Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
MEDICARE  HMO  APPEAL  AND 
GRIEVANCE  PROCESSES 
Sutvey  of HMOS  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 
Survey  of HMOS  EXECUTIVE  SUMMARY

PURPOSE 
To  evaluate  the  effectiveness  of Health  Maintenance  Organizations  (HMOS) 
processing  of Medicare  beneficiary  appeals  and  grievances. 
BACKGROUND 
Beneficiaries  mayjoinarisk  HMO  through  the  Medicare  program.  Fora 
predetermined  monthly  amount,  the  HMO  provides  Medicare  covered  medically 
necessary  services.  Thegoals  ofthis  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. 
To  determine  how  HMOS  were  implementing  these  processes,  we  surveyed  132 
Medicare  risk-based  HMOS  that  had  at  least  450  enrollees  in April  1995.  We  also 
obtained  and  analyzed  marketing/enrollment  materials  and  operating  procedures  from 
these  HMOS. 
FINDINGS 
HMOS z%cowectlycategorized appl  and grievance iwues. 
Fifty  percent  of the  HMOS  responding  to  our  sumey  categorized  appealable  issues  as 
grievances,  while  36 percent  categorized  grievance  issues  as  appeals,  and  10 percent 
reported  using  incorrect  processes  for  cases  involving  both  appealable  and  grievable 
issues.  The  distinction  between  appeals  and  grievances  is important  to  beneficiaries 
i  because  appeal  cases  (denials  of services  or  payment)  are  subject  to  independent 
Federal  review  for  appropriatenessof  the  HMO  decision  while  grievances  are  only 
subjectto  internal  HMO  reviews. 
HMOS mar4@ing@ud7ment  znaterids and operating procedures that we rmewed contaiiz 
incomzt  or incomplete  informationon appeal and grievance rights. 
Sixty-six  percent  of the  HMOS  distribute  materials  to  beneficiaries  and  69 percent  of

HMOS  use  operating  procedures  that  contain  either  incorrect  or  incomplete

information  regarding  beneficia~  appeal  and  grievance  rights.  Some  examples  include

no  information  on  beneficiary  rights,  incorrectly  combined  appeal  and  grievance

processes,  and  inaccurate  definitions  or  no  distinction  between  appeals  and  grievances.

HMO.Ydo not maintain statistical kfonnation  neixkd for the ongoing evahuztion of 
appeal and ~evance  pmctices. 
Twenty-three  HMOS  (18  percent)  could  not  produce  the  statistical  information 
requested  for  this  inspection  relating  to  numbers  of appeal  and  grievance  cases.  This 
poses  significant  problems  considering  that  such  statistical  information  is needed  by 
the  Health  Care  Financing  Administration  (HCFA),  beneficiaries,  and  others  as  a 
basis  for  evaluating  HMO  performance. 
Some HMO  staff report they do not have a HCFA  HMO/CM~  Manual - othtm report 
need for  tiprovernents  in the Manual 
Eight  HMOS  (six percent)  report  that  staff  responsible  for  processing  appeals  and 
grievances  do  not  have  the  HMO/CMP  Manual,  the  manual  created  by  Office  of 
Managed  Care  for  HMOS  to  use  as guidelines  in these  processes.  Others  report  a 
need  for  improvement  in the  guidelines  for  appeals  and  grievances  (10  percent), 
additional  services  (23  percent),  and  emergency/urgent  care  (7 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 
functions.  Currently,  they  are  also  working  with  HMOS  to  develop  national  guidelines 
for  marketing  materials,  improve  informational  publications,  research  data  reporting 
needs,  and  have  obtained  funds  to  evaluate  problems  in the  area  of appeals  and 
grievances.  While  HCFAS  efforts  should  favorably  impact  these  processes,  we  believe 
there  is still  room  for  improvement. 
1  Competitive Medieal Plan 
11  We  recommend  that  HCFA 
  ensure that HMOS correctly distinguishand process appah  and gnevamxx 
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. 
  work with HMOS to establkh standimdizedappeal and grievance kmguage 
requirements in marketinglenrolbnent muterid  and operating procediires. 
- 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. 
--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  services  are  being  sought. 
 require HMOS to repit  Medicare contract spe+c  data on appeal and grievance 
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). 
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 
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 
111  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

