Regulation of Ambulatory Surgical Facilities

The Department of Health administers state and federal oversight programs for ambulatory surgical facilities (ASFs). These facilities provide outpatient surgical services such as general surgery, orthopaedics, plastic surgery, endoscopy, eye surgery, and others. Patients are admitted and discharged within 24 hours and do not require inpatient hospitalization.

State licensing program: DOH licenses and conducts routine surveys of 186 ambulatory surgical facilities

In 2009, the Legislature created state licensing requirements for ASFs, and required DOH to license and inspect them. Statute requires DOH to set license fees that will cover the full cost of this regulatory program. DOH establishes health and safety standards for ASFs and surveys (inspects) the facilities to determine whether they meet state regulations.

As of 2019, there are 186 licensed ambulatory surgical facilities (ASF) in Washington. To be licensed, all ASFs must undergo an initial state licensing survey and pay a license fee every three years. DOH conducts routine surveys of all ASFs after they are licensed.

Exhibit 1.1: There are 186 state-licensed ASFs in Washington

Source: JLARC analysis of DOH licensing data.

Federal certification program: DOH surveys ASFs that receive Medicare and Medicaid payments for eligible patients

Since 1985, DOH has had an agreement with the federal Centers for Medicare and Medicaid Services (CMS) to survey ASFs that participate in Medicare and Medicaid. CMS pays DOH to perform these surveys through a federal grant. The surveys include:

• An evaluation of whether the facilities meet federal standards.
• Written statements of deficiencies, if any deficiencies are found.
• Recommendations to CMS on whether or not a facility should be certified. CMS makes final certification decisions.

In 2019, there were 188 CMS-certified providers of ambulatory surgery in Washington. Of these, 130 meet the definition of an ambulatory surgical facility and are state licensed as ASFs. The other 58 include facilities such as office-based surgical practices or podiatry clinics regulated by state boards.

Exhibit 1.2: As of 2019, 130 facilities are both state licensed and CMS certified

Source: JLARC staff analysis of DOH licensing, CMS certification data.

The two programs have different funding sources

The state licensing program is funded through state license fees paid by each facility. The federal program is funded from a CMS grant to DOH, based on workload and cost estimates DOH submits to CMS in the preceding year.

DOH sets state licensing fees based on two criteria

State law requires DOH to fully fund its state oversight program from license fees. DOH establishes and updates fees in the Washington Administrative Code. Currently, ASF licensing fees range from $12,900- $27,200, depending on two criteria:

1. Is the facility state-licensed only or is it also CMS-certified or accredited from a professional organization? DOH assesses lower fees to ASFs that are also CMS-certified or accredited because these facilities are subject to less frequent state licensing surveys.

   • State-licensed only: DOH surveys these facilities to determine if they meet state regulatory standards.
   • CMS-certified: ASFs that are certified to meet federal Conditions for CoverageASFs must meet federal standards for governance, safety, quality, and facility to participate in Medicare and Medicaid. are permitted to accept Medicare or Medicaid payments for eligible patients. In addition to state licensing surveys, these facilities are subject to periodic CMS-certification surveys to determine if they meet federal standards.
   • Accredited: ASFs may elect to become accredited by a private accrediting organization (AO)The Joint Commission, the American Association for Accreditation of Ambulatory Surgery Facilities, and the Accreditation Association for Ambulatory Health Care.. In addition to state licensing surveys, these ASFs are also subject to periodic surveys by an AO to determine if they meet that organization's standards.

• Of the 186 state-licensed ASFs, 170 are CMS-certified, accredited, or both.

2. How many surgical procedures does the ASF perform each year? DOH scales its licensing fees based on the volume of procedures performed at a facility. DOH assesses higher fees for facilities that perform more procedures because the agency assumes facilities with higher volumes are larger and will require more resources to survey. It is unclear whether surgical procedure volume and the cost of performing a survey are meaningfully related.

Exhibit 1.3: ASF licensing fees are based on certification/accreditation status and annual surgical procedure volume

Source: WAC 246-330-199, JLARC analysis of DOH licensing data.

For CMS surveys, the federal government establishes priorities for surveying facilities and assigns complaint investigations and validation surveys to DOH. As long as it meets the federal criteria below, DOH may select which facilities to survey, based on its judgment of risk at the facilities.

