Physician  Perspectives  of 
Medicare  HMOs 
JUNE  GIBBS  BROWN 
Inspector  General 
MAY  1998 
OEI-02-97-00070  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. 
OEIs New  York  Regional  Office  prepared this report under the direction  of John I. Molnar, 
Regional  Inspector  General.  Principal  OEI staff included: 
REGION  HEADQUARTERS 
Demetra Arapakos,  Project  Leader  Brian  Ritchie 
Jennifer  Caves  Barbara Tedesco 
Daniel  Ginsberg  Winnie  Walker 
Stuart Wright 
To obtain copies of this report, please call the New York Regional Office at (212) 264-1998 
Reports are also available  on the World  Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  EXECUTIVE  SUMMARY 
PURPOSE 

To determine  the experiences and perspectives  of physicians  who work  with  Medicare  health 

maintenance  organizations  (HMOs). 

BACKGROUND 

The Office  of Inspector  General (OIG)  has issued numerous  reports on Medicare  HMOs  over the 

past several years.  Some of these reports have raised concerns with  the impact  of HMOs  on the 

access and quality  of health care provided  to Medicare  beneficiaries. 

An HMO  is a type of managed care plan that both provides  and insures a set of health care 

services for enrollees.  Medicare  beneficiaries  have the option  of receiving  health care either 

from private  providers  on a fee-for-service  basis or from  an HMO  with  an approved  Health  Care 

Financing  Administration  (HCFA)  contract.  These HMOs  are required  to contract  with 

sufficient  numbers  of providers,  including  physicians,  to enable them to provide  adequate access 

and continuity  of care to their Medicare  enrollees.  As of April  1, 1997, 5.2 million  beneficiaries 

(approximately  13.7 percent of the total Medicare  population)  were members of one of 378 

HMOs,  up from  4.5 million  in 325 plans as of September  1, 1996. 

We used three methods of data collection  for this inspection.  First, we sent a mail questionnaire 

to a stratified  random  sample of 2,500 physicians  in June 1997.  We received questionnaires 

from  1,140 physicians,  for an overall  response rate of 46 percent.  Of the 1140 questionnaires 

returned  to us, 449 were from physicians  with  Medicare  HMO  contracts.  All  percentages 

reported  in our findings  are based on these 449 physicians.  Second, we conducted  structured 

telephone  interviews  with  25 physicians  who volunteered  to be called for a follow-up  interview. 

Third,  we reviewed  five contracts  sent to us by the physicians  we interviewed  by telephone. 

This report makes no comparison  to physicians  perceptions  of the health care provided  in a fee-

for-service  setting,  since no comparable  survey work  has yet been conducted  in this area.  While 

this report  confirms  many commonly  expressed concerns regarding  HMOs,  it also contributes 

additional  insights  into these concerns from Medicare  HMO  physicians. 

FINDINGS 

Overall  Physician  Satisfaction  With Medicare  HMOs  Is Low 

Close to one-half  of physicians  with  Medicare  HMO  contracts (43 percent)  say they are very or 

somewhat  dissatisfied  with  the Medicare  HMO,  while  just  18 percent are somewhat  or very 

satisfied.  The remaining  39 percent are neither  satisfied nor dissatisfied.  Half  of the physicians 

who  are salaried HMO  employees  (13 of 27) are satisfied overall,  compared to just  16 percent of 