RELATED  REPORTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..2

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5

  Incorrectly  Categorized  Appeal  and  Grievance  Issues  . . . . . . . . . . . . . . . . . . . .  5

  Marketing/EnrollmentMaterials  and  Operating  Procedures  . . . . . . . . . . . . . . . .  6

 
Statistical  Information  Not  Maintained  . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7


Improvement  in HMO/CMP  Manual  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...9

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...11

Agency Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...12

APPENDICES

A  Most  Common  Grievable/Appealable  Issues  Reported  . . . . . . . . . . . . . . . . .  A-1

B:  Procedural  and  Marketing/Enrollment  Information  . . . . . . . . . . . . . . . . . . . .  B-1

c-1

CHCFAResponse  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  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  evaluate  the  effectiveness  of Health  Maintenance  Organizations  (HMOS) 
processing  of Medicare  beneficiary  appeals  and  grievances. 
BACKGROUND 
Lq@ation 
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.

Risk and 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 percent  since  1993,  HCFA  reports  that  enrollment  in 
risk-based  plans  has  grown  105 percent. 
2
  Appeal  & Grikvance I%nxsses
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  serves  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  payment  for  services  made  by  the  HMO. 
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  sewices  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  beneficiary  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  (ALJ)  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 
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. 
3
 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  HCFA,  ALJ, 
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. 
METHODOI-XIGY 
In  this  inspection,  we  surveyed  and  collected  procedures  and  marketing/enrollment 
materials  from  132 risk-based  HMOS,  each  with  at  least  450  Medicare  enrollees  as  of 
April  1995.  The  survey  instrument  was  tested  in three  HMOS  to  ensure 
understandability  and  comprehension.  Our  universe  of HMOS  came  from  HCFAS 
Monthly  Report  of Medicare  Prepaid  Health  Plans.  We  did  not  include  cost-based 
and  HCPPS  in  the  sample  as  the  majority  of Medicare  beneficiaries  are  enrolled  in 
risk-based  HMOS.  We  received  survey  responses  from  all  132 risk-based  HMOS  and 
compiled  this  data  into  frequency  distributions.  We  also  conducted  a content  analysis 
of  all  materials  received  from  the  HMOS  comparing  them  to  Federal  regulations  and 
the  HMO/CMP  Manual,  and  whether  they  provide  a reasonable  approach  for 
processing  beneficiaries  complaints. 
This  report  is based  on  our  review  of self-reported  information  and  materials  received 
from  the  HMOS. 
We  conducted  our  review  in accordance  with  the  Qualify  Standard  for Iinpections 
issued  by  the  Presidents  Council  on  Integrity  and  Efficiency. 
4 FINDINGS

HMOS  1NC0RRECTL%  CATEGORIZED  APPEAL  AND  GRIEVANCE  ISSUES 
  Fifiypercent  of the HMOS categorized appealable iwues asgrievances. 
The  incorrect  processing  of denials  of services  or  payment  for  services  as

grievable  issues  has  important  implications.  Because  grievable  issues  are  only

subject  to  HMOS  internal  review,  beneficiaries  are  being  denied  due  process  as

established  by  42 CFR  417.622  for  appeal  cases,  and  the  right  to  an

independent  Federal  review  of an  HMOs  negative  determination.  Further,

beneficiaries  may  suffer  out-of-pocket  expenses  and  potential  health  related

problems  from  inappropriate  denials.

