Department  of Health  and Human  Services 
OFFICE OF

INSPECTOR GENERAL

MEDICARE  HMO  APPEAL  AND 
GRIEVANCE  PROCESSES 
Review  of Cases 
JUNE  GIBBS  BROWN 
Inspector  General 
DECEMBER  1996 
OEI-07-94-O0283 
  OFFICE  OF  INSPECTOR  GENERAL 
The  mission  of the  Office  of Inspector  General  (OIG),  as mandated  by Public  Law  95-452,

is to  protect  the  integrity  of the  Department  of Health  and  Human  Services  programs

as well  as  the  health  and  welfare  of beneficiaries  served  by them.  This  statutory

mission  is carried  out  through  a nationwide  program  of audits,  investigations,

inspections,  sanctions,  and  fraud  alerts.  The  Inspector  General  informs  the  Secretary

of program  and  management  problems  and  recommends  legislative,  regulatory,  and

operational  approaches  to  correct  them.

Office  of  Evaluation  and  Inspections 
The  Office  of Evaluation  and  Inspections  (OEI)  is one  of several  components  of the

Office  of  Inspector  General.  It  conducts  short-term  management  and  program

evaluations  (called  inspections)  that  focus  on  issues  of concern  to  the  Department,  the

Congress,  and  the  public.  The  inspection  reports  provide  findings  and

recommendations  on  the  efficiency,  vulnerability,  and  effectiveness  of departmental

programs.

The  OEIS  Kansas  City  Regional  Office  prepared  this  report  under  the  direction  of

James  H.  Wolf,  Regional  Inspector  General.  Principal  OEI  staff  included:

KANSAS CITY REGION  HEADQUARTERS

Jennifer  Collins,  Project  Leader  Stuart  Wright,  Program  Specialist

Linda  Paddock,  Program  Inspection  Barbara  Tedesco,  Mathematical

Assistant  Statistician

Hugh  Owens,  Program  Analyst  Brian  Ritchie,  Program  Analyst

DALLAS REGION

Judith  Tyler,  Program  Analyst

To  obtain  a copy  of this  report,  call  the  Kansas  City  Regional  Office  at  (816)426-3697.
 Department  of Health  and Human  Services 
OFFICE OF 
INSPECTOR GENERAL 
MEDICARE  HMO  APPEAL  AND 
GRIEVANCE  PROCESSES 
Review  of Cases  EXECUTIVE  SUMMARY

