The “flagship program” meant to drive quality at nursing homes most in need of improvement is not working, in part due to an overreliance on financial penalties.

That’s according to a new report from the Department of Health and Human Services Office of Inspector General (OIG).

The report examined nursing homes that went through the Special Focus Facility (SFF) program from 2013 to 2022. The Centers for Medicare & Medicaid Services (CMS), working in conjunction with state agencies, places nursing homes that have the poorest health inspection survey scores in the SFF program.

Some nursing homes in the SFF program ultimately are terminated from Medicare or Medicaid participation. Nursing homes that meet certain quality improvement benchmarks, confirmed through surveys, graduate from the program.

Of the 495 nursing homes that graduated from the program in the report’s time frame, 64% received a serious violation within the next three years, the report found. One-third of these graduates received a serious violation each year for three years after graduation. Additionally, 31 of 49 participating states saw more than half of program graduates receive a serious violation within three years.

One positive note in the findings showed facilities that maintained higher staffing levels after graduating from the program had fewer violations and better maintained their improvements.

The SFF was created in 1998 to address quality and compliance issues at the lowest-performing nursing homes in the United States. The program is co-administered by the states, with state teams conducting quality and compliance inspections before, during and after a facility is placed in the program.

Since 2014, the SFF has had 88 slots for nursing homes in every state except Alaska that receive the worst health inspection scores, according to the OIG report. States have between one and six slots for SFF nursing homes. CMS maintains a list of 440 candidates to fill open slots as nursing facilities leave the program, either through graduation or termination.

Nursing home industry stakeholders also have taken issue with the effectiveness of the SFF program, and a leader with the American Health Care Association/National Center for Assisted Living (AHCA/NCAL) expressed support for the OIG report’s essential findings.

“While we are still reviewing the report in detail, we agree that the Special Focus Facility program is not working,” AHCA Senior Vice President of Quality, Regulatory and Clinical Services Holly Harmon said in a statement emailed to SNN. “Simply increasing inspections and publicly shaming facilities that are struggling are not going to help them change or improve. We appreciate that OIG acknowledges that the program relies too heavily on financial penalties.”

An official with LeadingAge, the largest association of U.S. nonprofit aging services providers, likewise expressed support for the OIG’s findings.

“LeadingAge generally supports the OIG recommendations,” Senior Director, Nursing Home Quality and Policy Jodi Eyigor told SNN via an emailed statement. “We have long been concerned about CMS’s reliance on financial penalties in lieu of nonfinancial remedies and collaborative quality‑improvement approaches. Expanding nonfinancial remedies, both initially and as part of progressive enforcement, is more likely to produce lasting improvements.”

SFF program by the numbers

In a related data snapshot, OIG shared that 645 nursing homes entered the SFF from 2013 to 2022. Of these, 71 facilities terminated or closed without reaching the end of the program. There were 17 SFFs repeating participation more than once, with five in the program as of 2022.

CMS does not consider ownership characteristics in the SFF program, but OIG found there were several owners with multiple facilities either in or eligible for the program. The vast majority of SFF nursing homes (88%) are for profit, with only 8% being nonprofit and 3% government owned.

Infection control issues were the leading factor that led to nursing homes being selected for the SFF, with 90% of nursing homes having a serious deficiency in this area. SFF facilities also failed to provide care to the highest level of well-being 90% of the time, among other serious deficiencies.

The SFF does not shield nursing homes from complaint surveys during their time in the program. From 2013 through 2022, two-thirds of SFF nursing homes received 10 or fewer complaint surveys while in the program, but 15 facilities received more than 50 complaint surveys, and one received more than 250 complaint surveys. Of the 15 SFFs that received more than 50 complaint surveys, 13 were in the program for more than two years, according to the data snapshot.

Diagnosing the problems

A primary cause for facilities continuing to fail was a focus on financial penalties rather than other forms of remediation, the OIG report proposed.

“For nursing homes in the SFF program that violate Federal requirements, the SFF program relies too heavily on financial penalties that do not require changes in nursing home operations,” the report stated.