• Investigations of complaints to CMS that represent immediate patient risk.
• Validation surveysThese surveys are performed after a facility receives an accreditation survey in order to validate the findings and ensure any deficiencies were identified. of a sample of facilities that maintain their CMS certification through an accrediting organization.
• Surveying 25 percent of facilities that maintain their certification through state oversight each year, and each facility at least once every 6 years.
• Complaint investigations that do not pose an immediate patient risk.
• Initial certification surveys. Facilities typically gain their CMS certifications through a survey by an accrediting organization rather than DOH.

DOH has performed fewer state licensing surveys on average than federal surveys

The primary cost driver for both survey programs is staffing, including inspectors, managers, and administrative staff. The state licensing program has had greater fluctuations in revenue and staffing than the federal program, resulting in fewer surveys performed in more recent years. In contrast, the CMS program has maintained steady funding and staffing levels and performed a more consistent number of surveys each year.

Between fiscal year 2013 and fiscal year 2019:

• DOH's state licensing program spent an average of $398,000 annually, and 1.2 inspector FTEs surveyed an average of 29 ASFs per year.
• DOH's CMS-funded program spent an average of $563,000 annually, and 2.4 inspector FTEs surveyed an average of 44 facilities per year.

Exhibit 1.4: The average number of state licensing surveys declined between FY17 and FY19

Source: JLARC staff analysis of DOH survey data.

State program includes cost of credentialing activities in addition to survey costs

It is difficult to directly compare the costs of the state licensing program and the CMS certification programs due to some differences in program structure. The state licensing program performs activities that are not directly associated with survey work. These include collecting license fees and paying the legal costs associated with enforcement activities.  In contrast, DOH does not perform these types of activities for the federal program so they are not reflected in DOH’s federally funded program costs.

​Despite these differences, from fiscal year 2013 through fiscal year 2019, the program costs per survey for the two programs were similar, averaging $13,700 for the state program and $12,600 for the federal program.

This changed, beginning in fiscal year 2017, when the costs per state licensing survey increased as a result of several factors:

• The primary reason is the reduction in inspector staff to an average of 0.7 FTE, which resulted in fewer surveys performed. The program's fixed costs, including the costs of management, credentialing, and administrative staff, were distributed across a smaller number of surveys, causing the cost per survey to rise.
• Beginning in fiscal year 2018, all inspector salaries increased by 27 percent in response to a collective bargaining agreement.
• The program had several unanticipated cost increases, such as attorney general costs related to enforcement activities and public records requests.

DOH is meeting the federal priorities for certification surveys, but it is not meeting its own goals for the state licensing program

CMS sets priorities for surveying facilities that participate in Medicare and Medicaid. DOH has met the federal priorities. However, DOH is not meeting its own goals for the state licensing program. See Sections 3 through 5 for more details.

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State and federal surveys of ambulatory surgical facilities (ASFs) cover regulations of similar scope, are performed by the same types of DOH staff positions, and take approximately the same amount of time to complete.

State and federal surveys are similar in scope even though they assess different sets of regulations

JLARC staff worked with a consulting firm specializing in health policy and regulatory compliance to review state and federal regulations of ambulatory surgery. State licensing surveys and CMS-certification surveys inspect ASFs against different sets of regulations that cover similar topics.

• State regulations are established in the Washington Administrative Code and generally require ASFs to implement policies that satisfy the provisions of the regulations.
• Federal regulations are called Conditions for Coverage, and are established in the Code of Federal Regulations. They require facilities to follow specific practices, often according to recognized standards of care. One of the Conditions for Coverage requires that federally certified facilities also comply with state and local regulations, adding to the similarity between the two survey types.

Exhibit 2.1: How state licensing and federal certification surveys compare

Source: JLARC staff and independent contractor analysis of DOH and CMS regulations.
*DOH staff that perform state and federal surveys must have the same professional qualifications and training.