PURPOSE 
To  determine  the  effectiveness  of Health  Maintenance  Organizations  (HMOS) 
processing  of Medicare  beneficiary  appeals  and  grievances  through  on-site  reviews. 
BACKGROUND 
Beneficiaries  may  join  a risk  HMO  through  the  Medicare  program.  For  a 
predetermined  monthly  amount,  the  HMO  provides  Medicare  covered  medically 
necessary  services.  The  goals  of this  coverage  are  to  provide  coordinated  medical 
care,  offer  comprehensive  benefits,  and  contain  costs  by using  the  most  cost-efficient 
methods  of treatment  and  preventing  unnecessary  care.  As  a protection  for 
beneficiaries,  the  Social  Security  Act  requires  Medicare  HMOS  to  have  two  separate 
and  distinct  processes,  an  appeal  and  a grievance  process,  to  handle  beneficiary 
complaints. 
In  order  to  protect  beneficiaries  from  inappropriate  denials  of services  or  payment, 
the  Act  requires  that  Medicare  HMOS  establish  an  appeal  process  to  handle  these 
types  of complaints.  If an  enrollee  disagrees  with  the  HMO  decision  to  deny  services 
or  payment,  the  enrollee  has  60 days  to  file  a request  for  reconsideration.  If the 
HMOs  decision  is against  the  beneficiary  in whole  or  in part,  the  HMO  is required  to 
automatically  send  the  case  to  the  Network  Design  Group  within  60 days  for  an 
independent  Federal  review. 
All  other  complaints  such  as  those  relating  to  quality  of care  are  processed  under  a 
separate  internal  grievance  procedure.  Under  this  procedure,  there  are  no  specific 
time  frames  or  preordained  levels  of review  established  by law.  However,  HMOS  are 
responsible  for  timely  transmission,  an  investigation,  decision,  and  notification  of the 
results. 
From  a universe  of  132 risk-based  HMOS,  we  selected  a purposive  sample  of  10 
HMOS  for  on-site  review.  To  provide  a cross-section,  HMOS  were  selected  by number 
of  enrollees,  rate  of appeals  sent  to  Network  Design  Group,  beginning  contract  date, 
location,  and  other  criteria.  Within  the  sampled  HMOS,  we  randomly  selected  cases 
for  review  (144  appeals  and  148 grievances)  and  analyzed  them  to  determine  whether 
procedural  guidelines  were  followed,  if complaints  were  being  properly  categorized,  if 
time  requirements  were  being  met,  and  if problems  or weaknesses  existed  in  the 
appeal/grievance  processes. 
FINDINGS 
Beneficiarieswerenot alwaysadviwdof theirappealrightrat the timeservicesorpayment 
weredenied. 
Regulations  require  HMOS  to  issue  a written  initial  determination  of  denials  and  to 
advise  patients  of their  right  to  request  a reconsideration  (appeal).  Twenty-seven 
1  percent  of  sample  case  files  did  not  have  initial  determinations  on  file,  5 HMOS  sent 
them  without  including  the  required  appeals  rights  (6 cases),  and  5 more  sent  the 
notice  to  beneficiaries  after  receiving  their  appeals  (12  cases). 
I%e HMOS dki rwtproperly&tzk@h  appah jiom grkvances. 
HMOS  incorrectly  processed  appeal  issues  as grievances  in  37 cases.  This  represents 
26 percent  of the  148 grievances  we  examined.  Every  plan  made  at  least  one  such 
error.  In  addition,  three  incorrectly  processed  five  complaints  that  included  both 
appeal  and  grievance  issues.  The  distinction  between  appeals  and  grievances  is 
important  to  beneficiaries  because  appeal  cases  (denials  of services  or  payment)  are 
subject  to  independent  Federal  review  for  appropriateness  of the  HMO  decision  while 
grievances  are  only  subject  to  internal  HMO  reviews. 
l%e HMOSdidnotjidlycomplynuthHealthCareFinancingAdministration(HCFA) 
directivesforprocixsingappealsandgrievanmx 
Processing Appeals.  Five  HMOS  did  not  refer  eight  denied  cases  to  Network  Design 
Group.  Three  did  not  document  the  basis  for  good  cause  for  accepting  14 cases 
filed  after  60  days.  Five  sent  beneficiaries  multiple  initial  determinations  in  nine  cases. 
In  addition,  5 HMOS  had  13 cases  where  beneficiaries  appealed  several  times  before 
the  plans  would  begin  the  appeals  process. 
Time Frames  for Appeals.  Five  HMOS  did  not  issue  the  initial  determination  within 
60  days  of the  beneficiarys  initial  request  for  services  or  payment  in  11 cases.  One 
HMO  waited  two  years  before  sending  two  cases  to  Network  Design  Group  and 
resolution  took  five years.  Nine  plans  did  not  make  the  reconsideration  determination 
within  60 days  or  inform  the  beneficiary  timely  in  19 percent  (28  cases)  of  our  sample. 
Further,  4 HMOS  did  not  send  9 cases  to  Network  Design  Group  within  the  required 
60  day  time  frame. 
Resolving Grievances.  One  HMO  suspends  action  on  grievance  cases  while  awaiting 
medical  records.  If records  are  not  received,  cases  remain  closed  without  resolution. 
One  other  plan  had  seven  while  another  had  two  unresolved  grievance  cases  that  were 
either  suspended  without  resolution  or  closed  without  resolution. 
Documentation.  Eight  HMOS  had  undated  initial  determinations  or  did  not  have 
them  on  file  in  46 appeals  cases  (32  percent  of the  sample).  Five  plans  had  25  appeal 
cases  (17  percent  of the  sample)  where  there  were  no  dates  on  the  reconsideration 
determinations  or  they  did  not  have  them  on  file.  Five  HMOS  did  not  have 
documentation  supporting  that  beneficiaries  were  notified  of grievance  results  in 
15 cases.  Also,  6 had  such  poor  documentation  that  it was  impossible  to  reconstruct 
16 appeal  cases  (11  percent)  and  8 grievance  cases  (5 percent). 
RECOMMENDATIONS 
HCFAS  Office  of Managed  Care  is making  substantial  efforts  to  improve  the  HMO 
appeal  and  grievance  processes.  It has  recently  created  a work  group  - Managed  Care 
Appeals  and  Grievance  Initiative  - organized  to  make  program  improvements  in  these 
ii  functions.  In  1995,  HCFNs  Office  of Managed  Care  retised  guidelines  used  by 
HCFA  Regional  Offices  in their  annual  review  of HMOS.  In  addition,  HCFA  in 
conjunction  with  Netsvork  Design  Group,  has  conducted  training  sessions,  provided 
technical  assistance,  and  issued  publications  to  improve  HMOS  understanding  and 
processing  of  appeals  and  grievances.  HCFA  plans  to  revise  the  HMO/CMP  Manual 
and  has  received  funds  to  evaluate  problems  in the  area  of appeals  and  grievances. 
However,  as  our  findings  reflect,  there  are  areas  where  improvement  is needed. 
We  recommend  that  HCFA 
  ensurethatHMOS cowect~ distinguishandprocessappeakandgnevances. 
HCFA  can  accomplish  this  during  their  annual  visits  to  HMOS.  However,  we 
suggest  that  HCFA  conduct  case  reviews  as well  as  examine  the  operating 
procedures  to  determine  that  appeals  and  grievances  are  processed  correctly.  We 
also  suggest  that  HCFA  focus  closely  on  whether  HMOS: 
- are  in  compliance  with  all  directives  in processing  of appeal  and  grievance 
cases; 
- include  appeal  rights  in all initial  determinations  sent  to  beneficiaries;  and 
- release  initial  determinations  and  reconsideration  decisions  in  appeal  cases 
according  to  established  time  frames. 
  rnodijjtheHCFA HMO/CMP Manualto clar#jandspecijjkq  requirements. 
This  can  be  accomplished  by: 
- clarifying  the  explanation  and  language  required  on  the  appeal  and  grievance 
issues  to  improve  HMOS  understanding  of the  differences  and 
- establishing  minimum  requirements  for  documentation  of appeal  and 
grievance  files  so  that  an  independent  reviewer,  based  upon  examining  the 
files,  will be  able  to  follow  and  understand  the  adjudication  by the  HMO. 
  broaden#orts  toforma@ traihHMOSon theappal andgrievanceprocesses. 
We  noted  a significant  amount  of turnover  in HMO  staff  responsible  for 
processing  appeals  and  grievance  cases  during  this  inspection.  In  light  of this 
turnover,  there  is a need  to  continue  training  on  a routine  basis. 
AGENCY  COMMENTS 
We  solicited  and  received  comments  on  our  draft  report  from  HCFA.  They  agreed 
with  the  conclusion  of  our  reports  that  improvements  are  needed  and  indicated  that 
they  are  working  to  implement  a number  of our  recommendations.  We  are  pleased 
... 
111  that  HCFA  agrees  that  improvements  are  needed  in the  appeal  and  grievance 
processes,  and  we  recognize  that  changes  are  in the  process  of being  made  through 
the  Medicare  Appeals  and  Grievance  Initiative  (MAGI).  However,  because  HCFAS 
response  does  not  specifically  address  the  recommendations  contained  in  our  reports, 
we  are  unsure  whether  the  problems  identified  in  our  report  will be  fully  addressed 
through  this  initiative.  As  a result,  it will be  important  for  HCFA  to  include  in  their 
response  to  the  final  report  an  action  plan  that  specifically  addresses  each 
recommendation. 
The  full  text  of HCFAS  comments  is included  as  an  appendix  to  this  report. 
iv  TABLE  OF  CONTENTS

PAGE

EXECUTIVE  SUMMARY

RFWWEDREP
ORTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1

INTRODUCHON  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..6


Appeal  Rights  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...6


Distinguishing  Appeals  from  Grievances  . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..7

 
Complying  with  HCFADirectives  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...8

Processing  Appeals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...8

Time  Frames  for  Appeals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...9

10

Resolving  Grievances  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
10

Documentation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
RECOMMENDATION.S.  . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12

Agency Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

APPENDIX

A  Problem  Areas  Detected  inHMO  Case  File  Reviews  . . . . . . . . . . . . . . . . . .  A-1

B:  HCFAResponse  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B-1
 RELATED  REPORTS

This  is one  of  a  series  of  four  reports  relating  to 
Medicare  risk  HMO  appeal  and  grievance  processes. 
The  four  reports  are: 
Medicare  HMO  Appeal  and  Grievance  Processes: 
Overview,  (OEI-07-94-O0280) 
Medicare  HMO  Appeal  and  Grievance  Processes: 
Beneficiaries  Understanding,  (OEI-07-94-00281) 
Medicare  HMO  Appeal  and  Grievance  Processes: 
Survey  of  HMOS,  (OEI-07-94-00282) 
Medicare  HMO  Appeal  and  Grievance  Processes: 
Review  of  Cases,  (OEI-07-94-00283) 
1
 INTRODUCTION

PURPOSE 
To  determine  the  effectiveness  of Health  Maintenance  Organizations  (HMOS) 
processing  of Medicare  beneficiary  appeals  and  grievances  through  on-site  reviews. 
BACKGROUND 
Le@lation 
Sections  1833  and  1876  of the  Social  Security  Act  specify  the  requirements  that  HMOS

must  meet  in  order  to  enter  into  a contract  with  the  Health  Care  Financing

Administration  (HCFA)  to  furnish  Medicare  covered  services  to  beneficiaries.  The

goals  of HMO  coverage  are  to  provide  access  to  medical  care  while  containing  costs

by using  the  most  cost-efficient  methods  of treatment  and  preventing  unnecessary  care.

