, and the National Council for the Accreditation of Nursing Homes. The task force consulted with organizations and experts in medicine, nursing, and related fields.

Based on its own studies and consultation with interested organizations, the task force developed draft conditions of participation for hospitals, extended care facilities, home health agencies, and for the coverage of the services of independent laboratories and submitted each set of draft conditions to a special work group of non-government consultants convened to offer expert advice. The consultant work groups included representatives of the American Medical Association, the American Hospital Association, the American Nurses' Association, the American Nursing Home Association, Blue Cross and other insurers, the Joint Commission on Accreditation of Hospitals, State health and welfare administrators, and directors of various extended care facilities; and hospitals. The comments of these groups were reviewed by the task force and carefully considered in the preparation of the draft conditions of participation which were submitted to the Health Insurance Benefits Advisory Council for review.

Following review and approval by the Health Insurance Benefits Advisory Council, the draft conditions were published in booklet form and distributed to all institutions identified as possible participants and to the State agencies which would survey facilities applying to determine if they met the conditions of participation. The release of the draft conditions permitted institutions wishing to participate to consider whether changes would have to be made in their physical plants, staffing patterns, etc., in. order to participate.

Proposed regulations incorporating the condition of participation for hospitals were published in the Federal Register on February 15, 1966, and for home health agencies and extended care facilities on May 14, 1966. Proposed regulations covering conditions for coverage of independent laboratories' services were published on June 22, 1966.

Comments were made by many interested organizations, institutions, and individuals. Many of the suggestions went to very basic questions which required thorough analysis before they could be properly resolved. In many instances, a series of communications with the commentators was required to satisfactorily resolve the issues raised. A number of meetings were also held with representatives of the health care industry to discuss these issues. Every effort was made to give full and careful consideration to all comments.

The conditions of participation for hospitals were published as final regulations on October 18, 1966. The conditions for coverage of services of independent laboratories were published as final regulations on
December 16, 1966. The conditions of participation for extended care facilities--whose services were covered starting January 1, 1967--were published as final regulations on October 28, 1967. The conditions of
participation for home health agencies were published as final regulations August 1968. These regulations are based on careful evaluation and reevaluation by all interested parties and represent the best professional and administrative ,judgments about the conditions that should appropriately be required of institutions; seeking to participate in the Medicare program.

Certification as Providers

Health facilities are certified to participate in Medicare if they are in "substantial compliance" with the conditions of participation--that is, if they can be found to meet all of the specific statutory requirements, and if they are operating in accordance with all other health and safety conditions of participation without any serious deficiencies. Hospitals accredited by the Joint Commission on Accreditation of Hospitals or the American Osteopathic Association are deemed to meet all of the conditions of participation, except for the utilization review requirement.{28} Hospitals not so accredited, extended care facilities, home health agencies, and independent laboratories must be found to meet the conditions by the State agencies that survey such facilities
on behalf of the program.

Providers of services which have deficiencies in one or more of the conditions of participation may nevertheless be found to be in substantial compliance if the deficiency: (1) does not involve failure to meet a specific statutory requirement, (2) does not interfere with adequate patient care, (3) does not represent a hazard to patient health or safety, and (4) is one which the institution is making reasonable plans and efforts to correct. Consultative services are made available by the State agencies to help providers complete their plans for correcting all deficiencies.

The regulations provide that the initial certifications of hospitals and home health agencies found to be in substantial compliance are for a period of 2 years. If deficiencies in one or more of the conditions are found on initial survey, a resurvey must be made by the State agency within 18 months, or earlier, depending on the nature of the deficiencies. The regulations provide that extended care facilities and independent laboratories must be recertified after a period of one year, or, if deficiencies were detected on the initial survey, within nine months.

If a provider is surveyed or resurveyed and is determined not to be in compliance, or no longer in compliance with the conditions of participation., the State agency will inform the Social Security Administration of this fact. The Social Security Administration, in turn, will act on the State agency's finding--terminating the provider's contract, if appropriate. If the provider disagrees with the Administration's decision, it may request a review of the decision, and will be afforded an administrative review of the determination by the Social Security Administration.

