DEPARTMENT OF HEALTH &. HUMAN SERVI.CES 	 Office of Inspector General 
Washington, D.C. 20201 
OCT  22 2009 

TO:	  Charlene Frizzera 
Acting Administrator 
Centers for Medicare & Medicaid Services 
FROM:  stuart Wright 
Deputy Inspector General 
for Evaluation and Inspections 
SUBJECT:	  Memorandum Report:  "Beneficiary Appeals in Medicare Advantage," 
OEI-OI-08-00280 
This~emorandum report provides information about appeals made by beneficiaries in Medicare 
Advantage (MA).  Specifically, it provides information on:  (1) outcomes oforganization 
determinations and first-and second-level appeals ofbeneficiaries enrolled in MA, (2) Medicare 
Advantage Organization (MAO) compliance with timeliness requirements for determinations 
and appeals, and (3) the Centers for Medicare & Medicaid Services (CMS) oversight ofthe MA 
appeals system. 
We found that MAOs make the vast majority of organization determinations in favor of 
beneficiaries, and deny very few.  Ofthese denials, called adverse determinations, very few were 
appealed, and upon appeal, MAOs overturned more than half oftheir own denials.  We also 
found thatMAOs decided 23 percent of adverse expedited determinations, and 18 percent of 
appeals, late.  At the second level of appeal, the Independent Review Entity (IRE) overturned 
about one in five adverse MAO reconsiderations.  Finally, CMS'identified many MA contracts 
that failed to meet appeals-related audit elements. 
Our review also raises questions and concerns.  We found that beneficiaries appealed fewer than 
1 in 10 adverse determinations.  Although no rate of appeal is expected or correct, further study 
could examine factors that might explain this rate.  Further study could also identify differences 
between denials that beneficiaries appeal and those that beneficiaries do not appeal.  Particularly 
concerning are the problems with timeliness in processing adverse expedited determinations and 
the higher IRE overturn rate of expedited cases.  Because expedited cases concern time-sensitive 
care, it is important that such care be delivered with minimal delays. 
OEI-O 1-08-00280	  Beneficiary Appeals in Medicare Advantage  Page 2  Charlene Frizzera 
 
 
BACKGROUND 
 
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 made several 
important changes to Medicare managed care, including increasing payments to MAOs and 
renaming the program Medicare Advantage.1  As of April 2009, 10.9 million Medicare 
beneficiaries (about 22 percent of all Medicare beneficiaries) were enrolled in 752 MA 
contracts.2  These numbers represent increases of 106 percent and 164 percent, respectively, 
from 2003, when MA was enacted.  An MAO, the parent organization, may hold multiple 
managed care contracts, which are agreements to provide MA services across a specified 
geographic area.  Each contract may include multiple plans.   
 
A capitated payment system, such as that used by MAOs, could create fiscal incentives to 
underserve beneficiaries.3  A properly functioning appeals system provides a vital safeguard to 
protect against those incentives. 
 
MA Appeals Process 
The Social Security Act states that MAOs must have a procedure to determine whether a 
beneficiary is entitled to receive health services and the amount, if any, a beneficiary is required 
to pay for these services.4  It also mandates that MAOs offer beneficiaries the right to appeal an 
adverse determination.5  Further, it requires that the Secretary of the Department of Health and 
Human Services contract with an IRE to review second-level appeals in cases where an MAO 
has returned an adverse decision to a beneficiarys initial appeal.6 
 
If the IRE upholds the MAOs decision, a beneficiary can continue the appeal with an 
Administrative Law Judge, then with the Medicare Appeals Council, and finally, via judicial 
review.7  MAOs can appeal Administrative Law Judge decisions and any higher-level 
decisions.8 
 
Organization Determination.  An organization determination is any decision made by an MAO 
about whether a beneficiary is entitled to receive health services and the amount, if any, a 
beneficiary is required to pay for these services.9  For example, MAOs make organization 
 
1 P.L. No. 108-173  211 and 201. 
2 CMS, Monthly Contract and Enrollment Summary Report.  Available online at  
http://www.cms.hhs.gov/MCRAdvPartDEnrolData/.  Accessed on July 14, 2009.    
3 Government Accountability Office, GAO/T-HRD-93-10, Medicaid: States Turn to Managed Care to Improve 
Access and Control Costs, 1993.  Available online at http://archive.gao.gov/d42t14/148756.pdf.  Accessed on 
July 14, 2009. 
4 Social Security Act,  1852(g)(1)(A). 
5 Social Security Act,  1852(g)(2)(A). 
6 Social Security Act,  1852(g)(4). 
7 Social Security Act,  1852(g)(5), 42 CFR  422.600, 422.608, and 422.612. 
8 42 CFR  422.608 and 422.612. 
9 42 CFR  422.566(a). 
 