In  addition,  HMOS  can  reduce  the  medical  management  complexities  experienced  by

elderly  patients  with  multiple  chronic  conditions,  the  paperwork  burden  of  a

fee  for  service  system,  and  financial  barriers  to  obtaining  preventive  and  medically

necessary  health  care.

Unlike  traditional  fee  for  service,  HMOS  are  designed  to  coordinate  care  through  a

primary care provider, offer comprehensive  benefits,  and  reduce  or  contain  the  costs

of medical  treatment.  They  operate  under  a fixed  annual  budget,  based  on  the

prepaid  premiums.  Except  for  fees  of a few  dollars  for  each  doctors  visit  or

prescription,  the  premium  is to  cover  all  of a patients  medical  needs  which  include

everything  from  checkups  to  open-heart  surgery.

Rikkand Cost Plans 
There  are  three  types  of Medicare  HMO  plans  included  in the  Act.  Generally,  the 
differences  involve  the  method  used  by HCFA  to  reimburse  the  HMO  for  providing 
services  and  delivering  medical  services  to  beneficiaries.  The  three  types  of  contracts 
are  risk-based,  cost-based,  and  Health  Care  Prepayment  Plan  (or  HCPP)  HMOS.  The 
latter  two  types  are  paid  on  a reasonable  cost  basis,  wherein  any  differences  in  actual 
costs  and  interim  payments  are  reconciled  and  adjusted  with  HCFA  at  the  end  of the 
year.  Risk-based  are  reimbursed  on  a prepaid  cavitation  basis  with  no  retrospective 
adjustment.  While  cost-based  and  HCPP  HMOS  give  beneficiaries  a choice  of 
physicians  that  they  see,  a risk-based  plan  requires  enrollees  to  be  locked  into  only 
its  contracted  physicians  unless  emergency  or  urgent  care  is needed. 
As  of March  1, 1996,  there  were  197 risk-based  HMO  plans,  27 cost-based  plans,  and 
54 HCPPS  nationwide,  which  accounted  for  almost  4 million  Medicare  HMO  enrollees, 
or  10 percent  of the  total  Medicare  population.  While  Medicare  enrollment  in 
managed  care  has  increased  67 perc&~  since  1993,  HCFA  reports  that  enrollment  in 
risk-based  plans  has  grown  105 percent. 
2
 Ap~al  & GrievanceBocesses 
One  of  the  most  effective  ways  HMOS  contain  costs  is by using  family  practitioners  or 
internists  as  gatekeepers  to  control  a patients  access  to  services.  The  patient 
chooses  one  doctor  as  a primary  care  physician;  from  then  on  that  doctor  setves  as 
first  arbiter  for  any  treatment.  The  primary  care  physician  provides  medical 
examinations  and  treatments,  and  serves  as  a gatekeeper  to  specialty  care,  except  in 
emergency  and  urgent  care  situations. 
Because  the  payment  mechanism  of HMOS  provides  a strong  incentive  to  manage 
utilization  of  enrollee  medical  services  (including  the  institution  of a physician 
gatekeeper  and  use  of medical  practice  guidelines),  the  Act  requires  that  HMOS 
establish  an  appeal  process  to  handle  disputes  Medicare  enrollees  have  involving  a 
denial  of  or  payment  for  services  they  believe  should  be  covered  by the  HMO.  Other 
kinds  of complaints  such  as  quality  of care  received  are  handled  under  a grievance 
procedure.  Prior  to  May  1995,  only  risk  and  cost-based  plans  were  required  to  have 
these  processes  in  place.  HCPPS  now  must  also  comply  with  these  requirements. 
HCFA  directives  require  HMOS  to  inform  beneficiaries  of their  appeal/grievance 
rights  at  enrollment,  in member  handbooks,  and  annually  through  a newsletter  or 
other  communication. 
Appeals  Process  - According  to  42 CFR,  Sections  417.600-638,  an  appeal  is any 
dispute  involving  a denial  of services  or  ayment  for  services  made  by the  HMO. 
P 
Federal  regulations  and  the  HMO/CMP  Manual  require  a five-step  process  and  time 
limits  for  each  step.  HMOS  must  make  an  initial  determination  upon  receiving  an 
enrollees  request  for  services  or  payment  for  services  within  established  time  frames 
(24  days  if the  case  is complete  and  no  later  than  60 days  if development  is needed). 
Each  plan  is required  to  make  a decision  on  information  they  currently  have  within 
this  time  frame.  If the  decision  is to  deny  services  or  payment,  the  enrollee  has  60 
days  from  the  date  of the  initial  determination  to  file  a request  for  reconsideration 
(appeal)  in writing  unless  good  cause  can  be  shown  by the  beneficiary  for  the  delay. 
The  HMO  then  has  60 days  to  make  a reconsideration  decision. 
If the  HMOs  reconsideration  decision  is against  the  beneficia~  in whole  or  in  part, 
the  HMO  is required  to  automatically  forward  the  case  to  HCFA  for  an  independent 
review  to  determine  if the  decision  is appropriate.  Due  to  the  increasing  numbers  of 
appeal  cases,  HCFA  contracted  with  Network  Design  Group  (NDG)  in  January  of 
1989  to  fulfill  this  function.  The  number  of appeals  reviewed  by NDG  has  varied  in 
the  last  3 years  from  a high  in  1993  of 3,806,  to  2,945  in  1994,  and  3,691  in  1995. 
Beneficiaries  whose  cases  are  not  resolved  fully  in their  favor  at  the  NDG  level  can 
request  a hearing  before  an  Administrative  Law  Judge  (AU)  if the  disputed  amount  is 
at  least  $100.  After  this  level,  any  party  (including  the  HMO)  may  request  a review  by 
the  Department  of Appeals  Board  if there  is dissatisfaction  with  the  ALJs  decision  or 
1 Competitive  Medical  Plan 
3  dismissal.  The  final  recourse  in the  appeals  process  is a Federal  court  review  if the 
Board  denies  the  partys  request  for  review,  and  the  amount  in controversy  is $1,000 
or  more. 
Grievance  Process  - Grievances  are  any  complaints  about  a Medicare  enrollees 
experience  with  the  health  plan  and/or  its  providers,  excluding  determinations 
involving  payment  for  services  or  denial  of services  (which  are  subject  to  the  appeals 
process).  Examples  of grievable  issues  include  quality  of care,  physician  behavior, 
involuntary  disenrollment  concerns,  and  waiting  times  for  services. 
Guidance  for  processing  grievances  is found  in 42  CFR,  Sections  417.600  and  417.606, 
and  in  Section  2411  of the  HMO/CMP  Manual.  The  guidelines  do  not  provide  for 
time  frames  or  specify  levels  of review,  but  call  for  timely  transmission,  an 
investigation,  decision,  and  notification  of the  results.  While  appeal  cases  that  are  not 
resolved  fully  in favor  of the  beneficiaries  are  subject  to  independent  HCF~  AL.J, 
Appeals  Board,  and  Federal  court  review,  beneficiary  grievances  are  only  subject  to 
internal  levels  of review  within  the  HMO. 
The  Office  of Managed  Care  (OMC)  within  HCFA  is responsible  for  policy  and 
oversight  of HMOS  and  ensuring  there  is compliance  with  the  appeal  and  grievance 
regulations.  To  assist  plans  in these  processes,  OMC  has  created  the  appeal  and 
grievance  sections  in  the  HMO/CMP  Manual. 
METHODOLOGY 
From  a universe  of  132 risk-based  HMOS  obtained  from  HCFAS  April  1995  Monthly 
Report  of Medicare  Prepaid  Health  Plans,  we  selected  a purposive  sample  of  10 
HMOS  for  on-site  review.  We  did  not  include  cost-based  plans  and  HCPPS  in the 
sample  as  the  majority  of Medicare  beneficiaries  are  enrolled  in risk-based  HMOS. 
We  based  our  selection  upon  the  number  of enrollees,  rate  of appeals  sent  to  NDG 
(including  no  appeals  and  highest  rates  of appeals),  number  of appeals  overturned  at 
this  level,  beginning  contract  date,  and  percent  of retroactive  disenrollment2.  Also,  an 
important  factor  in  our  selection  was  location;  two  plans  were  selected  in  close 
proximity  to  each  other  for  economy  of travel  and  for  geographical  representation 
within  the  country. 
While  we  randomly  selected  150 appeal  cases  and  150 grievance  cases  (15  of  each  in 
the  plans),  the  HMOS  were  able  to  provide  only  144 appeals  and  148 grievances  for 
2 Retroactive  Disenrollment  is an  administrative  procedure  established  by HCFA  to  reverse  a 
beneficiarys  enrollment  back  to  Medicare  fee-for-service  participation.  An  example  where  this  might 
be  used  is in a case  where  HCFA  determined  that  a beneficiary  did  not  understand  how  HMOS  operate 
at  the  time  of enrollment  and  incurred  large  out-of-pocket  expenses  from  services  obtained  outside  the 
HMO.  In this  case,  HCFA  may  approve  a retroactive  disenrollment  which  would  require  an  HMO  to 
reimburse  premiums  paid  by the  beneficiary  and  the  medical  bills  would  be  processed  through 
Medicare. 
4
 our  review.  One  HMO  had  only  8 appeal  cases  in our  sample  time  frame  (1/1/94  to 
7/3 1/95),  and  at  another  we  sampled  16 cases.  Because  the  latter  plan  was  unable  to 
provide  us  a universe  of  cases,  we  selected  on-site  eight  cases  from  1994,  and  eight 
cases  from  1995.  In  the  grievance  sample,  one  HMO  had  only  13 cases  in the 
universe.  We  analyzed  the  cases  to  determine  whether  procedural  guidelines  were 
followed,  if appeals  and  grievances  were  being  properly  categorized,  and  if time 
requirements  were  being  met.  We  also  reviewed  cases  to  determine  if there  were 
problems  or  weaknesses  in the  appeal/grievance  processes. 
Because  we  used  a purposive  sample  of HMOS,  the  results  from  this  study  only  apply 
to  them  and  cannot  be  projected  to  the  universe  of Medicare  risk  HMOS. 
We  conducted  our  review  in  accordance  with  the  QuaZi2y Standards  for Iinpections 
issued  by the  Presidents  Council  on  Integrity  and  Efficiency. 
5
 FINDINGS