To  determine  how  HMOS  categorize  complaints,  we  asked  the  plans  in  two

separate  survey  questions  to  identify  from  a list  of options  which  complaints  are

considered  appealable  and  which  are  grievable.  The  number  of errors  in

categorizing  appeal  and  grievance  issues  is shown  in Table  1.  The  table

illustrates  the  amount  of confusion  HMOS  had  in  categorizing  the  issues.  In

completing  their  surveys,  some  HMOS  responded  that  certain  issues  were

considered  as both  appeals  and  grievances. 
Table 1 
HMOsl LNCORIUXII.Y  CATEGORIZING  APPEALS & GRIEVANCES 
HMOS did not consider  HMOS considered these 
Appealable Issues  these issues as AppeAabl#  Grievabl~
iSSUtS  as 
Emergency versus urgent  care  18 (14%)  X3(25%) 
HMOS considered these  HMOS did not mnsider 
Grievable Issues  issuesasAppealable  these issues as Grievable 
Dissatisfaction  with rnedkal  care received  11 (8%)  7 (5%) 
Beneficiary  complaints  not taken  6 (5%)  10 (8%) 
seriously 
Waiting times for services  5 (4%9)  6 (5%) 
1 Some HMOS considered  the issue as both an appeal  and grievance. 
2 Fifty percent  or 66 HMOS were in error  in one or more  area when asked which issues they 
consider  appealable. 
3 Thirty-six percent  or 47 HMOS were in error  in one or more area when asked which issues they 
consider  grievable.  A  further  analysis  of the  responses  is provided  in Appendix  A  (page  A-1)  which 
presents  information  on  themost  conzrnon  grievance  issues  reported  byHMOs.  As 
noted  at  the  bottom  of the  Appendix,  some  HMOS  reported  that  their  most  common 
issues  received  and  resolved  through  the  grievance  process  were  actually  appealable 
issues. 
  lldy-six  pement  of the HMOS categotied  grievance iwues as appeak. 
Although  grievable  issues  can  involve  serious  allegations  of  quality  of  care  or 
mistreatment  of beneficiaries,  current  regulations  only  require  HMOS  to 
process  them  internally.  They  are  not  subject  to  an  independent,  Federal 
review.  Nevertheless,  treating  grievance  cases  as  appeals  adds  unnecessary 
costs,  HMO  staff  time  to  prepare,  and  can  consume  NDGs  time  if the  case 
reaches  that  level  (NDG  is responsible  only  for  processing  beneficiary  appeal 
cases).  Refer  to  Table  1 for  details  illustrating  HMOs  confusion  in 
categorizing  appeal  and  grievance  issues. 
For  further  details  on  this  issue,  see  the  lower  portion  of Appendix  A 
(page  A-2).  One  HMO  reported  the  most  common  issue  received  and  resolved 
through  the  appeals  process  was  actually  a grievable  issue. 
  Some HMOS incowectlyprocess cases withboth appealable and gnkvable iwues. 
The  HMO/CMp  Manual  Section  2400.1  requires  that  HMOS  process 
complaints  that  contain  both  appeal  and  grievance  issues  separately  and 
simultaneously  rather  than  through  one  process  or  the  other.  In  our  survey, 
thirteen  (10  percent)  of  132 plans  reported  they  do  not  process  these  issues 
separately  and  simultaneously.  Three  of these  plans  indicated  they  handle  both 
appeal  and  grievance  issues  through  the  grievance  process. 
HMOS  MARKETING/ENROLLMENT  MATERIALS  AND  OPERATING 
PROCEDURES  THAT  WE  REVIEWED  CONTAIN  INCORRECT  OR 
INCOMPLETE  INFORMATION  ON  APPEAL  AND  GRIEVANCE  RIGHTS 