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determinations about whether to pay for temporarily out of the area renal dialysis services, 
emergency services, poststabilization care, or urgently needed services; whether to pay 
for any other health services furnished by a provider other than the MAO that the enrollee 
believes are covered under Medicare (or, if not covered under Medicare, should have been 
furnished, arranged for, or reimbursed by the MAO); or discontinuation or reduction of a service 
if the enrollee believes that continuation of the service is medically necessary.10 
 
The parties that can request an organization determination are:  the beneficiary or an authorized 
representative, the beneficiarys provider, or the legal representative of a deceased beneficiarys 
estate (in this memorandum report we refer to all of these parties as the beneficiary).11 
 
Beneficiaries can request three types of organization determinations:  a standard service request, 
an expedited service request, and a payment request.12  Organization determinations have three 
possible outcomes for the beneficiary:  favorable, partially adverse, or wholly adverse.  When the 
MAO notifies a beneficiary of a partially or wholly adverse determination, it must inform the 
beneficiary, in writing, of the right to appeal a wholly or partially adverse determination.13 
 
Table 1 shows the timeframes by which MAOs must provide their decisions on organization 
determinations.14  If an MAO fails to meet these timeframes, the determination is considered 
adverse to the beneficiary and the beneficiary may appeal.15 
 
 Table 1:  Timing for Organization Determinations and Appeals 
Organization  First-Level  Second-Level 
Type of Request 
Determination  Appeal  Appeal 
Standard Service Request  14 days  30 days  30 days 
Expedited Service Request  72 hours  72 hours  72 hours 
In accordance with Prompt 
Payment Request  60 days  60 days 
Payment Standards* 
* See 42 CFR  422.520. 
 
 
10 42 CFR  422.566(b). 
11 42 CFR  422.566(c)(1) 
12 42 CFR  422.568(a), (b), and 422.572. 
13 Social Security Act,  1852(g)(1)(B), and CMS, Medicare Managed Care Manual, Pub. No. 100-16, ch. 13, 
 40.2.2. 
14 42 CFR  422.568(a), 422.568(b), and 422.572(a).  For standard and expedited service requests, an MAO must 
make its determination and notify the beneficiary as expeditiously as the beneficiarys health requires, but no later 
than the timeframes set forth in Table 1.  42 CFR  422.568(a) and 422.572(b) allow for an extension to the 
timeframes under certain circumstances. 
15 42 CFR  422.568(f). 
 
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First-Level Appeal.  Beneficiaries have 60 days to appeal an MAOs adverse organization 
determination.16  The same parties that can request a determination can also file an appeal with  
the MAO.17  Appeals, like organization determinations, fall into one of these three categories: 
 
  Standard Service Request:  A beneficiary can appeal an MAOs refusal to authorize 
provision of a service.18 
 
  Expedited Service Request:  A beneficiary or a physician may request an expedited 
reconsideration of a determination.19  The MAO does not have to grant a beneficiarys 
request for an expedited reconsideration, unless the MAO determines that the standard 
timeframe could jeopardize the life or health of the beneficiary or the beneficiarys ability to 
regain maximum function.20  However, if a physician requests or supports an expedited 
reconsideration and states that the standard timeframe could jeopardize the life or health of a 
beneficiary or the beneficiarys ability to regain maximum function, the MAO must expedite 
the reconsideration.21 
 
  Payment Request:  A beneficiary can appeal the MAOs denial of payment for a service that 
a provider has already performed.22 
 
Table 1 also shows the timeframes by which MAOs must provide their decisions on first-level 
appeals.23 
 
The MAO must designate a person other than the one involved in making the organization 
determination to decide the outcome of the appeal.24  This outcome is called a reconsideration.  
The MAOs reconsideration is either favorable, partially adverse, or wholly adverse to the 
beneficiary.  If the reconsideration is partially or wholly adverse, the MAO must forward it to the 
IRE.25  The MAO must also notify the beneficiary that it has forwarded the case.26 
 
 
16 42 CFR  422.582(b). 
17 42 CFR  422.578. 
18 42 CFR  422.590(a). 
19 42 CFR  422.584(a). 
20 42 CFR  422.584(c)(2)(i). 
21 42 CFR  422.584(c)(2)(ii). 
22 42 CFR  422.590(b). 
23 42 CFR  422.590(a), 422.590(b), and 422.590(d).  For standard and expedited service requests, an MAO must 
make its reconsideration as expeditiously as the beneficiarys health requires, but no later than the timeframes set 
forth in Table 1.  42 CFR  422.590(a) and 422.590(d)(2) allow for an extension to the timeframes under certain 
circumstances.   
24 42 CFR  422.590(g). 
25 42 CFR  422.590(a)(2), (b)(2), and (d)(5). 
26 42 CFR  422.590(e). 
 