BENEFICIARIES  WERE  NOT ALWAYS ADVISED OF THEIR  APPEAL 
RIGHTS  AT THE TIME SERVICES OR  PAYMENT  WERE  DENIED 
According  to  42 CFR  417.608,  HMOS  are  required  to  send  a written  initial 
determination  of any  negative  decision  to  beneficiaries  within  60 days  of their  request 
for  services  or  payment  for  services.  The  notice  must  advise  beneficiaries  of their 
right  to  appeal  these  decisions.  Our  case  reviews  revealed  that  some  HMOS  in  our 
sample  did  not  comply  with  these  requirements.  See  Appendix  A  for  detailed 
information  on  the  numbers  of cases  where  HMOS  were  not  fully  in  compliance  with 
HCFA  directives. 
lhwnty-seven  pementof oursamplecase@x  didnothaveinitialdeterminationsonjile. 
In  our  appeal  sample  of  144,  8 HMOS  did  not  have  initial  determinations  in 
27 percent  or  39 case  files.  There  was  no  evidence  that  beneficiaries  were  sent  the 
initial  determinations  or  given  their  appeal  rights.  One  of these  HMOS  did  not  have 
initial  determinations  in  10 out  of  15 case  files  and  could  not  produce  them  upon 
request. 
This  finding  is supported  by our  companion  report  Medicare  HMO  Appeal  and 
Grievance  Processes:  Beneficiaries  Understanding  (OEI-94-07-00281).  In  that 
inspection,  we  found  that  41 respondents  (9.6  percent)  considered  they  were  denied 
services.  Of  these  41,  34  (83  percent)  beneficiaries  reported  that  they  did  not  receive 
the  required  notice  explaining  the  denial  and  appeal  rights.  Similarly,  a total  of  39 
respondents  (8 percent)  were  denied  payment.  Of  these,  9 (23  percent)  reported  they 
did  not  receive  this  required  notice. 
Five HMOS sent initiizdleterminationws ithoutinch.idinag ppah  rights.
These five  plans  sent  denial  notices  to  beneficiaries  in six cases  without  including 
instructions  on  their  right  to  appeal  the  decision.  The  notices  sent  to  beneficiaries 
contained  only  the  reason  for  the  denial.  We  also  noted  that  an  HMO  sent 
2 additional  initial  determinations  in  1 case,  including  appeal  rights,  but  gave 
beneficiaries  less  than  the  required  60 days  to  file  a request  for  reconsideration.  The 
beneficiary  was  given  two  business  days  to  appeal  in one  notice  and  seven  days  to 
respond  to  the  second  notice. 
HMOS sent initialdeterminationtso ben@ciariesAFTER receivingthe requestfor 
reconsideration. 
Five  HMOS  sent  initial  determinations  after  receiving  the  beneficiarys  request  for 
reconsideration  in  12 cases.  One  of these  plans  sent  an  initial  determination  on 
the  same  day  the  case  was  sent  to  NDG.  ln  four  other  cases,  it sent  the  letter  from 
four  to  seven  months  after  receiving  the  request  for  reconsideration. 
6
 THE HMOS DID NOT PROPERLY  DISTINGUISH APPEALS FROM 
GRIEVANCES 
HMOS zhcomectlpjrocessedcaseswithappealiwuesasgnevaraces. 
The  42  CFR  417.606  requires  that  HMOS  completely  separate  disputes  involving 
appeal  issues  (i.e.,  denials  of or  payment  for  services)  and  grievance  issues  (i.e.,  quality 
of care  or  waiting  time  for  services).  They  are  required  to  process  beneficiary  disputes 
under  one  process  or  the  other,  depending  on  the  nature  of the  case.  While  appeal 
cases  are  subject  to  independent  Federal  review  and  various  other  levels  of appeal, 
grievances  are  resolved  internally,  without  the  same  protection  of independent  reviews. 
In  our  review  we  identified  37 cases  (26  percent)  where  appeal  requests  were 
improperly  processed  as grievances.  Examples  include: 
	 One  HMO  processes  cases  with  appealable  issues  as  either  an  appeal  or  a 
grievance  based  on  whether  the  HMO  provides  an  initial  determination  in 
writing  to  the  beneficiary.  If the  case  involves  an  appealable  issue  and  the 
HMO  does  not  issue  a written  initial  determination,  the  case  is incorrectly 
processed  as  a grievance.  There  were  three  such  cases  incorrectly  processed  in 
our  sample. 
.	 Another  HMO  had  7 cases  with  appealable  issues  in its  grievance  sample  of  13 
that  were  incorrectly  processed  as grievances,  more  than  half  of its  sample 
cases.  This  HMO  also  had  five  cases  in the  appeal  sample  that  were  initially 
processed  as grievances. 
	 Two  other  HMOS  indicated  during  intemiews  that  they  had  incorrect  processes, 
however,  no  cases  were  found  in the  30 reviewed  in their  sample.  One  HMO 
indicated  that  they  attempt  to  resolve  cases  containing  both  an  appeal  and  a 
grievance  through  their  informal  grievance  process.  If the  beneficiary  is 
dissatisfied  with  the  decision,  the  plan  attempts  to  process  the  case  through 
their  formal  grievance  process.  The  other  HMO  indicated  that  When  a 
doctor  refuses  care,  it is treated  as  a grievance  - informal,  or  formal  if in 
writing.  The  grievance  would  go  to  either  the  Peer  Review  or  NDG.  This 
HMO  is treating  an  appealable  issue  as  a grievance. 
As  a result  of incorrectly  processing  appeals  as grievances,  beneficiaries  maybe  denied 
full  due  process.  These  beneficiaries  may  not  receive  their  right  to  an  independent 
Federal  review  and  may  suffer  financial  expenses  and  potential  harm  to  their  health. 
Some HMOS incowectlyprocessedcomplairattihatincludedboth appal andgrievance 
iiwues. 
The  HCFA  HMO/CMP  Manual  Section  2400.1  instructs  HMOS  to  process  separately 
and  simultaneously  those  cases  with  both  appeals  and  grievances.  Issues  in  these  cases 
are  not  to  be  resolved  through  one  process  and  then  the  other  if the  beneficia~  is  dissatisfied  with  the  results.  However,  three  plans  in our  sample  did  not  comply  with 
these  guidelines  in five  cases. 
One  HMO  in  our  sample  incorrectly  processed  a case  that  involved  both  an 
appealable  ($16,200)  and  grievable  issue  through  the  grievance  process.  After 
processing  the  case  as  a grievance  and  resolving  the  grievance  issue,  it eventually 
processed  the  appeal,  sending  the  initial  determination  to  the  beneficiary  seven 
months  after  the  request  for  reconsideration,  and  then  to  NDG  one  month  after  this. 
NDG  overturned  the  HMO  decision  and  the  claim  was  paid  almost  12 months  after 
the  beneficiary  first  filed  the  appeal. 
THE  HMOS DID NOT FULLY COMPLY WITH HCFA DIRECTIVES  FOR 
PROCESSING  APPEALS AND GRIEVANCES 
processim  Appeals 
Refemd  of Appeal  Cases to NDG.  While  the  HMO/CMP  Manual  Section  2405.3 
requires  all  denials,  whether  partial  or  full  denial  cases,  be  forwarded  to  NDG  within 
60 days  of request,  we  found  some  HMOS  did  not  forward  cases  and  sent  beneficiaries 
multiple  reconsideration  determinations. 
	 Five  HMOS  in  our  sample  did  not  forward  eight  denied  or  partially  denied 
cases  (six percent)  to  NDG.  These  cases  were  closed  without  resolution  and 
the  beneficiaries  were  not  provided  the  right  to  an  independent  Federal  review. 
In  one  appeal  case,  it was  explained  to  the  beneficiary  that  the  service  would 
not  be  covered  and  the  case  was  closed  without  giving  the  beneficiary  full  due 
process.  The  case  was  not  sent  to  NDG  for  review  as  required. 
	 One  HMO  sent  multiple  negative  reconsideration  determinations  in response  to 
a non-plan  providers  requests  for  payment  in two  cases  over  a span  of two 
years.  The  non-plan  provider  wrote  numerous  letters  to  this  HMO  requesting 
they  forward  the  cases  to  NDG  and  twice  furnished  copies  of HCFAS 
instructions  of how  to  forward  cases  to  NDG  prior  to  it complying. 