The  HMO/CMP  Manual  Section  2402  requires  HMOS  to  inform  all  enrollees  of the 
appeal  and  grievance  procedures  and  to  provide  a written  description  at  the  time  of 
enrollment  as  part  of the  membership  materials.  It requires  them  to  clearly 
distinguish  between  appeal  and  grievance  issues  in  all written  explanations.  For 
appeals,  HMOS  are  to  describe  all steps  of the  process,  from  the  initial  determination 
by the  health  plan  to  the  judicial  review  rights  after  exhausting  administrative  appeal 
rights.  It  is to  include  time  limits,  amount  in controversy  requirements,  and 
procedures  for  filing  appeals.  The  grievance  process  explanation  must  include  how  to 
file,  time  limits  for  filing,  and  time  limits  for  each  step  in the  process. 
As  part  of this  inspection,  we  requested  that  HMOS  send  us  their  marketing  and 
enrollment  materials  distributed  to  Medicare  beneficiaries.  Our  analysis  was 
specifically  based  on  materials  received  from  HMOS. 
6 We  found  that  66 percent  of the  HMOS  distribute  materials  to  beneficiaries  that 
contain  either  incorrect  or  incomplete  information  on  their  appeal/grievance  rights  in 
HMOS.  Further,  we  found  that  69 percent  of HMOS  use  operating  procedures  for 
processing  appeals  and  grievances  that  are  deficient.  Examples  are  HMOS  that  have 
  no  information  on  beneficiary  rights. 
c	 inaccurate  definitions  of appeal  and  grievance  issues,  unclear  distinctions 
between  them,  or  no  information  included. 
	 inaccurate  definitions  of emergency  and  urgent  care,  unclear  distinctions 
between  them,  or  no  information  related  to  these  issues. 
  incorrect  or  no  money  amounts  included  within  the  steps  of the  appeal  process. 
  incorrect  procedures  that  combine  appeals  and  grievances  processes. 
  incomplete  explanation  of the  grievance  process. 
  erroneous  extra  steps  and  time  added  to  the  appeals  process. 
	 inaccurate  or  incomplete  time  frames  included  in  explanations  of steps  in the 
appeals  process. 
Appendix  B identifies  the  frequency  in which  we  noted  errors  by  category.  These 
errors  could  impact  the  level  of understanding  beneficiaries  have  of these  processes. 
Incomplete  or  incorrect  information  in materials  distributed  to  them  may  cause 
confusion.  Further,  inaccurate  operating  procedures  may  result  in HMOS  incorrectly 
processing  appeals  and  grievances. 
HMOS  DO  NOT  MAINTAIN  STATISTICAL  INFORMATION  NEEDED  FOR 
THE  ONGOING  EVALUATION  OF  APPEAL  AND  GRIEVANCE  PRACITCES 
llventy-three HMOS could not produce  the statktical information related to appeah  and
grievances.
Although  all HMOS  reported  that  they  retain  statistics  on  appeals  and  grievances,  and 
review  data  for  trends  and  processing  times,  Table  2 reveals  that  almost  one-fifth  of 
the  HMOS  were  not  able  to  produce  statistical  information  on  appeals  and  grievances. 
These  figures  are  potentially  understated;  they  do  not  include  those  HMOS  where 
incomplete  statistical  information  was  submitted  with  the  sumey  nor  those  that 
responded  with  N/A  when  the  plan  meant  it does  not  retain  data  in  the  areas  we 
requested.  TABLE 2 
HIKOSCOULD NOT PROVIDE STATISTICAL INFORMATION 
Reasons  for Lack of Information  Number  of HMOS