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If an MAO does not provide the beneficiary with a decision within the specified time, the 
outcome of the case is considered to be adverse to the beneficiary, and the MAO must forward 
the case to the IRE.27  The IRE then reviews the case as it would any partial or wholly adverse 
reconsideration.  
 
Second-Level Appeal.  CMS currently contracts with Maximus Federal Services, Inc., as the IRE.  
The IRE must review wholly or partially adverse MAO reconsiderations.28  The IRE can either 
overturn, partially overturn, or uphold the MAOs reconsideration.  When it has made its 
decision, the IRE must notify the beneficiary, the MAO, and CMS.29  If the IRE overturns the 
MAOs reconsideration, the MAO then must act within certain timeframes.  The IRE can also 
dismiss the appeal under certain conditions:  for example, if the appeal is brought by a party with 
no standing to do so, if it was not filed timely, or if a preservice appeal has become moot because 
a beneficiary received the service.30  MAOs must submit these cases to the IRE; they do not have 
the authority to dismiss them on their own.  Table 1 also shows the timeframes by which the IRE 
must provide decisions on second-level appeals.31   
 
CMS Oversight of MA Appeals Process 
CMS oversees MAOs performance in the appeals process in two ways:  through audits of 
MAOs and through data submitted by MAOs and the IRE.  CMS regional offices are responsible 
for ongoing MAO oversight.   
 
Audits.  Prior to 2007, CMS audited every Part C contract every 3 years.  However, resource 
constraints and the growth in the number of MA contracts necessitated changes to this approach.  
Beginning in 2007, CMS implemented a risk-based approach to identify contracts for audit.  
These contracts are audited by CMS regional staff.  Regional staff can also recommend that 
contracts receive focused, or for-cause, audits. 
 
CMS also uses an assessment tool called the Targeted Appeals Monitoring System to select 
contracts for audit, by identifying MA plans that are outliers in performance in processing 
appeals.  This system uses data from the IRE, as well as specific appeals-related questions from 
beneficiary surveys. 
 
CMSs annual audit strategy details the specific elements that must be reviewed in every routine 
audit for that year (CMS regional auditors can request additional elements be included during an 
 
27 42 CFR  422.590(c) and (f). 
28 42 CFR  422.592(a). 
29 42 CFR  422.594(a). 
30 Maximus Federal Services, Inc., Medicare Advantage Organization Reconsideration Process Manual,  4.2.5 
and 4.7.  CMS, Medicare Managed Care Manual, Pub. No. 100-16, ch. 13,  70.7.5. 
31 Medicare Part C Qualified Independent Contractor Task Order Statement of Work,  I.A.3.  For standard and 
expedited service requests, the IRE must make its reconsideration as expeditiously as the beneficiarys health 
requires, but no later than the timeframes set forth in Table 1.  Section I.A.3 of the Medicare Part C Qualified 
Independent Contractor Task Order Statement of Work allows for an extension to the timeframes under certain 
circumstances. 
 
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audit).  Specific appeals-related elements include whether MAOs are:  meeting timeliness 
requirements for making organization determinations and reconsiderations, meeting 
documentation requirements, and designating appropriate MAO staff to decide appeals. 
 
Data submitted by MAOs and the IRE to CMS.  Upon request, MAOs must provide beneficiaries 
with aggregate appeals data including the total number of appeals per 1,000 enrollees as well as 
the outcome of those appeals.32  MAOs should provide informational copies of these data to the 
appropriate CMS regional office.33  In 2009, CMS began requiring MAOs to submit the number 
and outcomes of organization determinations and reconsiderations.34 
 
The IRE submits reports to CMS that include aggregate MAO appeals data on an ongoing basis.  
These reports include timeliness of MAO organization determinations and reconsiderations, as 
well as MAO compliance with the IREs decisions.  The reports are derived from the Medicare 
Appeals System (MAS), a CMS system containing appeals data. 
 