Good  Cause.  According  to  the  HMO/CMP  Manual  Section  2405.l(C),  HMOS  accept 
requests  for  reconsideration  filed  after  the  60 day  deadline  if beneficiaries  reveal 
circumstances  that  show  good  cause  for  the  delay.  Examples  include:  the 
beneficiary  did  not  receive  the  initial  determination,  was  seriously  ill, or  had  an 
accident  that  destroyed  important  records.  To  accept  these  late  requests  for 
reconsideration,  HMOS  must  establish  the  reason  for  the  beneficiarys  delay  in  filing 
an  appeal. 
Three  HMOS  did  not  document  the  basis  for  good  cause  when  accepting  appeals 
filed  after  60  days  in  14 cases,  or  10 percent  of the  sample.  One  HMO  had  eight 
cases,  or  over  half  of its  sample  appeal  cases  where  they  were  accepted  without 
8
 requiring  the  beneficiary  to  show  good  cause.  One  appeal  case  was  accepted  two 
years  after  the  initial  determination  was  sent. 
Delays in Processing Appeals.  HMO/CMP  Manual  Section  2405.4(A)  states  that  HMOS 
should  never  issue  more  than  one  denial  notice  for  a request  for  service  or  item  or 
payment  for  an  out-of-plan  claim.  When  a beneficiary  files  a request  for 
reconsideration,  the  HMO  has  already  denied  the  case  once  and  should  automatically 
send  it to  NDG  within  60 days  if the  decision  is upheld.  In  our  sample,  we  found 
examples  of  appeal  cases  that  were  processed  incorrectly. 
	 Five  HMOS  sent  beneficiaries  multiple  initial  determinations  in nine  cases  (six 
percent)  in  our  sample.  One  plan  sent  six initial  determinations  in  one  case, 
while  another  plan  sent  three  in  one  case. 
	 Five  HMOS  had  13 cases  (9 percent)  where  beneficiaries  had  to  request  a 
reconsideration  determination  multiple  times  before  the  HMO  began  the 
appeals  process. 
Time Frames  for Appeals 
Although  98 percent  of the  132 HMOS  surveyed  in our  companion  inspection 
(Medicare  HMO  Appeal  and  Grievance  Processes:  Survey  of HMOS 
[OEI-94-07-O0282])  reported  in their  responses  that  appeals  are  processed  within  the 
required  time  frame,  case  reviews  revealed  that  some  HMOS  did  not  meet  these 
requirements. 
	 The  42  CFR  417.608  requires  the  initial  determination  be  sent  within  60  days  of 
request  for  payment  or  services.  Failure  to  issue  a written  notice  within  this 
time  frame  constitutes  an  adverse  initial  determination  which  the  beneficiary 
may  appeal.  Five  HMOS  in our  sample  did  not  issue  the  initial  determination 
within  the  60  days  of the  request  in  11 cases. 
	 The  HMO/CMP  Manual  Section  2403.1  requires  that  HMOS  process  claims 
within  24 days  if complete  and  no  later  than  60 days  if development  is needed. 
However,  one  plan  had  two  cases  in  our  sample  that  had  not  been  paid  since 
1990.  The  provider  was  appealing  for  payment  two  years  after  services  were 
rendered.  These  2 case  files  contained  1992  documentation  showing  the 
non-plan  provider  had  13 additional  appeals  pending  with  this  HMO  since 
1990.  Resolution  of the  two  sample  cases  took  five years. 
	 HMOS  are  to  make  the  reconsideration  determination  within  60 days  from  the 
time  the  appeal  is filed.  However,  9 plans  did  not  make  the  reconsideration 
determination  within  this  time  frame  or  inform  the  beneficiary  timely  in  19 
percent  (28  cases)  of the  our  sample.  The  case  file  reviews  showed  that  HMOS 
made  the  determinations  from  3 to  11 months  past  the  due  date.  We  noted 
that  1 made  its  determinations  late  in  7 out  of  15 cases. 
9
 	 One  HMOinour  sample  hasapre-sefice  denial  procedure  that  causes 
inordinate  delays  in processing  appeals.  A  contracted  plan  physician  requests 
HMO  authorization  for  a referral  with  the  plan  denying  the  referral  until  proof 
of medical  necessity  is provided.  This  cycle  may  occur  several  times  before  a 
beneficia~  questions  the  delay  or  files  an  appeal.  These  beneficiaries  may  not 
receive  due  process  if the  HMO  does  not  send  the  initial  determination  even 
though  the  referral  has  been  denied  multiple  times.  Our  review  revealed 
3 cases  where  the  HMO,  after  multiple  internal  denials  were  made,  sent  the 
initial  determination  4 to  5 months  past  the  required  60  days. 
	 The  HMO/CMP  Manual  Section  2405.3(A)  requires  that  HMOS  automatically 
send  reconsiderations  to  NDG  within  60 days  of the  request  if denied  in part  or 
in full.  They  are  required  to  meet  this  time  frame  even  if the  file  is incomplete 
or  pending  medical  records.  In  our  reviews,  however,  we  found  four  HMOS 
that  did  not  send  nine  cases  to  NDG  within  this  time  frame. 
	 The  HMO/CMP  Manual  Section  2405.4(B)  instructs  HMOS  to  notify  NDG 
within  60  days  that  decisions  on  overturned  cases  have  been  carried  out.  Our 
file  review  reflects  that  four  plans  in  our  sample  did  not  notify  NDG  of 
payment  in  seven  overturned  cases  within  the  time  requirements. 
ResolvimzGrievances 
.	 The  42  CFR  417.600  and  417.606  requires  HMOS  to  investigate  and  resolve 
grievance  cases  in a timely  manner.  We  found  one  plan  that  suspends  action 
on  grievance  cases  while  awaiting  receipt  of medical  records.  Cases  remain 
closed  and  are  re-opened  only  if the  medical  records  are  received.  As  a result 
of this  incorrect  process,  cases  are  not  being  resolved.  In  our  sample,  we  found 
two  cases  which  had  been  closed  pending  medical  records  in this  HMO. 
	 While  required  to  resolve  grievance  cases,  one  HMO  in  our  sample  had  seven 
unresolved  grievances  and  another  had  two  cases  that  were  either  left  open  or 
closed  without  resolution. 
Documentation 
.	 Eight  HMOS  had  undated  or  undocumented  initial  determinations  on  file  in  46 
(32  percent)  of the  sample  cases.  Half  of these  plans  had  7 to  12 cases  with 
insufficient  information.  Not  having  these  vital  documents  dated  or  on  file 
causes  difficulty  in assessing  timeliness  and  poses  a problem  for  HMOS  in 
proving  they  sent  beneficiaries,  with  appeal  disputes,  the  required  initial 
determination  and  appeal  rights. 
	 Five  HMOS  had  25  cases  (17  percent)  with  undated  or  undocumented 
reconsideration  determinations  on  file.  Without  the  date  on  the 
10
 reconsideration  determination,  it is extremely  difficult  to  determine  if the  HMO 
made  this  decision  within  the  60 day  requirement. 
	 HMOS  are  required  to  inform  the  beneficiary  of their  decision  within  60 days 
from  the  time  the  appeal  request  was  filed.  Although  there  are  minimal 
directives  for  processing  grievance  cases,  regulations  also  mandate  that  HMOS 
notify  beneficiaries  of the  results  of grievance  disputes.  However,  we  found 
4 HMOS  in  our  sample  that  had  20 appeal  cases  (14  percent)  and  5 HMOS 
with  15 grievance  cases  where  there  was  no  evidence  that  the  beneficiary  was 
ever  notified  of results. 
	 Six HMOS  had  such  poor  documentation  that  it was  impossible  to  reconstruct 
16 appeal  cases  (11  percent)  and  8 grievance  cases  (5 percent).  HMOS  refer  to 
notices,  attachments,  beneficiary  letters,  and  phone  calls  but  did  not  keep  them 
on  file.  One  plan  had  completely  separate  files  documenting  this  information  in 
two  different  departments.  However,  this  important  information  was  not 
reconciled  or  reviewed  with  the  appeal  or  grievance  files.  Another  HMO  rarely 
documented  its  modes  of communication  with  the  beneficiary  and  retained  little 
documentation  on  cases.  RECOMMENDATIONS