Could  not separate  statistical information  by contract  on appeals

and grievances when the HMO  had multiple  Medicare  risk contracts.  14 (11%)

Could  not separate  Medicare  from commercial  enrollees  to provide

information  on appeals  and grievances.  3 (2%)

Could  not produce  data for a specified time because  they either  did

not retain  it during  the time requested  or never had retained  this information.  3 (2%)

Could  not separate  appeal  cases from grievance  cases in the database.  2 (1.5%)

Could  not include all grievance cases filed by enrollees  when the HMO  processed

formal and informal grievances separately.  1 (1%)

Total Number of HMOS  23 (17.5%) 
HMOS reprted  thefolkmikg muin reasonsfor beikg unable to provhie thisreformation:
  they  do  not  retain  data  separately  when  an  HMO  has  multiple  Medicare 
contracts  and  all  appeals  and  grievances  were  processed  at  headquarters; 
  they  retain  combined  data  of commercial  and  Medicare  complaints;  and 
  they  do  not  have  the  staff  or  computer  systems  to  collect  or  retain  the  data. 
This  results  in difficulty  in  data  collection  and  analysis  of the  data.  The  information 
HMOS  do  report  may  be  skewed  or  unreliable  as  not  all HMOS  retain  the  same  data, 
if it is retained  at  all.  For  example,  one  large  HMO  in  our  sample  initially  reported  it 
had  345  grievances.  However,  upon  further  investigation,  it actually  had  over  37,000 
grievances.  The  problem  was  that  the  HMO  initially  reported  only  the  grievances  that 
they  considered  as  formal  and  not  the  informal  grievances.  Thus,  it appeared  the 
HMO  had  very  few  grievances  when  in fact  it had  thousands. 
Lack  of  consistent  terminology  for  complaints,  and  the  collection,  retention,  and 
reporting  of data  makes  it extremely  difficult  to  truly  compare  HMOS.  This  is highly 
problematic  given  that  such  statistical  information  is needed  by  HCFA,  beneficiaries, 
and  others  as  a basis  for  evaluating  HMO  performance. 
8 While  HMOS  are  not  currently  required  to  report  this  information  to  HCFA,  OMC 
officials  and  a number  of reports  cite  the  importance  and  appropriateness  of 
collecting,  retaining,  and  reporting  data.2 
SOME  HMO  STAFF  REPORT  THEY  DO  NOT  HAVE  A HCFA  HMO/CMP 
MANUAL  - OTHERS  REPORT  NEED  FOR  IMPROVEMENTS  IN  THE 
MANUAL 
Eight  HMOS  (six percent)  report  that  staff  responsible  for  processing  appeals  and 
grievances  do  not  have  the  HMO/CMP  Manual.  This  is problematic  considering  that 
the  Manual  serves  as  a major  guidance  directive  for  HMOS  in preparing  local 
guidelines  and  for  training  staff.  Of  these  HMOS,  three  improperly  categorized  appeal 
and  grievance  issues. 
While  most  plans  report  this  Manual  is sufficient,  others  report  areas  that  they  believe 
need  improvement. 
General  Guidelines 
Thirteen  HMOS  (10  percent)  report  that  guidelines  for  appeal  and  grievance 
issues  in  the  HMO/CMP  Manual  are  unclear  and  inadequate.  Of  these  HMOS, 
six improperly  categorized  appeal  and  grievance  issues. 
HMOS  also  indicated  the  need  for  simplified  definitions  of appeals  and 
grievances  and  examples  of each.  They  stated  that  providing  information  in 
lay terms  on  these  processes  would  be  helpful  in  explaining  them  to 
beneficiaries.  HMOS  indicated  that  appeal  and  grievance  terminology 
established  by  HCFA  for  HMO  materials  is difficult  for  beneficiaries  to 
understand. 
Additional  Services 
Thirty-one  HMOS  (23  percent)  reported  that  guidelines  on  additional  services 
relating  to  appeal  rights  are  inadequate  and  unclear.  Of  these  HMOS, 
14 improperly  categorized  appeal  and  grievance  issues. 
2 HCFAS OMC  has incorporated  this issue in their  Managed  Care Appeals  & Grievance 
Initiative,  a workgroup  designed  to improve  these  processes;  General  Accounting  Office  (GAO), 
Medicare:  Federal  Efforts  to Enhance  Patient  Quality  of Care  (April  1996), 29; GAO,  Medicare: 
Increased  HMO  Oversight  Could  Improve  Quality  and Access to Care (August  1995), 10-11;  Public 
Citizens  Health  Research  Group,  Serious  problems  for Older  Americans  In Health  Maintenance 
Organizations  (May  1995), 10; The  Columbia  Law Review  1994,Notes: Securing  Access To Care  in 
Health  Maintenance  Organizations:  Towards  a Uniform  Model  of Grievance  and Appeal  Procedures 
(June  1994), 22. 
9 An  additional  service  is one  that  is covered  under  the  HMOs  plan  but  is not

covered  under  traditional  fee-for-service  Medicare.  For  example,  denial  of

payment  or  authorization  for  a hearing  aid  that  the  beneficiary  believes  is

needed,  which  is covered  in the  basic  plan,  is appealable.  However,  optional

supplemental  benefits  elected  by  the  beneficiary  and  paid  for  through

additional  premium  payments  are  grievance  issues.