When an MAO makes an adverse reconsideration, it forwards descriptive case information to the 
IRE.  The IRE staff enters this information, without verification, into the MAS.  They also enter 
second-level appeals data, such as date and disposition of the appeal, into the MAS. 
 
METHODOLOGY 
 
Scope 
This evaluation is national in scope.  We analyzed data on service-related organization 
determinations made from October 1 to December 31, 2007, and service-related appeals made 
subsequent to adverse determinations from that timeframe.  We did not analyze data on payment 
determinations or reconsiderations.  We also analyzed data on second-level service appeals 
reviewed by the IRE in which the original determination date was between October 1 and 
December 31, 2007. 
 
Data Sources 
MAO data.  To obtain data on organization determinations and first-level appeals, we drew a 
stratified random sample of 105 MA contracts from the universe of 505 MA contracts in the 
50 States and District of Columbia as of October 2007.  We excluded demonstration contracts 
and contracts not subject to the MA appeals requirements.  We stratified the 505 contracts based 
on enrollment: 
 
  high-enrollment contracts:  all contracts with more than 60,000 beneficiaries 
(25 contracts, all included in the sample);   
 
 
32 CMS, Medicare Managed Care Manual, Pub. No. 100-16, ch. 13,  170 and 170.5.1. 
33 Ibid.,  170.5. 
34 CMS, Medicare Part C Plan Reporting Requirements Technical Specifications Document, Version:  July 21, 
2009. 
 
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  medium-enrollment contracts:  contracts with 10,001 to 60,000 beneficiaries 
(40 contracts sampled out of a universe of 136); and 
 
  low-enrollment contracts:  contracts with 10,000 or fewer beneficiaries (40 contracts sampled 
out of a universe of 344). 
 
IRE data.  We analyzed data on second-level appeals from the MAS.  We also conducted 
structured interviews with IRE staff. 
 
CMS data.  We analyzed data on audits of MA contracts and summary data on corrective action 
plans.  We also conducted structured interviews with staff at five purposively selected CMS 
regional offices.  We selected the offices based on geographic diversity. 
 
Data Collection 
MAO data.  To obtain data on organization determinations and first-level appeals, we sent each 
MAO in our sample a data request.  We attempted to contact nonresponsive MAOs three times in 
writing, and once by telephone, to obtain data.  We received data for 101 of the 105 contracts in 
our sample.  Of the four that did not submit data, we dropped two contracts that served 
dual-eligible populations, effectively reducing our sample to 103 contracts.  The beneficiaries 
from those two contracts could have utilized the Medicaid appeals process, which is outside the 
scope of this study.  Of the remaining 103 contracts, 2 did not respond to our request for data, 
yielding a 98-percent response rate.35  We allowed MAOs to report aggregate counts of 
favorable organization determinations. 
 
IRE data.  We obtained the MAS data from CMS.  We also visited the IREs office in Victor, 
NY, where it reviews the majority of second-level MA appeals, and conducted structured 
interviews with staff there. 
 
CMS data.  We obtained data from CMS on the number of audits conducted in 2007 and 2008, as 
well as data on corrective action plans resulting from those audits.  We also conducted structured 
interviews with staff at five CMS regional offices, by telephone and in person. 
 
Data Analysis 
MAO data.  We concatenated all the data submissions from each MAO into two analytic files, 
one for organization determinations and one for appeals.  We then analyzed each file in SAS.   
Some MAOs provided data outside the scope of our review.  Because some MAOs submitted 
data outside our requested timeframe, we limited the organization determinations to those 
decided between October 1 and December 31, 2007.  Similarly, we limited reconsiderations to 
those requested between October 1, 2007, and February 29, 2008, (this latter date corresponds to 
the 60-day limit on appeals of adverse determinations in our requested timeframe).36  To 
 
35 We have sent CMS information regarding these two contracts under separate cover. 
36 In limiting reconsiderations by date, we recognize that some could stem from organization determinations made 
prior to October 1, 2007.   
 
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determine the timeliness of determinations and appeals, we compared the request date with the 
decision date.  We weighted the results of our analysis based on the strata described above, 
making them projectable to the universe of MA contracts.  See Appendix A for confidence 
intervals and point estimates for the results of our analysis of MAO data. 
 