HCFAS  Office  of Managed  Care  is making  substantial  efforts  to  improve  the  HMO 
appeal  and  grievance  processes.  It has  recently  created  a work  group  - Managed  Care 
Appeals  and  Grievance  Initiative  - organized  to  make  program  improvements  in  these 
functions.  In  1995,  HCFAS  Office  of Managed  Care  revised  guidelines  used  by 
HCFA  Regional  Offices  in their  annual  review  of HMOS.  In  addition,  HCFA  in 
conjunction  with  Network  Design  Group,  has  conducted  training  sessions,  provided 
technical  assistance,  and  issued  publications  to  improve  HMOS  understanding  and 
processing  of  appeals  and  grievances.  HCFA  plans  to  revise  the  HMO/CMP  Manual 
and  has  received  funds  to  evaluate  problems  in the  area  of appeals  and  grievances. 
However,  as  our  findings  reflect,  there  are  areas  where  improvement  is needed. 
We  recommend  that  HCFA 
  ensure  that HMOS comect~distinguishandprocessappak  andgrievances. 
HCFA  can  accomplish  this  during  their  annual  visits  to  HMOS.  However,  we 
suggest  that  HCFA  conduct  case  reviews  as well  as  examine  the  operating 
procedures  to  determine  that  appeals  and  grievances  are  processed  correctly.  We 
also  suggest  that  HCFA  focus  closely  on  whether  HMOS: 
- are  in  compliance  with  all  directives  in processing  of  appeal  and  grievance 
cases; 
- include  appeal  rights  in all initial  determinations  sent  to  beneficiaries;  and 
- release  initial  determinations  and  reconsideration  decisions  in  appeal  cases 
according  to  established  time  frames. 
  modfi  the HCFA HMO/CMP Manualto cla~  andspecifjkq  requimrnenfi. 
This  can  be  accomplished  by: 
- clarifying  the  explanation  and  language  required  on  the  appeal  and  grievance 
issues  to  improve  HMOS  understanding  of the  differences  and 
- establishing  minimum  requirements  for  documentation  of appeal  and 
grievance  files  so  that  an  independent  reviewer,  based  upon  examining  the 
files,  will be  able  to  follow  and  understand  the  adjudication  by the  HMO. 
  broadenefoms toformalljtrainHMOSon theappealandgrievanceprocesses. 
We noted  a significant  amount  of turnover  in HMO  staff  responsible  for 
processing  appeals  and  grievance  cases  during  this  inspection.  In  light  of this 
turnover,  there  is a need  to  continue  training  on  a routine  basis. 
12
 AGENCY COMMENTS

