Department  of Health  and Human  Services 
OFFICE OF 
INSPECTOR GENERAL 
MEDICARE  HMO  APPEAL  AND 
GRIEVANCE  PROCESSES 
Overview  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

Linda  Paddock,  Project  Leader  Stuart  Wright,  Program  Specialist

Jennifer  Collins,  Program  Analyst  Barbara  Tedesco,  Mathematical

Hugh  Owens,  Program  Analyst  Statistician

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 
Overview 
# SE RVICE$ 
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++--$ DECEMBER  1996
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> 0EI-07-94-O0280  TABLE  OF  CONTENTS 
PAGE 
PURPOSE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..1 
BACKGROUND  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1 
FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1 
Beneficiary  Awareness 
 
Communication  of Denials 
 
.  Compliance  with  HCFA  Directives 
.  Publications  and  Procedures 
.  Statistics 
RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..2 
.  Monitoring

.  Standard  Language

.  Distinguishing  Appeals  and  Grievances

.  Data

.  HMO/CMPManual

.  Training

RELATED  REPORTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...5 
Agency Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...6 
Appendix kHCFAResponse  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l  Medicare  HMO  Appeal  And  Grievance  Processes 
PURPOSE 
To  examine  the  operations  of the  Medicare  risk-based  Health  Maintenance 
Organizations  (HMOS)  appeal  and  grievance  processes. 
BACKGROUND 
The  goals  ofmanaged  care  are  to  provide  preventive  and  coordinated  medical  care, 
offer  comprehensive  benefits,  and  contain  costs  by using  the  most  cost-efficient 
methods  of treatment  and  preventing  unnecessary  care.  Because  the  payment 
mechanism  of HMOS  may  provide  incentives  to  limit  services,  the  Social  Security  Act 
requires  establishment  of two  separate  and  distinct  processes  to  handle  Medicare 
beneficiary  complaints. 
The  appeals  process,  which  covers  disputes  involving  denials  of services  or  payment, 
begins  within  the  plan  and  extends  to  outside  administrative  and  judicial  reviews. 
Regulations  require  a five-step  appeals  process  and  time  limits  for  each  step. 
The  grievance  process  involves  disagreements  relating  to  services  furnished  for  which 
the  beneficiary  has  no  further  liability  for  payment.  It also  includes  such  issues  as 
quality  of  care,  physician  behavior,  waiting  times  for  services,  and  involuntary 
disenrollment.  Grievance  regulations  do  not  contain  time  frames  or  specific  levels  of 
review  but  call  for  timely  transmission,  investigation,  decision  and  notification  of 
results. 
We  examined  these  processes  through:  a survey  of 426  beneficiaries;  a survey  of  132 
risk-based  HMOS;  analysis  of written  procedures  and  marketing/enrollment  material 
from  these  HMOS;  and  on-site  reviews  of  10 HMOS  where  we  interviewed  staff  and 
examined  144  appeal  and  148 grievance  case  files. 
FINDINGS 
BENEFICL4RYA  W~NESS.  A  majo@  of beneficiaries  are aware  they have  the right to 
fonmdly  compkzin  about  swims  and paymentx  Howeve~  they have  less Undentanding 
of the particular  cimumstaruxx  &  which  these  righfi  can  be exenxkd. 
Eighty-six  percent  of respondents  stated  that  they  know  they  have  the  right  to 
complain  about  their  plans  medical  care  or  services.  However,  one-third  of 
beneficiaries  did  not  know  or were  not  sure  of their  right  to  complain  about  specific 
problems  for  which  filing  an  appeal  or  grievance  is possible. 
1
 COMUUNKATION  OF DENL4LS.  The COmmunication  between  the HMO  and  the 
beneficiary  that  a service  or payment  has  been  dknied  does  not  work  wel 
When  an  HMO  denies  a semice  or  payment,  the  HMO  is required  to  issue  a written 
explanation  for  the  denial,  including  the  right  to  appeal.  Thirty-four  of 41  sumeyed 
beneficiaries  who  believed  they  had  been  refused  referral  to  a specialist  indicated  they 