Where denial of participation to providers would seriously limit the access of beneficiaries to needed services because of such factors as isolated location or the absence of sufficient facilities in an area, the institution may, upon recommendation of the State agency, be approved as a provider of services. Such approvals are granted only where the institution has no deficiencies which would jeopardize the health and safety of patients and is making the test use of existing resources to improve its services. Such special certification was not extended to tuberculosis or psychiatric hospitals or to independent laboratories.

Hospitals and home health agencies with these special certifications are resurveyed within 12 months, or sooner if the State agency believes it appropriate. If, on resurvey, it is determined that the provider has not corrected serious deficiencies and that the factor of limited access no longer applies, the provider's participation is terminated. Most of the institutions which were granted such special certifications have been cooperating with State agencies to effect needed improvements in their services and have made considerable progress toward eliminating the problems which stood in the way of their being found in substantial compliance with the conditions of participation.

Certification of Hospitals

The process of bringing hospitals into the program began with the mailing of a general informational pamphlet and a question-and-answer booklet to 10,000 institutions. By January 1966, the State agencies had narrowed the number of institutions which might meet the statutory definition of a hospital to about 8,000 institutions then in existence. In February 1966 applications were sent through the State agencies to these 8,000 institutions for their use in requesting participation in the hospital insurance part of the program. Over 90 percent of these institutions applied for participation and the State agencies, working closely with the social security regional offices and the Public Health Service, began the intensive effort that was required to determine hospital eligibility for participation in the program. This involved reviewing applications, conducting onsite surveys, and consulting with many institutions to help them take corrective action necessary to meet the conditions of participation. It also required the evaluation of more than 7,000 utilization review plans submitted by hospitals, including the approximately 3,800 hospitals then accredited by either the Joint Commission on Accreditation of Hospitals or the American Osteopathic Association. Shortly before July 1, 1966, special arrangements were set up for interdepartmental coordination to assure availability of beds in Federal hospitals, including armed forces, Public Health Service, and Veterans Administration hospitals in the event a shortage of participating beds should develop at the start of Medicare operations; and a referral center for Medicare emergency cases was established in the office of the Surgeon General, Public Health Service.

By July 1, 1966, over 6,200 hospitals had been certified as eligible to participate in the program. By the end of the second year of operations, an additional 700 hospitals had been.certified to participate in the program, bringing the total to almost 6,900 hospitals, representing approximately 1.2 million beds. While the 6,400 participating general hospitals constitute about 93 percent of the total, their 823,000 beds are only 71 percent of the total in hospitals certified to participate in Medicare. The other 7 percent of the participating hospitals are psychiatric and tuberculosis institutions, having a combined total of 343,000 beds. {29} Approximately 2,300 hospitals were certified with deficiencies; of these, about 600 were granted special certification to assure beneficiary access and require special attention by the State agencies to insure that the hospitals correct deficiencies.
As of July 31, 1968, an additional 760 hospitals, though not participating in the program on a regular basis, met special requirements for coverage of emergency services. The large increase in these hospitals resulted from a section of the 1967 amendments which made it possible for many hospitals heretofore ineligible to render reimbursable emergency service.

Certification of Extended Care Facilities

To assure that interested institutions would have an opportunity to qualify for participation by the January 1967 effective date for the coverage of extended care services, State agencies mailed applications to over 13,000 nursing homes in mid-1966. They began immediately to make follow-up contact to provide advice and assistance to facilities which needed help in meeting the conditions of participation. By December 1966, nearly 6,000 facilities had filed applications, onsite surveys were being completed, and the other steps in the certification process were well underway.

Many nursing homes had to make substantial changes and. improvements in order to be in position to provide the relatively intensive, short-term services covered under Medicare. Most nursing homes, for example, had to develop written patient care policies; almost all had to negotiate transfer agreements with hospitals and to develop utilization review plans. Frequently, these facilities also lacked professional direction of one or more of the services offered by the institution, and arrangements had to be made for regular consultation by qualified dietitians, pharmacists, social workers, and others. The shortage of nursing personnel posed problems for many institutions. For that reason, the guidelines for certification permitted, in some instances, temporary conditional certification of facilities which were found to be deficient in meeting the requirement that they have at least one registered professional nurse or qualified licensed practical nurse (a graduate of a State-approved school of practical nursing) on duty at all times and in charge of nursing activities during each tour ofduty. {30}

