Arizona Bill Aims to Privatize the Survey Process for Nursing Homes 

As federal entities continue to call for significant changes to nursing home operators and oversight through surveys, Arizona appears to be the first state intent on outsourcing this crucial tool.

The legislature in Arizona may let nursing homes and assisted living facilities be surveyed by a third party to conduct annual and complaint surveys – essentially privatizing the process.

Introduced by Republican Rep. Steve Kaiser this month, the bill allows the state Department of Health to contract with a third party entity to conduct all inspections, complaint investigations and survey duties related to long-term care facilities, according to the bill’s text.

But nursing home advocates seem adamantly against the bill.

“We’re against it. We are opposed. We don’t think this bill, if it passes, and the governor signs, that it would really serve the state,” said David Voepel, executive director for the Arizona Health Care Association. “It doubles inspections; and let’s keep in mind, that’s a state inspection.”

Even if the Arizona legislature passes the bill, CMS would still need to approve it, Voepel said.

“There’s still a contractual agreement between CMS [and] the state of Arizona, to provide surveys,” noted Voepel. “CMS has the authority because they pay most of the bill to say yay or nay on it.”

Still, the bill has majority support, and it will go before the whole state senate before the end of session, through the end of the fiscal year on June 30.

Privatized surveys as cost saving measure

If passed, the bill will require third parties to conduct inspections at least twice annually, moving from the current norm of annual surveys. By July 1 2024, the Arizona Department of Health Services (ADHS) would be fully able to contract with third parties for the survey process.

Will Humble, executive director for the Arizona Public Health Association, said in a statement that the bill would charge ADHS with contracting with a third party certification organization to do investigations, but it’s unclear to what standard the third party would hold the facility accountable, state standards, federal or otherwise.

ADHS would use their licensing fees to hire the third party entity, Humble said.

Voepel said the state may be proposing the change as a cost saving measure, hoping to contract with third-party surveyors for lower salaries.

The current state surveyor salary is quite low compared to what a Registered Nurse (RN) can garner for the work these days, salaries increasing mostly due to the staffing nurse shortage.

“[Arizona state surveyors] start out at $57,750, and they can only go up as much as $4,000. Trying to find an RN, or a person qualified at that price is very difficult now that we’ve been through a lot of the workforce challenges,” said Voepel.

In other words, states aren’t able to keep up with the costs with wages going up as a result of ongoing staffing shortages and rising cost of care.

An extra $1 million in the ADHS budget was added last year toward hiring surveyors, Voepel said. Legislators might try to put out a request for proposals (RFPs) using this allocation to hire surveyors, he said, adding that it remains to be seen if this path will in fact result in cost savings for the state.

“Maybe you can find somebody. Nevertheless, creating more bureaucracy in the hopes of saving money just doesn’t seem to be too wise of an idea,” said Voepel.

Another aspect of the bill would take away a “deemed-status” provision that currently allows facilities to hire their own certification entity and turn that in for “deemed status licensure,” Humble said.

Wider implications

The state bill comes on the heels of a report issued by the Department of Health and Human Services Office of Inspector General (OIG), which calls for significant changes to nursing home operations and oversight based on Covid infection rates.

Humble said the bill is Arizona’s effort to overhaul its own survey process, following two scathing reports issued in 2019 and 2022 by the Arizona Auditor General.

“The question becomes: Is the system irreparably broken and in need of a complete overhaul or is a better answer to hold ADHS accountable for their regulatory responsibilities? I would argue that the primary problem isn’t the existing statutory framework for regulating long term care facilities,” Humble said in his statement.

The primary problem, Humble said, falls to poor senior agency leadership and failure to hold ADHS accountable for making corrections after the 2019 report.

No other states are seeking a total privatization of state surveys as far as Voepel knows. The Centers for Medicare & Medicaid Services (CMS) contracts with private companies to bring in more surveyors, but they don’t totally abdicate the process to them, he said.

Much like the payor structure for the sector, survey processes seem to be a public-private venture as well.

“CMS pays for the majority of the survey process,” added Voepel. “It’s a partnership between the federal and the state, and 95% of the survey itself is done through federal guidelines. There’s only a small portion that is done through state guidelines.”