Most  HMOS  reported  that  this  issue  is confusing  and  unclear.  Very  little  is

included  in the  HMO/CMP  Manual  and  the  regulations  on  additional  services

and  appeal  rights.  The  plans  indicated  that  clearer  demarcation  between  what

is appealable  and  grievable  and  examples  of each  would  be  helpful.

Emergency  and  Urgent  Care 
Nine  HMOS  (seven  percent)  reported  that  the  difference  between  emergency 
care  and  urgent  care,  as defined  by HCFA  guidelines,  is problematic. 
HMOS  believe  that  the  definition  of urgent  care  is very  broad  and  requires 
the  plans  to  cover  an  extremely  wide  range  of out-of-area  services.  Several 
plans  indicate  that  it would  be  helpful  for  both  HMOS  and  beneficiaries  if 
HCFA  would  provide  working  examples  of each. 
Although  emergency  and  urgent  care  are  defined  in both  the  regulations  and 
the  HMO/CMP  Manual,  emergency  room  services  was  the  second  highest 
appeals  issue  in  cases  sent  to  NDG  in  1993  and  1994.  In  NDGs  1994  data 
report,  595  (19  percent)  of the  appeals  received  involved  emergency  services 
disputes.  Of  these  cases,  NDG  upheld  68 percent  and,  on  average,  these  cases 
involved  out-of-pocket  liability  of $579.  This  could  be  a result  of beneficiary 
confusion  about  the  difference  between  emergency  and  urgent  care. 
Our  companion  report  Medicare  HMO  Appeal  and  Grievance  Processes: 
Beneficiaries  Understanding  also  provides  detailed  information  on  beneficiary 
comprehension  of billing  disputes  involving  emergency  services.  In  our  survey, 
only  20 percent  of the  disenrollees  and  59 percent  of enrollees  knew  they  could 
appeal  their  HMOs  refusal  to  pay  a doctor  or  hospital  for  emergency  care  for 
which  they  were  billed. 
10
 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.  Currently,  they  are  also  working  with  HMOS  to  develop  national  guidelines 
for  marketing  materials,  improve  informational  publications,  research  data  reporting 
needs,  and  have  obtained  funds  to  evaluate  problems  in the  area  of appeals  and 
grievances.  While  HCFAS  efforts  should  favorably  impact  these  processes,  we  believe 
there  is still  room  for  improvement. 
recommend  that  HCFA 
ensure  that HMOS cowect~  distinguishand process appah  and gnevances. 
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. 
work with HMOS to estabbh  standardized appeal and gnevance language 
requiiemenfi  in marketinglenrollrnentmaterials and operatingprocedures. 
- 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. 
--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  sewices  are  being  sought. 
require HMOS to report Medicare contract specijticcikta on appeal and gnevance 
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). 
11
 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. 
12
 APPENDIX  A

HMO SURVEY  - Report on Process Operations 
MOST COMMON GRIEVABLE  ISSUES REPORTED  BY  ~os 
Waiting  time  for  services  19 
Phvsician  demeanor  8 
Dissatisfaction  with  services  or  provider  services  7 
Physician  preference  in medical  office  1 
Podiatry  disputes  1 
Total  Responses  137 
1 HMOS  responded  with multiple  issues resulting  in 137 total. 
2 HMOS  reported  the  most common  issues received  and resolved  through  the  grievance 
process  actually were  appealable  issues.  These  HMOS are incorrect  in processing  these 
issues  as grievances. 
A-1
 MOST  COMMON  APPEALABLE  ISSUES  REPORTED  BY HMOS 
Number of I-IJUO 
Total Responses  137 
1 HMOS  responded  with multiple  issues resulting  in 137 responses. 
2 The  HMO  reported  the  most common  issue received  and resolved  through  the  appeal 
process  actually was a grievable  issue.  This HMO  is incorrect  in processing  the  issue as an 
appeal. 
A-2
 APPENDIX  B