did  not  receive  a denial  letter.  Also,  our  review  of cases  revealed  that  39 out  of  144 
files  lacked  documentation  that  service  or  payment  denial  notices  were  sent  and  an 
additional  6 cases  did  not  include  the  required  instructions  on  the  beneficiaries  right 
to  appeal  the  decision. 
COMPLL4NCE  WITH HEALTH  CARE FIN4NCING  ADMNI.STRATION  (HCFA) 
DIRECT~S.  HMOS  do  not frilly comp~  with  HCFA  directives  for processing  appak 
and  grievances. 
Through  our  case  reviews  we  noted  problems  involving  failure  to  noti&  beneficiaries 
of their  appeal  and  grievance  rights  and  lack  of or  delays  in  processing,  referring,  and 
resolving  complaints.  Furthermore,  HMOS  do  not  always  correctly  categorize  appeals 
and  grievances.  Fifty  percent  of those  we  surveyed  incorrectly  categorized  appeals  as 
grievances  while  all  10 HMOS  we visited  improperly  processed  from  1 to  12 appeal 
cases  as grievances.  This  distinction  is important  to  beneficiaries  because  appeal  cases 
are  subject  to  independent  Federal  review  for  appropriateness  of the  HMO  decision 
while  disputes  involving  grievance  issues  are  only  subject  to  internal  HMO  reviews. 
PUBLICATIONS  M  PROCEDURES.  HMOS  numketingienrollrnent  matenhk  and 
operating  procedures  that  we reviewed  contain  incowect  or incomplete  tiforrnation  on 
appal  and  grkvance  righlk 
Sixty-six  percent  of HMOS  distribute  materials  to  beneficiaries  and  69 percent  of 
HMOS  use  operating  procedures  that  contain  either  incorrect  or  incomplete 
information  regarding  beneficiary  appeal  and  grievance  rights. 
STATISTICS.  HMOS  do  not  maintain  statktical  informatkm  needed  for  the  ongoing 
evaiktkm  of appal  and  grievance  practices. 
Eighteen  percent  of HMOS  in our  sample  could  not  produce  statistical  information 
relating  to  numbers  of  appeal  and  grievance  cases.  This  poses  significant  problems 
given  that  such  statistical  information  is needed  by HCFA,  beneficiaries,  and  others  as 
a basis  for  evaluating  HMO  performance. 
RECOMMENDATIONS 
HCFAS  Office  of Managed  Care  is making  substantial  efforts  to  improve  the  HMO 
appeal  and  grievance  processes.  It  has  created  the  Managed  Care  Appeals  and 
Grievance  Initiative  work  group  organized  to  make  program  improvements  in  these 
functions.  In  1995,  they  revised  the  annual  review  guidelines  and  standardized 
2
 language  in  the  lock  in and  Evidence  of Coverage  notices.  The  1996  Medicare 
Handbook  also  included  expanded  appeal  and  grievance  information  and  was  sent  to 
all  Medicare  beneficiaries.  Additionally,  HCFA  is developing  national  guidelines  for 
marketing  materials,  improving  publications,  educating  outside  entities,  and 
highlighting  beneficiary  rights.  While  these  efforts  should  favorably  impact  these 
processes,  we  believe  there  is still  room  for  improvement. 
We  recommend  that  HCFA  take  a number  of actions  to  address  problems  highlighted 
in  our  studies. 
	 MONITORING.  Actively  monitor  HMOS  to ensure  bentficiati  are iwued  written 
determinations,  ikch.iding  ap~al  rights, and  emphasize  the need for  benejkiaries  to 
communicate  cikarly  any disagreement  thq  have  with  HMO  dkisions  to deny 
services  or payment  for  services.  This  can  be  accomplished  by: 
- continuing  HCFAS  extensive  efforts  to  make  beneficiaries  aware  of  appeal 
and  grievance  provisions  and  of the  need  to  communicate  clearly  any 
disagreement  they  may  have  with  a physicians  decision  to  deny  a requested 
service  and 
- emphasizing  to  HMOS  the  requirements  to  make  beneficiaries  aware  of 
appeal  and  grievance  rights  and  to  provide  written  initial  determination 
notices  when  the  patient  communicates  disagreement  with  a decision  to  deny 
a requested  service  or  payment. 
Federal  regulations  are  intended  to  protect  the  rights  of beneficiaries  to  appeal 
the  denial  of services  by HMOS,  while  maintaining  the  ability  of the  physician 
to  treat  the  patient  in line  with  his  or  her  medical  judgment.  It is not  always 