Licensing and certification surveys follow the same structured process

State licensing and federal CMS certification surveys follow the same survey process based on steps developed by CMS:

• Off-site survey preparation. This includes reviewing materials specific to each facility such as previous survey reports.
• Entrance activities. Surveyors meet with the ASF staff on-site to explain the survey process.
• Information gathering/investigation. Surveyors observe facility practices and patient care, starting from patient check in through surgeries or other medical procedures and ending with patient discharge. Surveyors also tour the facilities, interview staff, and review infection control programs, quality assurance and performance improvement programs, facility policies and human resources records.
• Preliminary decision-making and analysis of findings. Surveyors review and analyze all information collected from observations, interviews, and record reviews and determine findings.
• Exit conference. At the end of the on-site portion of the survey, the inspector meets with ASF staff to discuss any preliminary findings and next steps.
• Post-survey activities. Inspectors communicate official survey findings to the ASF in a statement of deficiencies (SOD). After the facility receives the SOD, the ASF writes a plan of correction that DOH or CMS must approve. SODs for state licensing and CMS certification surveys are similar in content and appearance.

State licensing surveys take less time to conduct than CMS surveys

CMS requires DOH staff to track the length of time it takes to conduct CMS certification surveys. DOH also records this data for state licensing surveys. Based on data recorded between fiscal years 2011 and 2019, state licensing surveys have taken, on average, less time than CMS certification surveys.

One factor that contributes to this difference in survey length is the relative prevalence of revisits for CMS surveys. Usually DOH can complete a survey by making only one on-site visit. However, in some cases, a survey may require subsequent revisits to an ASF before the survey is complete. For federal surveys, CMS orders any such revisits to take place based on the deficiencies found. When revisits are included with the first visit times, the average survey length increases.

Exhibit 2.2 shows average survey lengths for first visits and for first visits combined with survey revisits. During the time period analyzed, 40 percent of CMS survey visits were revisits, compared with 3 percent for state licensing surveys.

Another contributing factor may be the difference in the scope of each survey. State licensing surveys review compliance with state regulations only, and DOH may limit the scope to high-risk regulatory areas or areas of past noncompliance. By contrast, CMS surveys must review compliance with all the federal Conditions for Coverage as well as state regulations.

JLARC staff also compared the length of CMS surveys in Washington to other states. While the results were comparable, the surveys themselves may not be. Federal regulations require certification surveys to cover state and local regulations, and these can vary in complexity from state to state.

Exhibit 2.2: State surveys are shorter in length than CMS surveys. CMS surveys in Washington are similar in length to other states.

Source: JLARC staff analysis of DOH and CMS 670 report data for Washington and 15 peer states for fiscal years 2011-2019.

DOH is making efforts to reduce the length of ASF surveys

DOH has documented and communicated several steps it is taking to reduce its average survey time. Although these efforts are underway, they are not yet fully implemented and their impact on survey length is not yet known.

• DOH is piloting what it terms "focused surveys" where the scope is limited to areas of past noncompliance, high-risk regulatory areas such as infection control, and to regulatory areas that may have changed since the facility's last state licensing survey. By focusing on a narrower set of regulations, DOH intends to reduce total survey time. Violations of regulatory areas that are outside the focused scope may still be cited.
• DOH aims to schedule surveys of multiple facilities when significant travel is required. This allows the department to share travel time and costs across multiple surveys. DOH also prepares contingencies in the event an ASF is closed or not performing surgical procedures on the planned survey day.
• Historically, ASF survey staff have been located in Tumwater. DOH is relocating its survey staff to its satellite office in Kent, which is closer to the majority of ASFs, and which could minimize survey staff travel time.

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DOH has chosen a state licensing survey frequency goal that is the shortest interval allowed by law. The agency has never met its goal.

From 2009 through 2015, statute set a minimum required frequency for routine licensing surveys: all state-licensed ASFs had to be surveyed once every 18 months. If an ASF was also CMS-certified or accredited, those respective surveys could replace one state licensing survey every three years. 

In 2016, the Legislature amended statute to set a maximum allowable frequency for routine licensing surveys: state-licensed only ASFs can be surveyed no more than once every 18 months and CMS-certified or accredited facilities can be surveyed no more than once every 36 months. DOH has not updated agency rules to reflect this statutory change.

Though it is no longer required, DOH's survey frequency goal is the shortest interval allowed by law: once every 18 months for state-licensed only facilities and once every 36 months for CMS-certified or accredited facilities.

To meet this goal, DOH would need to conduct 77 licensing surveys per year for the 186 state-licensed ASFs in Washington, which would include 67 routine surveys, as well as 8 initial licensing surveys and 2 complaint investigations.