We  solicited  and  received  comments  on  our  draft  report  from  HCFA.  The  complete 
text  of their  response  is included  as  an  appendix  to  this  report.  A  summary  of  their 
comments  and  our  response  follows. 
The  HCFA  agreed  with  the  conclusion  of our  reports  that  improvements  are  needed 
and  indicated  that  they  are  working  to  implement  a number  of our  recommendations. 
We  are  pleased  that  HCFA  agrees  that  improvements  are  needed  in the  appeal  and 
grievance  processes,  and  we  recognize  that  changes  are  in the  process  of being  made 
through  the  Medicare  Appeals  and  Grievance  Initiative  (MAGI).  However,  because 
HCFAS  response  does  not  specifically  address  the  recommendations  contained  in  our 
reports,  we  are  unsure  whether  the  problems  identified  in  our  report  will be  fully 
addressed  through  this  initiative.  As  a result,  it will be  important  for  HCFA  to  include 
in  their  response  to  the  final  report  an  action  plan  that  specifically  addresses  each 
recommendation. 
Although  HCFA  acknowledges  the  case  review  report  identifies  mistakes  made  by 
health  plans,  they  expressed  concerns  about  the  sample  sizes  and  number  of cases 
reviewed.  We  agree  that  this  sample  could  not  be  used  to  make  national  projections 
of the  incidence  of mistakes.  However,  the  number  of cases  reviewed  and  outcomes 
of the  reviews  are  more  than  adequate  to  indicate  the  existence  of significant  problems 
in  HMO  processing  of appeals  and  grievances. 
Finally,  HCFA  raised  questions  about  the  knowledge  and  expertise  of the  individuals 
who  prepared  the  HMOS  responses  to  our  survey  documents.  We  requested  and 
must  assume  that  knowledgeable  HMO  staff  completed  our  survey.  We  also  note  that 
beneficiaries  making  inquiries  regarding  appeals  and  grievances  are  likely  to  be 
interacting  with  these  same  individuals  or  their  staff. 
13
 APPENDIX  A 
Problem Areas Detected  III 
On-Site Review Of HMO Case Files 
A-1  BENEFICIARIES  WERE  NOT  ALWAYS  ADVISED  OF THEIR  APPEAL  RIGHTS  AT THE  TIME  SERVICES  OR PAYMENT  WERE  DENIED 
HMOS did not have evidence of giving 
beneficiaries  appeal rights in initial 
determination.  (27% or 39 cases)  10  6  2  2  6  4  8  1 
HMOS sent initial determinations  without 
appeal  rights included.  (4% or 6 cases)  1  1  2  1  1 
HMOS sent initial determinations  AFfER 
receiving the request  for reconsideration. 
(8% or 12 cases)  6  2  1  2  1 
THE  HMOS DID  NOT  PROPERLY  DISTINGUISH  APPEAU  FROM  GRIEVANCES 
HMOS incorrectly processed  cases with appeal 
issues as grievances.  (26% or 37 cases)  3  1  3  3 
HMOS incorrectly processed  cases with both 
appeal and grievance issues.  (3% or 5 cases)  +2  
HMOS DID  NOT  FULLY  COMPLY  WITH  HCFA  DIRECIfVES  FOR  PROCESSING  APPEALS  AND  GRIEVANCES 
Processing Appeals 
HMOS did not forward  partially or fully denied 
cases to NDG.  (6% or 8 cases)  1  T1    1 2 
HMOS sent multiple reconsideration 
determinations  in cases denying payment  over 
two years prior to forwarding  cases to NDG. 
(1% or 2 cases)  2
HMOS did not show good cause for accepting 
beneficiary cases filed past the 60 day 
requirement.  (1070 or 14 cases)  8 3 
A-2
 CNSITE  REVIEW  OF APPEAJJGRIEVANCE  CASE FILE@  AND  ERRORS 
10 HMOS BY NUMBER  OF CAWS 
AREAS  IN ERROR  E  c  E  F  G  H  I 
HMOS sent beneficiaries  more  than one initial 
determination.  (6% or 9 cases)  2  1  2  2  - 2  -
HMOS did not begin the appeals  process  until 
beneficiaries  requested  a reconsideration 
multiple  times.  (9% or 13 cases)  5  1  2  2  3 
Time Frames  for Appeals 
HMOS did not make the initial determination 
within the 60 day requirement.  6  2  1  - 1  1 
(8% or 11 cases) 
HMOS did not pay claims timely within 60 days 
of request  (cases were not paid until 5 years 
after service).  (190 or 2 cases)  2 
HMOS did not make reconsideration 
determination  within 60 days of beneficiary 
request.  (1990 or 28 cases)  4  2  6  1  7  1  1  5  1 
HMOs pre-service denials caused  inordinate 
delays in the process.  (2% or 3 cases)  3 
HMOS did not forward cases to NDG  within 
the 60 days required.  (6% or 9 cases)  1  3  3  2 
HMOS did not notify NDG when decisions on 
overturned  cases were carried out. 
(5% or 7 cases)  1  2  1  3 
Resolving  Grievances 
HMOS suspend  unresolved  grievances while 
awaiting receipt of medical records.  Cases 
remained  closed unless the HMO  received  the 
records.  (170 or 2 cases)  2 
HMOS did not resolve grievance cases; cases 
were left open or closed without  resolution. 
(6% or 9 cases)  2  7 
A-3
 Documentation 
HMOS either did not have dates on initial 
determinations  or evidence of sending them  to 
beneficiaries.  (32% or 46 cases)  12  9  3  2  7  4  8  1 
HMOS either  did not have dates on 
reconsideration  determinations  or dld not have  + 
them on file.  (17% or 25 cases)  1  T6  1  6  11 
HMOS did not have evidence of noti~ing 
beneficiaries of the results of the HMO 
reconsideration  determinations. 
(14% or 20 cases)  3  1  7  9 
I 
HMOS had no evidence of noti@ing 
beneficiaries  of the results from grievances 
cases.  (10% or 15 cases)  3  1 1  2  3 6 
HMOS had such poor documentation  that  it 
was impossible to recreate  appeal  (a) and 
grievance (g) cases.  (appeals  - 11% or 16 cases, 
grievances -5% or 8 cases)  &Eik  3g  la  lg  - 10a 4g 
i 
Total Number  of Errors  in Cases by HMO  41  24 52  18 34 44 54 26 
1 Review was based on 144 appeal  cases and  148 grievance cases within 10 HMOS. 
2 HMO  had 7 cases with appeal  issues in the grievance sample  that were processed  as grievances and 5 cases in the appeal  sample  that were processed  initially 
through  the grievance process for a total of 12 cases. 
A-4
 APPENDIX  B 
Health  Care Financing Administration 
Response  to Report 
B-1  -t.
y  % 
!  ##f  DEPARTMENT  OF HEALTH&  HUMAN  SERVICES  Haalth  Care Financing Administrate 
s
-+. 
The Admlnbtrator 
W@Wxm OJcl  zozm 
DEC121W 
DATE: 
TO;  June  Gibbs Brown 
Inspedor  General 
FROM  Bruce  C. Vladeck 
Administrator 
Sulli-mm Office of bspector  General  (OIG)  Draft. Reports:  hkcliearc  HMO  Appeal 
and Grievance Processes-Overview:  (OEKOT-94-W2W);Medicare 
13M0 .4ppeal and Grievance Processes--Benefkiaries  Understanding, 
(OEI-07-94-00281); Medicare HMO Appeal and GrieWce  Processes-
Survey of HMOs, (OEI-07-94-00282); Medicare HMO Appeal and 
Grievance Prowsses-Ileview  of Cases, (OEI-07-94-00283) 
we reviewed the above-referenced reports that examine the operations of the Mc&m.re 
risk-based HMOSappeal andgrievanceprocesses.  We agreewiththe conclusion of your 
report that improvements are needed and are working to implement a number of your 
recommendations.  Our detailed wmments are attached, 
Thank  you  for the opportunity to review and comment on this report, 
Attachment  Health Care FinancbM Adminktraiion (HCFA) Comments