IRE data.  We analyzed MAS data on outcomes of second-level appeals.  To maintain 
consistency with the MAO data, we only analyzed appeals associated with contracts in the 
universe from which we drew our sample.  We analyzed all appeals from this universe.  The IRE 
reviewed 2,212 service-related appeals that had an original determination date between 
October 1 and December 31, 2007.  It dismissed 223 appeals, beneficiaries withdrew 91 appeals, 
and disposition data were missing for 2 appeals.  Our analysis includes the remaining  
1,896 appeals.  The numbers of appeals reviewed by the IRE does not match the number of 
adverse reconsiderations made by MAOs.  This discrepancy is likely because we analyzed the 
universe of data for IRE appeals, whereas our analysis of MAO data comes from a sample of 
contracts, with projected results.  
 
CMS data.  We analyzed the number of contracts CMS audited in 2007 and 2008.  We matched 
data on contracts audited with data on unmet audit elements and corrective action plans.  We 
analyzed elements related to organization determinations and reconsiderations as specified in 
Chapter 13:  Claims, Organization Determinations, Appeals and Grievances of CMSs 
Medicare Advantage Audit Guide Version 4. 
 
Limitations 
We did not independently verify any of the information submitted by MAOs or in the MAS.  
Further, we cannot verify that MAOs provided data on all organization determinations in our 
requested timeframe, or that they provided data on all reconsiderations associated with adverse 
determinations.  Though we requested that MAOs provide only reconsiderations of adverse 
determinations that were made between October 1 and December 31, 2007, we did not match 
reconsiderations to their initial determinations.  We did not verify whether MAOs forwarded all 
adverse reconsiderations to the IRE.  Our analysis of MAO timeliness did not include whether or 
not the MAO received an extension.  Finally, because we allowed MAOs to submit aggregate 
counts of favorable organization determinations, we could not analyze their timeliness.   
 
Standards 
This study was conducted in accordance with the Quality Standards for Inspections approved 
by the Council of the Inspectors General on Integrity and Efficiency. 
 
 
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RESULTS 
 
MAOs decided the vast majority of organization determinations in favor of beneficiaries; 
they denied very few 
MAOs processed over 3.2 million organization determinations from October 1 to 
December 31, 2007.  High-enrollment contracts processed about 1.3 million determinations, 
medium-enrollment contracts processed about 1.6 million, and low-enrollment contracts 
processed about 400,000.  Overall, MAOs decided 98 percent of organization determinations in 
favor of beneficiaries, with minimal variation by contract enrollment.  See Table 2 for the 
disposition of organization determinations. 
 
 
       Table 2:  Outcome of Organization Determinations 
Number of  Percentage of 
Disposition   Organization  Organization 
Determinations  Determinations   
Favorable to member  3,196,469  97.8% 
Wholly adverse to member  65,430  2.0% 
Partially adverse to member  7,593  0.2% 
Overall total  3,269,492  100% 
Source:  Office of Inspector General (OIG) analysis of MA contract data, 2009. 
 
Of the more than 3.2 million determinations MAOs processed, just over 73,000 were wholly or 
partially adverse to beneficiaries.  Standard determinations comprised 93 percent of these 
denials; 7 percent were expedited. 
 
Although most denials were timely, MAOs decided 23 percent of adverse expedited 
determinations late.  MAOs must process expedited service requests within 72 hours.37 
Expedited service requests are those in which the MAO or the beneficiarys physician 
determines that the standard 14-day timeframe could jeopardize the life or health of the 
beneficiary or the beneficiarys ability to regain maximum function.38  Our analysis does not 
examine whether the MAO received an extension to the mandated timeframe. 
 
In contrast with expedited denials, MAOs processed only 4 percent of standard service denials 
late.  Of these late denials, one in four was more than 16 days late.  Because the timeliness 
threshold is 14 days, this means at least 1 month had elapsed since the original service request.   
 
 
37 42 CFR  422.572(a). 
38 42 CFR  422.570(c)(2). 
 
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Of those adverse organization determinations, very few were appealed, and upon appeal, 
MAOs overturned more than half of their own denials 
Beneficiaries can appeal a wholly adverse or partially adverse organization determination made 
by the MAO.  Of the 73,023 adverse determinations, MAOs received only 5,478 appeals 
(8 percent).  However, when beneficiaries did appeal, MAOs overturned their own denial 
54 percent of the time, and partially overturned an additional 2 percent of denials (see Table 3).  
Beneficiaries appealed 5 percent of the standard service-related determinations that MAOs 
denied, versus 35 percent of adverse expedited determinations.  
 