By January 1, l967, when the extended care benefit provisions went into effect, approximately 2,800 facilities were in substantial compliance with the conditions of participation; and over the nation the number of participating extended care facilities was reasonably adequate. However, there were States and geographical areas within states where extended care beds were in short supply. State agencies turned their attention to identifying areas with such shortages and assisting institutions which had the potential for meeting Medicare standards to upgrade their facilities and services. By July 31, 1968, as a result of the assistance provided by the State agencies, an additional 2,000 facilities had been approved for participation. This brought the total number of participating extended care facilities to 4,800. {31}

Certification of Home Health Agencies

In 1965, when the Medicare law was enacted, it seemed unlikely that the existing home health services in the country would be adequate to assure the availability of covered services. Many agencies providing nursing service in the home were concentrated in large metropolitan areas, and a large number of these were not then providing at least one therapeutic service in addition to nursing, as is required by law.

Assisted by Public Health Service special grant funds and consultation; State health departments launched an intensive drive to stimulate the establishment of new agencies and the expansion and strengthening of existing ones. Through this effort, approximately 1,200 agencies were able to qualify for participation by July 1, 1966. Continued efforts by State agencies after July 1 led to the certification of some 900 additional agencies {32} by July 31, 1968, bringing the total to approximately 2,100, about 60 percent of which are subdivisions of local public healthdepartments. {33} Many areas are still not served by a participating home health agency. Available home health services have been under-utilized in other areas and, in those areas, some participating agencies have experienced financial difficulties. State agencies and the Department of Health, Education, and Welfare have assisted such agencies financially and by disseminating information on the availability of their services.

Certification of Independent Laboratories

The proposed regulations embodying the conditions for coverage of the sercices of independent laboratories were published on June 22, 1966. However, it was not considered desirable to finally certify laboratories until the regulations had been issued. Therefore, an interim arrangement was established to permit payment for services rendered until July 15, 1967, by apparently qualified laboratories. When formal certification activities began in December 1966, State agencies had to survey more than 2,700 laboratories which had submitted applications. By July 1968, almost 2,600 of these had been approved for participation.{34}

Following completion of most of the initial certifications, State agencies, along with the Social Security Administration and the National Communicable Disease Center of the Public Health Service, began addressing themselves to the question of the eligibility of the approximately 400 laboratories whose directors did not have the educational requirements specified in the regulations. Under the regulations, these laboratories had an interim approval until July 31, 1967. After that date, they could qualify only by substituting, for specified education requirements, successful participation by the director in a Public Health Service approved examination. By the end of the first year of operation, these examinations were being administered throughout the country. {35}

Utilization Review of Hospital and Extended Care Services

The purpose of Medicare's utilization review requirement for hospitals and extended care facilities is to promote the most efficient use of available services and facilities.

To participate in Medicare, a hospital or extended care facility must have in effect a utilization review plan which provides for (1) the review, on a sample or other basis, of the medical necessity for inpatient admissions, the length of stay, and the professional services furnished and (2) the review of each long-stay case (that is, a case of continuous extended duration) within a week of the last day of the period of extended duration by a staff committee of the institution, or an outside group, whose membership includes at least two physicians and may include other professional personnel.

The health care professions had recognized for some time the need for mechanisms which would assure quality care to patients through sound utilization of institutional facilities and professional services. As a result, the concept of utilization review as a function of the professional medical community has received increasingly widespread support over the years. Before Medicare, however, only about 1,000 hospitals had utilization review committees. Today, all of the almost 7,000 hospitals and 4,800 extended care facilities participating in the. program have utilization review committees.