on Office  of Insuector  Gene ral (OIG\

Draft  Rewrt  S:bkdicm?  ~dth  Maintenance ~f%MliZ8tiOllSw  01 Atmeal  and

Grievance  Processes  Overview.  (OEL07-94-0028@: Me&xe  HMO Apye@qnd 
Grievance Processes:Benei3ciariesUnderstanding  (OEI-07-94@2811:meficme 
HMO Am3ealand Grievance Processes: %uwY of HMOs~  (OEI-07-94-002S2); 
Medicare HMO APtxd  and(?nevanceProcesses; Review of Cases: 
(OEL07-94-00283\ 
OIG Reeomtnendations 
OIG recommends that HCFA take the following actions to aikkess problems hi@lighted 
in the above studies: 
o  Actively  monitor  HMOS  to ensure  beneficiaries  arc issued  written  determinations. 
* 
0  Work  with  HMOS to establish  *    d appeal  and  @eVan&  language 
requirements in marketin@nrolbnent  materials and operating procedures. 
0  Ensure that HMOScorrectly distinguish and procws appeals and grievances. 
0  Require HMOSto report Medicare  contract-specific data on appeal and grievance 
cases. 
0  Mod@ the HMO/CMP Manualto Glarifjand  speci& key requirements. 
0  Broaden efforts to formally tra.iuHMOSon the appeal andgrievanceprocesses. 
H(YA  Response 
We agree that improvements are needed.  We have a comprehensiveeffort underway 
called the Mcdioare Appeals and Grievatwe Initiative (MAGI) which includes  a number 
of objectives  that  are direetly  related  to the  recommendations  in your  reports.  Our 
objectives  include  identiijing  and meeting the information needs of beneficiaries 
regarding their appeal rights; promoting hml& plan accountability by de~eloping and 
hnprovhg i.n$ormationon appeals and making mea@.@l  information mop  available; 
and refining mechanisms for monitoring and assisting in the continuous improvement  of 
health  pkm  perfonuance.  Page 2 
OIG  and HCFA jointly ksued a Medicare benefi&uy  advisory btieti  entit.1~ What 
Medicare Beneficiaries Need to Know About HMO Arrangements: Know Your Rights. 
This easy-to-read document conta@ information on appeal @%  ~g  co~pltits,  and 
rights to emergency and urgently needed serviees.  Copies of this bulletin are being 
distributed nationally.  Additionally, significant chaqgcs were made to improve the 
managed care portions of the Medicare Haudboo~ wtich - seti to @ bfwfi@u@  MS 
year.  New data reporting requirements on phm=levelreoonsidemtions areiunder 
development and may be instituted as early as mid-1997.  We also plan to r@ructure and 
shorten the time lines for handling health care decisions and nxmnsiderations by,health 
plans. 
Beneficiaries Understanding 
We  are pleased to seethehi@ level of knowledge amongMedicareknrollees&ar&ng 
their right to appeal and fife complaids,  This is an improvement over w earlier finding, 
and one we believe results from both Federal program and plm effb~%t  edwxting 
beneficiaries and providingnotices,  With regard to the fitig  that lxxwfickuies~d  a 
lesser level of awareness as to when to exercise their appeal ri@s,  fortheotig 
regulations cIari&ing the rightto appeal when services are reduced or tcrtiated  and 
when to provide  notices  of nonGoverageat these points in care management  should 
si~cant.ly  help  address  ti  problem.  We  will  consider  the recommendations  in this 
area. 
Survey HMOS 
Incorrect categorization of appeals  as grievances  is an area for improvement  identiled  in 
our  MAGI  initiative.  However,  we question  the percentage  and methodology  set forth  in 
this  report.  Because oertain sta.lfwithin the organizational structure of an HMO, or staff 
at delegated medkal groups within the HMOs networ~ are generally responsible for 
as@ning  mmpltits  to the appeals or grkmme  tiac~  it would be important to know 
who responded to the two questions asked on this subject and what role they play in this 
particular PIOC6SSW, e will bemotig  to itit@  theswwePIMJkmW, AwWE? 
tu.mmrand ccmfhsionover differences in Federal and state termhology. 
The type of statistical  information  sought by OIG staff has not been a requirement for 
Medicare-contracting health plans.  Therefore, it is not surprising that many plsns 
aggregate the appeals information across  ~o~erc~~  MedicWe,  and Medicaid  rqembers. 
New  plan-level  appeals  reporting  requirements  should resolve the need for Medicare-only 
information, and respond to you  recommendation,  Page 3 
We have concerns about  the small sample sizes and number of cases used to present 
findings in this repofi  However, the report identifies the ~es  of mista?ceshealth plain 
make in operating an appeals sys~  and the needs that plaus have for clear, distinct. 
information and trainkg  about the Medicare managed care requirements (and how time 
differ from state requirements for their commercial and Medicaid enrollees), We wdl 
consider the Ietxmunendations presented