                          Table 3:  Outcome of First-Level Appeals (Reconsiderations) 
Number of 
Percentage of First-
Disposition  First-Level 
Level Appeals  
Appeals 
Favorable to member  2,966  54.1% 
Wholly adverse to member  2,428  44.3% 
Partially adverse to member  84  1.5% 
Overall total  5,478  100%* 
* Column does not add to total because of rounding. 
  
Source:  OIG analysis of MA contract data, 2009. 
 
MAOs decided 18 percent of first-level service appeals late.  MAOs must decide standard service 
appeals within 30 days and expedited appeals within 72 hours.39  When MAOs do not meet 
specified timeframes for appeals, the outcome is considered adverse to the beneficiary and the 
MAO must forward the case to the IRE.40  Our analysis does not examine whether the MAO 
received an extension to the mandated timeframe. 
 
At the second level of appeal, the IRE overturned about one in five adverse MAO 
reconsiderations 
The IRE received 2,212 service reconsiderations in which the MAOs adverse organization 
determination occurred in the last calendar quarter of 2007.41  The IRE dismissed 10 percent of 
these cases; beneficiaries withdrew their appeal in an additional 4 percent.  Our analysis 
excluded these withdrawals and dismissals.  The IRE reviewed 1,896 service appeals in which it 
rendered a decision, and decided in favor of the beneficiary in 19 percent of them.  Of these 
cases where the IRE overturned the MAOs decision, appeals for practitioner services 
(30 percent) were the most common; clinic, lab, or x-ray services (19 percent) were the second 
most common.  The IRE decided about 3 percent of service appeals partially adverse to the 
beneficiary.  See Table 4 for the breakdown of dispositions for second-level appeals. 
 
39 42 CFR  422.590(a)(1), 422.590(a)(2), 422.590(d)(1). 
40 42 CFR  422.590(c) and (f). 
41 To determine the outcome of IRE reconsiderations, we analyzed data from the MAS.  We did not match these 
data with data we received from MA contracts.  Further, the results of our analysis of MA contracts are projections.  
Therefore, the exact number of adverse MAO reconsiderations does not match the number of cases reviewed by the 
IRE.  
 
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                             Table 4:  Disposition of Second-Level Service Appeals 
Number 
of  Percentage 
Disposition  Second- of Second-
Level  Level Appeals  
Appeals 
Favorable to member  363  19.1% 
Wholly adverse to member  1,481  78.1% 
Partially adverse to member  52  2.7% 
Overall total  1,896  100%* 
* Column does not add to total because of rounding. 
  
Source:  OIG analysis of MAS data, 2009. 
 
IRE staff told us that the most frequent reason they overturn an MAOs decision is because it 
was not in accordance with Medicare coverage requirements.  On occasion, IRE reviewers need 
additional information from the MAO to render a decision.  In the event that an MAO does not 
provide requested data, the reviewer typically makes a decision favorable to the beneficiary.   
 
The IRE overturned 25 percent of adverse expedited service reconsiderations, compared with 
16 percent of standard service reconsiderations.  About 35 percent of the overturned expedited 
appeals concerned nursing home care; 23 percent related to clinic, lab, or x-ray services; and 
15 percent were for practitioner services.   
 
IRE staff told us that their review process worked well overall, although they did raise some 
concerns.  When MAOs submit case file data to the IRE, they include a standard form that 
includes the type and description of the appeal.  In some cases, IRE staff cannot determine from 
the form whether a case is a standard or expedited appeal, because the MAO marked both in 
different places.  In these cases, IRE staff review the entire case file to make an appropriate 
determination about the type of appeal.   
 
CMS identified many MA contracts that failed to meet appeals-related audit elements 
In 2007, the first year of CMSs new audit strategy, it audited 106 MA contracts.  Its strategy 
specified that all routine audits would include all audit elements related to organization 
determinations and first-level appeals. 
 
In 2008, CMS adjusted its methodology for selecting contracts to audit, moving from a focus on 
contracts to larger managed care entities.  For example, rather than auditing a single contract 
from a large MAO, CMSs audit included multiple contracts operated by that MAO.  As a result, 
CMS almost tripled the number of contracts it audited, auditing 279 MA contracts in 2008.  As 
in 2007, routine audits in 2008 included all appeals-related audit elements. 
 
Because CMS may not have much data on new contracts, it might not select them for routine 
audits until they have been in operation for some time.  As a result, staff from one CMS region 
 
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told us it holds regular conference calls with MAOs that operate contracts in its purview.  The 
region uses these calls to identify issues that can lead to a focused audit. 
 