possible  at  the  time  of service  for  the  physician  to  know  whether  a beneficiary 
believes  that  a service  has  been  denied  unless  the  beneficiary  specifically 
communicates  this  to  the  physician.  Therefore,  future  HMO  marketing, 
enrollment,  and  awareness  sessions  with  Medicare  beneficiaries  and  physicians 
should  emphasize  the  importance  of clear  and  open  communication. 
	 ST~ARD  LANGUAGE.  Work  with HMOS  to establkh  staiu-kmdized  appal  and 
grievance  kmguage  requiremenfi  in rnark@ing/enrollment  materials  and  opmting 
procedures. 
- In  marketing  materials,  provide  up  front  information  to  beneficiaries  on  their 
rights  under  the  appeal  and  grievance  processes  and 
- In  enrollment  materials,  more  thoroughly  educate  beneficiaries  about  their 
specific  rights  under  the  appeal  and  grievance  processes,  including 
--a  detailed  overview  of the  types  of services,  lack  of services,  or 
situations  which  may  be  appealed  or  grieved. 
3
 --when  and  under  what  circumstances  further  levels  of appeal  are 
permitted. 
--clarification  that  only  appeals  and  not  grievances,  are  subject  to 
independent  Federal  review. 
--the  difference  between  the  definitions  of emergency  and  urgent  care  at 
the  time  medical  semices  are  being  sought. 
	 DISTINGUISHING  APPEALS  AND  GRIEVANCES.  Ensure  that  HMOS  correct~ 
distinguish  and process  appah  and grievances. 
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. 
	 DATA.  Require  HMOS  to reprt  Medicare  contract  specific  dlzta  on  appal  and 
griiwance  cases.  At  a minimum,  include: 
- number  of appeal  and  grievance  cases  (including  formal  and  informal 
grievances); 
- number  of cases  resolved  internally  and  externally,  and  outcomes  of  cases; 
- issues  involved  in  cases;  and 
- time  it takes  to  resolve  the  cases  (upper  and  lower  limits,  median/mean). 
4
 .	 HMO/Clk@ M4NUAL. Modijj theHMO/CMP Manual  to cliuijj  and  specfi  key 
requirements.  This  can  be  achieved  by: 
- clari&ing  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. 
  TRALMNG.  Broaden  ejfo~  to fomudly  train HMOS  on  the  appal  and  grievance 
processes. 
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. 
RELATED  REPORTS 
Details  concerning  the  findings  and  recommendations  in  these  reports  are 
contained  in three  separate  technical  reports.  These  reports  are: 
Medicare  HMO  Appeal  and  Grievance  Processes: 
Beneficiaries  Understanding,  (OEI-07-94-00281) 
Medicare  HMO  Appeal  and  Grievance  Processes: 
Survey  of HMOS,  (OEI-07-94-O0282) 
Medicare  HMO  Appeal  and  Grievance  Processes: 
Review  of  Cases,  (OEI-07-94-00283) 
Copies  of these  reports  may  be  obtained  from  the  Kansas  City  Regional  Office,  Office 
of Inspector  General  at  (816)  426-3697. 
1 Competitive  Medical  Plan 
5  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. 
6
 APPENDIX  A 
Health  Care Financing Administration 
Response to Report 
A-1  .fl-~ 
& 
DEPARTMENT  OF HEALTH  & HUMAN  SERVICES  Haalth CareFinancingAdministration
1 
%
-& 
The Admhdstrator 
Waahlnston, OrC,  20201 
DEC1219W 
DATE: 
TO:  June  Gibbs Brown 
Inspector Generil 
JmoM  Bruce C. Vladeck 
Administrator 
su-Bi-EcR  Office of Inspector General (OIG) Draft Reports: CChledkueHMO Appeal 
and Grievance Processes-Ovemiew~  (OEMT-94a0280);  Medicare 
HMO Appeal  and Grievance Processes--Benefidaries Understanding, 
(C)EI-07.94-00281);Medicare HMO Appeal and Grievqce  Processes--
Sumey of HMOs, (OEI-07-94-00282); Medicare HM(l Appeal and 
Grievance ProcessesReview of Cases, (OEM7-94-00283) 
We reviewed the above-referenced reports that examine the operations of the Medicare 
risk-based HMOSappealand grievanceprocesses.  We agreewith the conclusion ofyour 
report that improvements are needed and are working to implement a number of your 
recommendations.  Our detailed comments are attached, 
Thank you for the opportunity to review and comment cmthis report, 
Attachment  Health Care FinanciIw Administration (HCFA)Comments 
on 0fi5co of Iusuector General (OIG) 
Draft Reoorts:  Maintenance  0) Atmealand 
