Report 2000-122 Summary - October 2000

Department of Health Services: A Conflict of Interest Did Not Cause the Fresno District's Inadequate Oversight of Skilled Nursing Facilities

RESULTS IN BRIEF

Allegations that the district administrator (administrator) at the Fresno district office (FDO) of the Department of Health Services' (department) Licensing and Certification Program (program) gave preferential treatment to certain skilled nursing facilities because of a perceived conflict of interest prompted the Legislature's request for this audit. The program, designed to ensure that skilled nursing facilities are operating in ways that protect residents' health and safety, is responsible for periodically inspecting facilities and for investigating complaints. The administrator in question has parents who live in a skilled nursing facility owned by Mission Medical Enterprises, Inc., and some members of the public became concerned that she had been inappropriately lenient in her oversight of that facility and one of three other facilities owned by the same company in her district.

However, we found no evidence suggesting that the administrator had improperly affected decisions concerning these four skilled nursing facilities. In fact, the administrator took prompt action to ensure that she removed herself from any potential perceived conflict of interest by seeking legal advice and delegating responsibility for those facilities to a senior supervisor in the FDO. Although the administrator did at one point inappropriately review a proposed citation, we found no evidence that the FDO treated the skilled nursing facilities owned by Mission Medical Enterprises more leniently than the other facilities it monitors.

As a result of public concerns about the administrator's perceived conflict of interest, the department transferred responsibility for monitoring the four skilled nursing facilities to the program's San Bernardino district office in June 2000. However, the department has been slow to implement the recommendation of the department's legal counsel that it expand its conflict-of-interest policies by adopting an impairment policy (a specific type of conflict-of-interest policy aimed at preventing biased decisions) to identify and prevent other potential conflicts of interest among its managers and employees.

Although we concluded that the four skilled nursing facilities owned by Mission Medical Enterprises did not receive special treatment, we did find that overall the FDO did not always adequately safeguard the welfare of residents at the skilled nursing facilities it oversees. For example, two top program managers at the central office in Sacramento agreed that, in 4 of the 19 citations we reviewed, the FDO issued citations that were at a level lower than what was appropriate given the seriousness of the violations. In one instance, despite the fact that a resident's death was involved, the FDO staff did not exercise prudence by seeking opinions from medical consultants or other experts who likely would have recommended a higher-level citation. In addition, the FDO did not always assign the appropriate priority to complaints, nor did it always ensure that its staff investigated complaints promptly.

RECOMMENDATIONS

To ensure that no perception of a conflict of interest arises, the FDO's district administrator should not participate in or review any district office activities related to skilled nursing facilities owned by Mission Medical Enterprises, Inc.

The department should follow the advice of its legal counsel to expand its existing conflict-of-interest policies by adopting an impairment policy that will ensure that all employees and managers can readily identify and avoid the appearance of bias and impropriety in their assessments of health care facilities.

To ensure that complaints are prioritized consistently and accurately, investigations are initiated and completed timely, and citations are issued at the appropriate level, the department should provide more detailed guidance to its Licensing and Certification Program's staff, and ensure that they meet all program requirements.

Finally, to ensure that the program's performance is consistently high throughout the State, the department should review the complaint and citation practices at each of its program's district offices and provide additional training, if necessary.

AGENCY COMMENTS

The department concurs with some of our conclusions and recommendations and disagrees with others. In particular, it acknowledges the need for more detailed guidance on the complaint and citation processes and states that it is updating its policies and procedures in these areas and recently provided extensive training for all evaluators. Additionally, the department states that in December 1999 it established standards for prioritizing complaints, classifying citations, and timeliness of complaint investigations. However, the department disagrees with our recommendation that it follow the advice of its legal counsel to expand its conflict-of-interest policies. Finally, the department disagrees that by not issuing citations at the highest possible level, the Fresno district office does not adequately safeguard residents of skilled nursing facilities. Our comments follow the department's response.