To audit the various elements, CMS regional staff request data from the MAO.  Regional staff 
we spoke with told us that obtaining accurate, complete data is often a challenge, requiring 
multiple requests from CMS.  According to one region, the quality of data varies across 
contracts, with newer contracts requiring more assistance from CMS.  If a contract fails to 
provide the requested data, CMS will deem it noncompliant with that audit element. 
 
The content of beneficiary notices was the most commonly unmet audit element regarding 
organization determinations, and unmet timeliness elements were the most common for appeals.  
In 2007, 68 contracts had at least one unmet appeals-related audit element (64 percent of all MA 
contracts audited that year).  The three most commonly unmet elements were all related to 
organization determinations:  the content of beneficiary notices of claim denials (unmet by 
41 percent of audited contracts), making correct claim determinations (27 percent), and content 
of beneficiary notices of standard preservice denials (25 percent).  The most commonly unmet 
elements related to reconsiderations addressed timeliness:  timeliness of favorable claims 
reconsiderations, and of requests for expedited reconsiderations, both unmet by 22 percent of 
audited contracts.   
 
In 2008, 197 contracts did not meet at least one appeals-related audit element (70 percent of all 
MA contracts audited that year).  The most frequently unmet element was again related to 
organization determinations:  50 percent of audited contracts did not meet the element for 
content of beneficiary notices of claim denials.  Other commonly unmet elements for 
determinations included timeliness of requests for expedited determinations (unmet by 
39 percent of audited contracts), and making correct claim determinations (38 percent). 
The most commonly unmet audit elements for reconsiderations all concerned timeliness:  
adverse standard preservice reconsiderations (unmet by 39 percent of audited contracts), requests 
for expedited reconsiderations (38 percent), and favorable claims reconsiderations 
(34 percent).  See Table 5 for the 10 most frequently unmet elements in 2007 and 2008. 
 
When a contract does not meet an audit element, it must develop a corrective action plan and 
submit it to the CMS regional office for approval.  CMS staff told us that, to approve a corrective 
action plan, they look for a credible plan with supporting documentation that is workable and 
doable.  Once CMS accepts the corrective action plan, the contract must successfully complete 
it and submit data to CMS demonstrating improvement.   
 
For example, CMS required one contract that did not meet the audit element for content of claim 
denial notices to complete a corrective action plan.  The contract had to establish policies and 
procedures to ensure that a denial notice is issued each time a claim is denied, train staff on these 
policies and procedures, and audit denied claims monthly. 
 
 
 
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Table 5:  Most Frequently Unmet Audit Elements From 2007 and 2008 CMS Audits 
Unmet Audit Elements, 2007 
 
Number of  Percent of 
Contracts Not  Contracts Not 
Meeting Element  Meeting Element 
Audit Element  N = 106  N = 106 
Claim Denials (Notice Content)  43  40.6% 
Correct Claim Determinations  29  27.4% 
Standard Preservice Denials (Notice Content)  26  24.5% 
Favorable Claims Reconsiderations (Timeliness)   23  21.7% 
Requests for Expedited Reconsiderations (Timeliness)  23  21.7% 
Interest on Clean Claims Paid Late  22  20.8% 
Timely Payment of Noncontractor Clean Claims  20  18.9% 
Adverse Standard Preservice Reconsiderations (Timeliness)  20  18.9% 
Favorable Standard Preservice Reconsiderations (Timeliness)  20  18.9% 
Adverse Claims Reconsiderations (Timeliness)  17  16.0% 
Unmet Audit Elements, 2008 
  
Number of  Percent of 
Contracts Not  Contracts Not 
Meeting Element  Meeting Element 
Audit Element  N = 279  N = 279  
Claim Denials (Notice Content)  141  50.5% 
Adverse Standard Preservice Reconsiderations (Timeliness)  110  39.4% 
Requests for Expedited Organization Determinations (Timeliness)  108  38.7% 
Requests for Expedited Reconsiderations (Timeliness)  107  38.3% 
Correct Claim Determinations  106  38.0% 
Standard Preservice Denials (Notice Content)  98  35.1% 
Favorable Claims Reconsiderations (Timeliness)   96  34.4% 
Standard Preservice Denials (Timeliness)  93  33.3% 
Adverse Claims Reconsiderations (Timeliness)  91  32.6% 
Effectuation of Third-Party Expedited Reconsideration Reversals  53  19.0% 
     
Source:  OIG analysis of CMS audit data, 2009. 
 