The number of DOH state licensing inspectors has declined over time

JLARC staff analysis of DOH payroll data shows the department has not maintained a level of inspector staffing that would allow it to meet its survey frequency goal. DOH estimates it would need 2.1 Nursing Consultant Institutional (NCI) FTEs to meet its goal, but the program has only reached this staffing level once, in fiscal year 2014. From fiscal years 2017 through 2019, the department’s inspection staff declined from 1.2 FTE to 0.3 FTE.

Exhibit 3.1: The number of ASF inspectors decreased after fiscal year 2016

Source: JLARC staff analysis of DOH payroll data.

From fiscal year 2013 through fiscal year 2016, DOH performed an average of 44 licensing surveys per year. The number of surveys declined in fiscal years 2017 through 2019 to an average of 9 surveys per year. This decline coincides with the decline in staffing.

Exhibit 3.2: DOH went from an average of 44 surveys per year to an average of 9 surveys

Source: JLARC analysis of DOH survey data.

71 percent of ASFs are more than a year past due for a routine state licensing survey

DOH has a backlog of surveys because it has consistently performed fewer routine surveys than its frequency goal.

Exhibit 3.3: As of March 2020, 18% of facilities have been surveyed on time and the rest are past due

Note: Percentages may not sum to totals due to rounding.
Source: JLARC staff analysis of DOH survey backlog estimate.

These backlog estimates reflect the amount of time that DOH is past due in performing a state licensing survey. However, many of these facilities are also subject to CMS certification or accreditation surveys and may have received those surveys in the interim. DOH has historically met CMS performance targets for certification surveys.

DOH bases its survey goal on previous statutory requirements and its survey schedule for acute care hospitals

DOH has flexibility in setting its survey frequency goal within the maximum frequency limits allowed by state law. However, in the agency's legislative reports and communications with JLARC staff, DOH asserts that surveying facilities as frequently as allowed is in the interest of patient safety.  

DOH's survey frequency varies by type of medical facility

DOH reports its current frequency goal is based on the original ASF survey frequency established by the Legislature and the survey frequency for acute care hospitals. These facilities are inspected once every 18 or 36 months, depending on their certification and accreditation status.  DOH's survey schedules for other types of medical facilities range from unscheduled visits to one survey every 36 months.

Exhibit 3.4: Survey frequencies of other DOH-licensed medical facilities range from unspecified to every 36 months

Source: JLARC staff analysis of Washington Administrative Code.

Other organizations and states survey ASFs on different schedules

Surveys performed by different organizations and other states may not be directly comparable to DOH's surveys. For example, an entity that surveys facilities annually may conduct a narrow review and require fewer resources than more extensive surveys that occur less frequently. However, the survey schedules used by other entities can provide some context for DOH's survey frequency goals.

• The three accrediting organizations that accredit ASFs in Washington require accreditation surveys every three years.
• CMS requires DOH to perform certification surveys of 25 percent of facilities that maintain their certification through state oversight each year. Over time, this equates to an average frequency of one survey every four years.
• Surveys of 21 other states conducted by DOH and JLARC staff's consultant found that survey frequency ranged from every year to once every four years.

DOH's survey frequency goal is not based on a demonstrated link between surveys and patient safety

DOH reports that its survey frequency goal is consistent with its general experience conducting surveys and feedback from other states.

• During the 2015-2017 biennium, DOH asserts that 68 percent of CMS certification surveys found condition-level violationsMore severe issues, indicating a facility is out of compliance with one of the federal conditions for coverage.. The department expressed concern that similar patterns of noncompliance may occur in ASFs not subject to CMS certification surveys and that this creates the potential for patient harm.
• DOH cites outreach to other state ASF regulatory programs in concluding that frequent surveys encourage compliance.

So far, DOH has not cited any research that supports its frequency goal or identifies an optimal interval between surveys. Additionally, DOH's own experience with surveying facilities more than once is limited to 20 facilities. On average, the interval between these surveys was 4.7 years and ranged from under 2 years to 7 years. This sample size does not provide strong support for or against the department's goal for more frequent surveys.