PROCEDURAL  AND MARKETING/ENROLLMENT  INFORMATION 
REPORTED  BY  THE  Hh@ 
Marketing/ 
Procedures  Enrollment? 
Area inError  Ddinition 
HMO  does not mention  money amounts  for appeals steps

or has incorrect  amounts.  11
 8 
HMO  will not give a reconsideration  determination  unless

case is $100 or more.  1
 1 
B-1  Marketing/ 
Proeedur62  Enrolhned 
Area in Error  Processing 
Area in Error  Time Requirements 
HMO  does not mention  they will make the initial

determination  within 60 daw  of receipt  of request.  15  9

1 Total  number  of errors  is beyond  132 HMOS - many HMOS had multiple errors  in the materials.

2 Sixty-nine percent  or 91 HMOS had either  incorrect  or incomplete  information  in their operating  procedures  for

processing  appeals  and grievances.

3 Sixty-six percent  or 87 HMOS had either  incorrect  or incomplete  information  in their marketing/enrollment

materials  for processing  appeals  and grievances.

4 HMOS were asked to provide  the HMO  procedures  for processing  appeals,  not all steps in the appeal  process.

B-2
 APPENDIX  C 
Health Care Financing Administration 
Response to Report 
c-1  cc
*-E 
4%
DEPARTMENT  OF HEALTH&  HUMAN  SERVICES  HaalthCareFinancingAdministratbn
%
%=  The Admlnlstrator 
waahlmton, O,G  20201 
DEC121996 
DATE: 
To: 
June  Gibbs  Brown 
Inspector  General 
FROM 
Bruce  C. Vladeck 
Administrator 
suB&m  Office of Inspector  General  (OIG)  Draft  Reports:  MedicareHMOAppeal 
and Grievance Processes-Ovcfiew~  (OE1-07-9440280); Medicare 
HMO Appeal and Grievance Processes--Benefidaries Undemanding, 
(0131-07-94-00281);Medicare J3M0 Appeal and Grie~ce  Processes--
Sumey of l-UviOs,(OEI-07-94-00282); %fedicare IIM~ Appeal and 
Grievance Processes-Review  of Cases, (OEI-07-94-00283) 
we  reviewed the above-referenced reports that examine the opera.tkjnsof the Mcdkxtre 
risk-based HMOSappeal snd grievanceprooesses. We agreewith theconclusion of your 
report that improvements are needed and are working to implement a number of your 
recommendations.  Our detailed wmments are attached, 
Thankyou  for the opportunity to review and comment on this report, 
Attachment  Health CareFinancingAdministration  (HCI?A) Comments 
on Office of InsuectorGemeral (OIG} 
DraftReuorts:MedicareHealthMaintenance~lZ-tiOIE  (EM  0)  Atmeal and 
Grievance  Processes  overview.  (OEI-07-94-00280):  Medicare  HM O Appeal  and 
Grievance  Processes:  Beneficiaries  Understan&n~  (OEI-07-94-0028  11: Medicare 
HMO  At.meal .aml Grievance  Processes:  Survev  of HMOs,  (OEL07-94-00282); 
Medicare  HMO  APPeaI  and  Grlevance  ProGesses;  Review  of Cases, 
[0331-07-94-00283] 
OIG Recommendations 
OIG recommends that HCFA take the follotig  actionsto aikhess problems highlighted 
in the above studies: 
o  Actively  monitor HMOSto ensure beneficiaries arc issued written determinations, 
o	 WorkwithHMOSto establish standmb ed appeal and g&wan*  language 
requirements in marketingkmrollrnentmaterials and operating procedures, 
o  Ensure that HMOScorrectly distinguish  and process appeak and grievances. 
o	 Require HMOSto report Medicare contract-specific data on appeal and &evsnce 
cases, 
o  Mod.@ the HMO/CMPManualto Glai&  and  speci&  keyrequirements, 
o  Broadeneffortsto formally trah  IIMOS on the appeiil and grievance proGesses. 
HCFA Rewonse 
We agree that improvements  am needecl  We have a comprehensive  effort underway 