OEI-01-08-00280                                             Beneficiary Appeals in Medicare Advantage  Page 14  Charlene Frizzera 
 
 
CONCLUSION 
 
We found that MAOs decided the vast majority of organization determinations in favor of 
beneficiaries, and that MAOs overturned more than half of their own denials upon appeal.  We 
also found that MAOs decided 18 percent of first-level appeals late.  Our review also showed 
that CMS audits have identified many MA contracts that did not meet its timeliness standards for 
determinations and first-level appeals. 
 
However, our review raises questions and concerns.  We found that beneficiaries appealed fewer 
than 1 in 10 adverse organization determinations.  Although no rate of appeal is expected or 
correct, further study could examine factors that might explain this rate.  For example, some 
beneficiaries may be unaware of their right to appeal an adverse determination.  This concern is 
reflected in CMSs audit findings, which showed that many MAOs failed to use CMS-approved 
notices when informing beneficiaries of a service denial.  These notices are important because 
they inform beneficiaries why the MAO denied their request and how to file an appeal.  Further 
study could also identify differences between denied requests that beneficiaries appeal and those 
that beneficiaries do not appeal. 
 
Particularly concerning are the problems with timeliness in processing adverse expedited 
determinations and the higher IRE overturn rate of expedited cases.  Because expedited cases 
concern time-sensitive care, it is important that such care be delivered with minimal delays. 
 
This report is being issued directly in final because it contains no recommendations.  If you have 
comments or questions about this report, please provide them within 60 days.  Please refer to 
report number OEI-01-08-00280 in all correspondence.  
 
OEI-01-08-00280                                             Beneficiary Appeals in Medicare Advantage  Page 15  Charlene Frizzera 
 
 
APPENDIX A 
 
Table A-1:  Confidence Intervals 
95-Percent Confidence 
         Interval 
Point  Lower  Upper 
Variable  Unweighted N   Weighted N  Estimate  Bound  Bound 
Outcome of Service Requests, Percentage 
       1,751,010    3,196,469  97.8%  97.2%  98.4% 
Favorable to Member 
Outcome of Service Requests, Percentage Partially 
            35,450         73,023  2.2%  1.7%  2.8% 
Or Fully Adverse to Member 
Type of Adverse Service Requests, Percentage 
           32,587         67,944  93.0%  90.4%  95.7% 
Standard Service Denials 
Type of Adverse Service Requests, Percentage 
              2,863           5,079  7.0%  4.3%  9.6% 
Expedited Service Denials 
Timeliness of Adverse Service Requests, 
              2,284           4,051  76.9%  69.6%  84.3% 
Percentage Expedited Decided Timely 
Timeliness of Adverse Service Requests, 
                 771           1,215  23.1%  15.7%  30.4% 
Percentage Expedited Not Decided Timely 
Timeliness of Adverse Service Requests, 
            33,686         68,214  96.1%  95.3%  97.0% 
Percentage Standard Decided Timely 
Timeliness of Adverse Service Requests, 
              1,803           2,746  3.9%  3.0%  4.7% 
Percentage Standard Not Decided Timely 
Timeliness of Adverse Service Requests,  
                 553              705  25.7%  22.8%  28.5% 
Percentage Standard 16 Days Late 
Outcome of Reconsiderations, Percentage 
              1,284           2,966  54.1%  45.8%  62.5% 
Favorable to Member 
Outcome of Reconsiderations, Percentage Partially 
                   40                84  1.5%  0.7%  2.4% 
Favorable to Member 
Timeliness of Reconsiderations, Percentage Service 
                 395              991  18.2%  7.7%  28.7% 
Reconsiderations Not Decided Timely 
Count of Service Requests, Total Number of 
       1,786,460   -  3,269,492   2,483,317   4,055,667 
Service Requests 
Count of Service Requests, Number of Service 
           46,158   -      396,959   -47,091      841,009 
Requests Processed by Low Enrollment Plans 
Count of Service Requests, Number of Service 
          471,763   -   1,603,994       857,125   2,350,863 
Requests Processed by Medium Enrollment Plans 
Count of Service Requests, Partially or Fully 
            35,450   -        73,023         56,039        90,007 
Adverse to Member 
Count of Reconsiderations, Total Number of 
Reconsiderations Processed by Medicare                2,630   -          5,478           4,096          6,859 
Advantage Organizations 
Source:  Office of Inspector General analysis of Medicare Advantage contract data, 2009.  
  
 
 
OEI-01-08-00280                                             Beneficiary Appeals in Medicare Advantage