While survey frequency has fluctuated, the number of reported adverse events at ASFs has trended downward

ASFs must report adverse events 29 serious reportable events which medical facilities are required to report to DOH. to DOH within 48 hours of their occurrence. Adverse events are organized into 7 categories, including negative situations related to surgical or invasive procedures, products or devices, patient protection, and the environment.

Although DOH performed fewer surveys in recent years, the number of reported adverse events did not increase. JLARC staff do not assert a causal relationship between the department's survey frequency and the frequency with which adverse events occur or are reported.

From fiscal year 2013 through fiscal year 2019, the ASFs reported an average of 11 adverse events per year. The most commonly reported adverse events during this period were:

• Wrong surgery/invasive procedure site (31 events, 4.4 per year).
• Unintended retention of foreign object (12 events, 1.7 per year).
• Wrong surgical/invasive procedure (12 events, 1.7 per year).

Exhibit 3.5: Adverse events reported at ASFs have trended downward during fiscal years 2013-2019

Source: JLARC analysis of DOH adverse event data.

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Inaccurate and incomplete data in its state licensing and survey database may inhibit DOH's ability to prioritize licensing surveys of ASFs.

DOH uses state and federal data systems to maintain licensing and survey data

The state's ILRS database tracks state licensing and survey data

The Integrated Licensing and Regulatory System (ILRS) is DOH's main database for recording state ASF licensing information. The department's inspection staff enter data into ILRS. Until 2016, ILRS included data on each state licensing survey as well as federal CMS and accreditation surveys. After 2016, the department stopped entering certification and accreditation survey information into ILRS.

The federal ASPEN database tracks CMS certification, accreditation, and survey data

DOH uses the federal Automated Survey Processing Environment (ASPEN) database to record information on its surveys of CMS-certified and accredited ASFs. The department also uses the system to draft Statement of Deficiency reports for both its CMS-funded and state licensing surveys.

DOH uses multiple data sources to develop a prioritized schedule for surveying ASFs

DOH schedules state licensing surveys based on a priority list of licensed ASFs. It ranks facilities based on the amount of time elapsed since their last survey. To determine this, DOH manually creates a priority list using data from ILRS, ASPEN, accreditation organization websites, and individual ASFs. DOH gives highest priority to ASFs that have gone the longest since their last survey. The accuracy of its prioritized list depends largely on the quality of the data entered into its systems.

Data inaccuracies in ILRS could limit DOH's ability to ensure ASFs are surveyed in the highest priority order

JLARC staff reviewed ILRS data and identified missing and inaccurate records. Staff identified 31 instances of facilities with active licenses that do not appear in ILRS survey records. Some of these are due to errors that could result in a facility's incorrect placement on DOH's prioritized list for survey visits. These 31 instances include:

• 19 facilities where a change in ownership resulted in missing historical data on credential status. DOH assigns a new credential number when an ASF changes ownership and ILRS does not link that new number to the ASF's previous credential history. While DOH indicated that change of ownership status can be manually reviewed in notes appended to the facility's ILRS record, this creates a potential risk that a facility will be incorrectly ranked on DOH's priority list for surveys.
• 3 ASFs that did not appear in ILRS because their survey records were not complete, although DOH had performed the on-site portion of the survey. One of these facilities had been licensed since 2009 and did not receive its first state licensing survey until 2019.
• 4 ASFs that did not appear in the ILRS survey data due to other data entry errors.
• 4 ASFs that did not appear in the survey record, but DOH reports that surveys were completed. DOH staff could not locate the associated Statements of Deficiencies for these facilities in either ILRS or ASPEN.
• 1 facility licensed since 2009 has never had a routine state licensing survey.

In addition to the above issues with ILRS records, during this review DOH identified at least 19 instances of CMS surveys incorrectly labeled as state licensing surveys. DOH states this issue appears to be isolated to a former survey staff member, but the department has not confirmed whether it has identified all instances of CMS surveys incorrectly labeled in ILRS as state licensing surveys.

New data system will replace ILRS in several years

DOH has stated that ILRS will be replaced by a new system, the Healthcare Enforcement and Licensing Modernization Solution (HELMS). Implementation of the new system is still several years out, but DOH hopes the new system will have functionality that allows it to track credential numbers across changes in ownership and minimize other data errors. This update also provides DOH an opportunity to develop business practices that minimize data entry issues and other inaccuracies.

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