Nursing homes that receive a deficiency are required to submit a plan of correction. Most nursing homes meet their plan and come back into compliance. For those that don’t, states are allowed to recommend enforcement actions, but CMS decides what actions to take.

“CMS may use different types of remedies at its discretion, depending on the scope and severity of noncompliance,” the report noted. “These include financial penalties [civil monetary penalties (CMPs)], directed plans of correction, and temporary management. CMS may also consider the extent to which nursing homes used optional resources to improve quality, such as QIOs, in deciding whether to apply enforcement or terminate a nursing home while it is in the SFF program.”

CMPs represented more than half of the enforcement actions taken from 2013 to 2022, OIG said. The median penalty was $9,750.

The SFF program is supposed to be completed within two years, but some nursing homes stay in the program longer. One nursing home in the program for more than three years only received CMPs and no other enforcement actions, OIG found.

“CMPs are undoubtedly appropriate remedies in some circumstances, but applying repeated rounds of CMPs on nursing homes that continue to provide poor care raises concerns that CMS is not effectively using the full array of remedies at its disposal,” the report read.

Next steps

The OIG made three recommendations for CMS to improve the program and care for nursing home residents.

The first recommendation was that CMS should impose more nonfinancial remedies. CMS did not concur with this recommendation.

“CMS stated that it has already taken action to address this recommendation, including working with State Agencies to use nonfinancial remedies to enforce compliance,” the report stated. “CMS stated that it would continue efforts to impose alternative (i.e., nonfinancial) remedies as appropriate.”

CMS also did not concur with the OIG recommendation to incorporate nursing home ownership information into the SFF program. CMS cited statutory authority limitations that limit the agency from taking enforcement action against groups of nursing homes versus individual facilities, while also noting that OIG did not evaluate the SFF program following updates in 2022.

LeadingAge also pointed out that the 2022 changes could warrant a closer look at the program since that time.

“[CMS] has made policy changes since the study period — including October 2022 updates that clarified program expectations, timelines for graduation or termination, and post‑graduation oversight — so a follow‑up report assessing the effectiveness of those changes would be valuable,” said Eyigor.

And the association also supports OIG’s recommendation related to ownership information, which has been a matter of some controversy in recent years. CMS in Nov. 2023 put forward a final rule requiring nursing homes to provide more detailed information related to ownership, management and financial control.

“Ownership, management, and leadership materially affect nursing home quality,” Eyigor noted on Wednesday. “While we have questions about the usefulness of some data collected under the November 2023 ownership transparency rule, we agree that ownership performance should be part of SFF evaluation and note recent CMS steps to link ownership data and display affiliated entities’ performance on Care Compare.”

And CMS could incorporate ownership information in ways that do not overstep its authority, OIG believes.

“OIG maintains that implementing this recommendation could support a data-driven, risk-based approach to selecting and monitoring nursing homes in program,” the watchdog agency stated in its report. “For example, when selecting between two comparable SFF candidates, State Agencies may benefit from knowing that one of the candidates is owned by an entity with many poorly performing nursing homes.”

CMS did concur with OIG’s recommendation related to effective use of enhanced enforcement actions.

Specifically, OIG recommended that CMS evaluate “the circumstances under which it imposes enhanced enforcement, the types of remedies imposed, and the effectiveness of these remedies.”

In particular, CMS should focus on SFF graduates that receive deficiencies related to staffing requirements, given that higher staffing levels correlated with sustained improvements in quality, the OIG proposed.

“CMS stated that in July 2025 it transitioned to a new nursing home survey database, which CMS said will allow State Agencies and CMS to identify SFF graduates and monitor enhanced enforcement actions imposed on them,” the OIG report stated.

Nursing home sector advocates also would like a seat at the table in discussions about the future of the SFF program.

“AHCA has put forth several ideas to HHS and CMS that can help identify and address the reasons for poor performance, ensure providers have the resources to make sustainable improvements, and eventually graduate from the program,” Harmon stated. “Turning around these facilities should be the goal for the sake of residents, families, and staff, and we look forward to working with CMS on this.”