While the establishment of these utilization review committees is, in itself, an important impetus to efficient and appropriate utilization of health facilities, much remains to be done in assuring that the full potential of utilization review is realized. Recognizing the inexperience of many providers in the area of utilization review, the Social Security Administration has undertaken a number of projects to promote understanding of the objectives of utilization review and uniformity in its application. Instructions have been issued to all State agencies and fiscal intermediaries outlining their respective roles in assessing the effectiveness of utilization review activities in participating providers. In April 1967, officials of the State agencies were brought to Baltimore to attend a conference, part of which was devoted to a discussion of State agency utilization review activities. Similar discussions were held with hospital insurance intermediaries at Social Security Administration regional offices in the fall of 1967. Since that time, the Social Security Administration has continued to work closely with State agencies and intermediaries to assure effective utilization review in participating hospitals and extended care facilities. As part of this effort, the State agencies are to obtain detailed information about the composition and functioning of utilization review committees and the positive effects the committees have on utilization of services.

Applicability of Title VI of the Civil Rights Act

In addition to meeting the quality standaxds established under the health insurance legislation, hospitals, extended care facilities, and home health agencies wishing to participate in the Medicare program must be in compliance with title VI of the Civil Rights Act of 1964. In its application to Medicare, the Civil Rights Act requires that hospitals, nursing homes, and other institutions participating in the program must provide access to their services and facilities without regard to the race, color, or national origin of a patient; that ancillary services and facilities be equally available to all people, and that the staff be recruited and employed in a nondiscriminatory manner. To meet these requirements of law, an institution must engage in no discrimination, separation, orother distinction on the basis of race, color, or national origin in providing services, facilities, or any other activities which influence
the admission, care, or treatment of patients.

Every effort, including enlisting the aid of professional groups and other organizations, has been made by the Department of Health, Education, and Welfare to secure voluntary compliance of institutions with the civil rights requirements. Almost all of the hospitals and extended care facilities which applied to participate are now in compliance with the civil rights requirements. As of July 31, 1967, approximately 55 hospitals that had been determined to meet the other conditions of participation were not participating because they did not have clearance under title VI of the Civil Rights Act. Roughly 100 additional hospitals that probably could meet Medicare standards had not applied for participation due to the civil rights requirements. By June 30, 1967, fewer than 20 extended care facilities that had submitted complete applications to participate were not participating in the program because of failure to comply with the civil rights requirements. Eighty additional facilities had not yet submitted all of the information asked of applying institutions, so that determinations of their civil rights status were still pending.

A number of extended care facilities meeting the conditions of participation have not applied for various reasons. In some cases, they are filled and have long waiting lists of patients seeking admission so that there is little inducement for them to participate if they think reimbursement under Medicare is more restrictive than the reimbursement they might otherwise obtain. And, of course, still other potentially eligible extended care facilities have not applied because of reservations about the civil rights requirements. Because there are such varied reasons for extended care facilities not having applied for participation in the program, it is difficult to determine what effect the civil rights requirements have had on the decision of otherwise eligible facilities to decline participation in the Medicare program..

There have been no indications that the civil rights requirements had significant effect on the participation of home health agencies in the Medicare program.

Footnotes (Footnote numbers not same as in the printed version)

{28} By statute, a hospital accredited by the Joint-Commission on Accreditation of Hospitals is automatically eligible to participate if it meets the utilization review requirement. The law also provides that, if the Secretary finds that accreditation by the American Osteopathic Association or any other national accreditation body gives reasonable assurance that any or all of the conditions of participation are met, he may treat any institution or agency so-accredited as meeting those conditions of participation. The Secretary has, by regulation, recognized the ADA accreditation program for hospitals surveyed after March 1966, or under new standards which the AOA released in November 1965.

{29} A table showing the number of participating hospitals and beds in each State as of July 1968 appears in Appendix C, Exhibit 1.

{30} Such conditional certification of extended care facilities expired on Aril 1, 1968. Of the 250 facilities originally granted such conditional certification, over 200 now meet the requirements for regular certification; others have withdrawn as providers or have had their participation terminated.

{31} A table showing the distribution of participating extended care facilities by State as of July 1968, appears in Appendix C, Exhibit 2.

{32} Includes some 400 subunits of eight State health departments which had not previously been certified as separate agencies.

{33} A table showing the distribution of participating home health agencies by State as of July 1968, appears in Appendix C, Exhibit 2.

{34} Their distribution by State as of July 1968 is reflected in Appendix C, Exhibit 3.

{35} Regulations provide for continued approval of directors who lack the specified educational requirements, based upon successful participation by their laboratories in State-operated or State-approved programs of proficiency testing.