%iCdiCW~  ~~tb  ~fVM.i=tiOXIS  ~ 
Grievance Processes  OvmieIWt  (OEI-07-94-00280):  M@iiM@WO  Appe@~d 
&ievance  Processes: Beneficiaries Understamlim% fOEI-07-94-002811%ledicare 
HMO APmal and CkievanceProcesses: Survev of HMOsj (OEL07-94-00282); 
Medicare HMO AoPeaI and Grievance Processes: Review of Cases~ 
(OE1-07-94-Q0283} 
OIG  Reeomrnendatiom 
OIG recommends that HCFA take the follotig  actions ti  address probl- highlighted 
in the above stndies: 
o  Actively  monitor  HMOS  to ensure  beneficiaries  arc issued written determinations, 
0 Woik with 13MOsto establish standdw- ed appeal and grievantx  language 
requirements in xnarketingknrollment materials and operating procedures. 
0  Ensure that HMOScorrectly distinguish and process appesls and grievances. 
0 Require HMOSto report Medicare contract-specitic data on appeal and grievance 
cases. 
0  Mod@ the KMO/CMP Manual to Glar@  and  speci& key requirements. 
0  Broaden efforts to formally train IIMOS on the appeal and grievance processes. 
H(2?A Response 
We agree that improvements are needed.  We have a comprehensiveeffort underway 
called the Medicare Appeals and fievance  Initiative (MAGI) whioh includes a number 
of objectives that are directly related to the recommendations in your reports.  Our 
objectives include identifying and meeting the information needs of beneficiaries 
regarding theu appealrights; promotinghmlfi  plan accountabilityby de~elopingand 
impruving information on appeals and making rneanhgfblinformation mop  available; 
and refining mechanisms for monitoring  and assisting in the continuous improvement  of 
health  plan  performance.  Page 2 
OIG  and HCFAjointly ksued a Medicare benefieiwy advisory btieti  entitl@ What 
Medicare Wneficiarkx Need to Know About HMO Arrangements: Know Your Rights. 
Ms  easy-to-mad docu.nmt conta@ information on appeal rights, filing co~pltits,  and 
rights to emergency and urgently needed services.  Copies of this bulletin are being 
distributed nationally.  Additionally, significant chruqys were made to improve the 
managed Grimportions of the Md.ieare Handboolq which was sent to all beneficiariw this 
year.  New data reporting requirements on plan-kwel reconsiderations an$under 
development and may be instituted as early as mid-1997.  We also pkm to restructure and 
shorten the time lines fix handling health care decisions and reecmsiderationsby health 
plans. 
We are pleased to see the high level of lmowledge among Medicare kmrolleesregarding 
their right to appeal and fife complaints,  This is an improvement over w earlier finding, 
and one we believe results from both Federal pro~am  and pl~  effiwtstattxhmting 
beneficiaries and providing notices,  With regard to the fintig  that bewficiwies tid  a 
lesser level of awareness as to when to exercise thek appe~ r@ts3 fofi~~g 
regulations clari&ing the right to appeal when services are reduced or terminated and 
when to provide notices of noncoverage at these points in care managemer$ should 
significantly help address ti  problem,  We wil  consider the recommendations k  this 
area. 
Survev 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 oertttinstaff within the organizational structure ofanHMO,orstaff 
at delegated medical groups within the HMOs network  are generally responsible for 
t@@ng  Gompkthh to theappealsor@ewmcetraG~itwouldbeimportanttoknow 
who responded to the two questions  asked on this subject and what role they play in this 
particular process,  We will bemotig  to identi@ the S9WWpr~bl~~ns,SN~hw ski& 
tummr  and confhsion over differences in Federal and statt terminology. 
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 plans 
aggregate the appeals information across qo~ercj~  Medic~e,  and Medicaid  ~embers. 
New plan-level appeals reporting requirements should resolve the need for Medicare-only 
information, and respond to your 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 types of mistalceshealth plain 
make in operating an appeals syst~  and the needs that plans have for clear, distinct 
information and tmining about the Medieare managed care requirements (and how these 
differ from state requirements for thck commercial and Medieaid enrollees), We will 
consider the ~txxmmmndationspresenteiL