Politics or Policy? A Talk with Thomas A. Scully, Administrator, CMS. (View On Washington).

This summer, policy analysts at the Centers for Medicare and Medicaid Services (CMS), the agency formerly known as HCFA, wrote a 17-page report implying that annual government inspection of well-run nursing homes is disruptive and wasteful. The report recommended asking Congress for permission to inspect nursing homes on a variable schedule. Under this schedule, facilities with solid records of regulatory compliance might be inspected only once in three years. In contrast, long-term care providers who often receive deficiency findings could be inspected several times each year.

The report recommendations appear to reflect some of the remarks made by newly appointed CMS Administrator Thomas A. Scully in an exclusive interview with NursingHomes/Long Term Care Management. During the August 30 interview, Scully said, "We should objectively know who are the 'good' actors and 'bad' actors, and lighten up on the good actors. We should reward good actors for good behavior."

Despite this display of logic and good sense, Scully told the Washington Post exactly one week later, "I can tell you without question, I've never seen [that report], and there is absolutely zero chance...of changing the frequency of nursing home inspections."

On the same day, White House Press Secretary Ari Fleischer told reporters that President Bush's domestic policy staff had reviewed the report in August and "rejected it out of hand." Declaring that the CMS report had been leaked by congressional Democrats for partisan advantage, Fleischer told reporters that any new policies affecting nursing homes would involve more, not less, regulation.

This series of exchanges would suggest that politics triumphed over the normal GOP policy interest in reduced business regulation. It makes the head of CMS appear so isolated that he does not read reports prepared by his own staff, while real decisions affecting his agency are made by obscure White House aides. But the impressions caused by clumsy PR handling of the CMS policy recommendation are false. The CMS report was drafted and submitted to the Secretary of Health and Human Services before Scully was confirmed in office. Scully now appears very much in control at CMS, and his ideas about nursing homes are consistent with the decision to torpedo the recommendation for "easing up" on OBRA requirements.

Scully told Nursing Homes/Long Term Care Management that blaming CMS regulations for the troubles of the nursing home industry is "ridiculous." Drawing on his own extensive background in the healthcare industry, he bluntly said, "The [nursing home] chains that blew up did so largely through their own problems.

"I'm as familiar with the chains as anyone in the country, Scully added. "A lot of these people [managing nursing home chains] set out to become subacute facilities. They were told it wouldn't fly, but they sold the [conversion] idea to the investors, and it blew up in their faces."

Scully admits that government policies might contribute to the problems he attributes to business errors within the nursing home field. He acknowledges that the loss of the Boren amendment protections and Medicaid reimbursement reductions at the federal and state level have hurt the operating income of long-term care. These changes, however, are not related to OBRA regulation. "CMS is following congressional mandates," he said, "and the states are responsible for the Medicaid squeezes."

Nevertheless, Scully contends that CMS should be doing more to help SNFs comply with OBRA instead of merely punishing deficiencies. "I think nursing homes have a lot of quality problems.... We should provide information on how to improve before the time of inspections, while making sure that nursing homes make good use of the millions of dollars they receive from the government.

The weeks that Scully has spent in consulting with stakeholders following his confirmation left him with a sense of the complexity of the issues. "I've put together seven task forces to talk to everyone about everything," he said. "Labor unions, for-profits, nonprofits--a huge number of people have a strong interest in taking care of the population. Seniors who have objective viewpoints are probably going to be the most important in shaping policies."

Scully noted that "everyone" has personal or family experience with nursing homes; in his case, he was involved in the long-term care decisions of a grandmother and a great uncle. "My experience has been mixed...what you pay for is generally what you get. I would be comfortable putting a family member in some of the homes."

Ultimately, however, Scully the former investment consultant, rather than Scully the consumer, dominates the CMS administrator's thoughts about longterm care. "It's not a lovable, fun business to be in," he mused. "We need to start making the nursing homes attractive and viable businesses that responsible investors want to be in--a good, solid business proposition."

This business-like approach to CMS is a major change from the attitudes of former HCFA administrators. The debacle over the inspection schedule shows that Thomas Scully will not be sympathetic to reduced regulation simply for the sake to reduced regulation. However, his comments to Nursing Homes/Long Term Care Management suggest that he might be receptive to proposals that make SNFs more attractive to private investment.