calledtheMedicareAppeals and Griewuwe Initiative (MAGI) whiGhincludes a number 
of objectives that are direetly related to the recommendations in your reports.  Our 
objectives include identifjdng and meeting the information needs of beneficiaries 
regarding their appeal rights; promoting hmlfi plan accountability by developing and 
imprutig  information on appeals and making rnemingful information mop  available; 
and refining mechanisms for monitorkg  andassistinginthecontinuousimprovement  of 
health  plan  performance.  Page 2 
OIG and HCFA jointly issued a Medicare benefi&uy  advisory bulleti  entit.l@ What 
Medicare Beneficiaries Need to Know About HMO Arrangements: K.nowYour R@hts. 
This easy-to-read docuumt  contairq informationon appeal@#@ filing CWWMMS,  and 
rights to erneqymcyand urgently  neededserviea.  Copiesofthisbulletin are being 
distributed nationally.  Additionally, significant changes were made to improve the 
managedcm  portionsoftheMtxlkareHandbook w~*  ww  $entto @ W@WU@  MS 
year.  New datareportingrequirements on pIan-level reconsiderations areundex 
development andmaybe institutedas early as rnid-1997.  We also pkn to restructureand 
shorten the time lines for handlinghealthewe decisions and reeansiderations by,health 
plans. 
Beneficiaries  Understanding 
,We are pleased to see the hi~  level of knowledge among Medieareknrolkes&irding 
theirrightto appeal and file complaints,  This is an improvement over w earlier finding, 
and onewebelieveresults hornbothFederalprogramandpkm@@ts%t  educating 
beneficiaries and providingnotices,Withregard@thefintig  thatbwwfkiwkstid  a 
lesser level  of awareness as to when to exercise their appeal rights, forthcoming 
regulations cku-iijdngthe right to appeal when servicek are reduced or tcrninate~  and 
when to provide notices of noncove~ageat these points in care managemen~ should 
significantly help address &isproblem,  We wiU consider the recommendations in this 
area. 
SurvevEIMOS 
Incorrect categorization  of appeals as grievances  is an area for improvement  identiled  in 
our MAGI initiative.  However,  we question  the percentage  and methodology  set forth i-u 
this report.  BecausecertainstafEwithintheorganizationasltructureofanHMO,orstaff 
at delegated medical groups within the HMOs nemor~  are generally responsible for 
assigning complaintstutheappeakorgrkvanGctiaGf$itwouIdbeimportanttohow 
who respondedto thetwo questions  asked  On this  subject  ancl what  role they play in this 
particular process,Wewillbemovingto icknti&thesome problems)surhw s!..S5 
turnoveraid coml!hsioonverdifferencesinFederalandstateterminology. 
The @e  of statistical  tiorrnation  soughtby 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 ~,~erci~  MedicWe,andMedicaid~embers. 
New plan-leveI appeals r~port.ingrequirements should resolve the need for Medicare-only 
information, and respond to your recommendation.  Page 3 
RowCwOfc.ases 
We have concerns aboutthesmallsamplesizes andmmiberof cases usedtopresent 
tidings  inthisreporb However,thereportid-es  theIypesof mistakes healthplans 
make in operating an appeals syst~  and the needs that plans have for clear, disti.net 
inftion  and tmining about the Medieam  managed cam requirements (and how these 
Mm  from state requirements for their oommereial and Medioaid enrollees), We will 
consider the nxxxnrnendations presented.