i  all other physicians. 
Many  Physicians  Report  Concerns  With Medicare  HMOs 
Referral  Process 
When reporting  on referral  times, 79 percent of physicians  who  need prior  approval  for referrals 
usually  wait  5 or more minutes to get through  when  calling  the HMO  for their referral;  16 
percent wait  1 to 3 days for the HMO  to reach a decision,  and 12 percent wait  longer than 1 
week.  Close to half of physicians  (42 percent)  are dissatisfied  with  the HMO  referral  process. 
Clinical  Indenendence 
A majority  of physicians  (62 percent)  believe that working  in a Medicare  HMO  often or 
sometimes restricts their clinical  independence.  At least one-quarter  say the HMOs  concern with 
costs always  or frequently  influences  their referrals  for specialists or tests, post-acute 
arrangements,  and general treatment  decisions. 
Access To Care 
Some physicians  believe Medicare  HMOs  limit  their patients access to care.  In particular,  a 
large majority  say that fee-for-service  is better than HMOs  for access to specialists (74 percent) 
and for access to new treatments  (69 percent).  Additionally,  29 percent think  referral  restrictions 
are worse for Medicare  HMOs  than for all HMOs  in general, and 27 percent say they often feel 
restricted  in referring  their Medicare  HMO  patients for specialists and tests.  A few volunteer 
other problems  specific  to caring for HMO  Medicare  patients,  such as the greater complexity  of 
their health care needs, their  susceptibility  to dishonest HMO  marketing  practices,  and their 
inability  to understand  and work  the HMO  system to their advantage. 
Comnlaints  And  Anneals 
Forty  percent of physicians  are dissatisfied  with  the way the HMO  handles their complaints,  and 
30 percent are dissatisfied  with  the formal  appeals process.  As their  dissatisfaction  with  these 
procedures  decreases, so too does their  overall  satisfaction  with  the Medicare  HMO.  Only  one-
quarter (28 percent)  have ever formally  appealed an HMO  decision,  and one-half  (53 percent)  are 
generally  not satisfied with  how  their complaints  are resolved. 
Utilization  And  Qualitv  Assurance  Reviews 
While  not required  by regulation,  less than half (40 percent)  of physicians  say they have ever had 
a utilization  and quality  assurance review.  Thirty-seven  percent report never having  one of these 
reviews  and the remaining  23 percent do not know  if they have had one.  Of those physicians 
who  say they have had such reviews,  three-quarters  (73 percent)  say they were done 
appropriately,  but less than half (43 percent)  say they were used appropriately. 
ii  Marketing  Practices 
A few physicians  are concerned that Medicare  beneficiaries  are particularly  susceptible to 
questionable  HMO  marketing  practices.  Of the fifty-five  physicians  who  report  observing  fraud 
in a Medicare  HMO,  eleven report dishonest marketing  practices.  The other fraudulent  practices 
reported  by physicians  but not related to marketing  include  delaying  or denying  medically 
necessary services and overbilling. 
Most  Physicians  Rate Medicare  Enrollee  Knowledge  Of Their  HMO  Low 
Most physicians  believe that Medicare  enrollees do not understand  core elements of their HMO, 
such as the referral  process (70 percent),  benefits  (75 percent),  restrictions  on services (83 
percent),  and the appeals and grievance process (89 percent).  Physicians  perceptions  of 
Medicare  enrollee  knowledge  and HMO  referral  times are linked  to their perceptions  of quality 
of care.  They believe quality  of care decreases as Medicare  enrollee  knowledge  decreases or 
referral  time increases. 
Despite  The Misgivings  Cited Above, Most  Physicians  Believe  That  Their  Medicare  Patients 
Receive Good Care 
A majority  of physicians  (71 percent)  report that the overall  quality  of care Medicare  enrollees 
get at their HMO  is excellent  or good; another 21 percent rate the care as fair, while  the 
remaining  8 percent say it is poor or very poor.  Similarly,  most physicians  (62 percent)  are 
satisfied with  their relationships  with  their Medicare  patients.  Furthermore,  nearly  all (90 
percent) believe they spend an adequate amount of time with  them during  office  visits. 
CONCLUSION 
Needless to say, HCFA  should work  with  physicians  to address their  concerns about Medicare 
HMOs  and to improve  the quality  of services provided  to Medicare  HMO  enrollees.  We believe 
that greater physician  satisfaction  with  the Medicare  HMO  program  will  enhance both enrollees 
and providers  experiences with  that program. 
This survey identifies  the issues which  most concern Medicare  HMO  physicians,  many of which 
are general in nature, such as a lack of clinical  independence  and restrictions  on access to care. 
Such concerns are most likely  to be resolved through  overall  improvement  of the HMO  program. 
However,  there are other distinct  concerns we believe might  be more amenable to specific 
solutions.  In particular,  physicians  expressed the following  concerns: 
l  the appeals process 

l  beneficiary  knowledge 

l  the referral  process 

l  utilization  and quality  assurance reviews 

. . . 
111  We believe that the implementation  of the 1997 Balanced  Budget  Act  MedicarePlus  program 
provides  HCFA  with  an opportunity  to address physicians  concerns about the lack of beneficiary 
HMO  knowledge.  This program  gives beneficiaries  the option  of receiving  their Medicare 
benefits through  MedicarePlus  plans, which  would  include  HMOs  and other coordinated  plans 
such as Preferred Provider  Organizations  (PPOs).  These plans will  be required  to provide 
specific  information  to beneficiaries  at enrollment,  and annually  thereafter,  about certain plan 
features such as quality  of care, utilization  reviews,  and procedures  for appeals and grievances. 
Other approaches HCFA  may want to consider  in addressing these issues include  establishing 
HMO  performance  standards, such as for referral  times and utilization  and quality  assurance 
reviews.  It may be necessary to conduct  further  studies of specific  areas of concern.  Whatever 
approach is used, we believe a process of consultation  between  HCFA  and physician  groups 
would  be a good first step towards  resolving  some of their concerns. 
The OIG plans to periodically  repeat this physician  survey to determine  if progress is being made 
in improving  physician  satisfaction.  We also plan to continue  our surveys of Medicare 
beneficiaries  to obtain their experiences and satisfaction  with  their HMOs. 
COMMENTS 
We received comments  on the draft report  from HCFA.  They concur with  our general 
observations  and conclusion  and state that the Balanced  Budget  Act  of 1997  addresses many of 
the physicians  concerns reported  in our study.  Both the Assistant  Secretary for Management 
and Budget  (ASMB)  and HCFA  provided  technical  comments, which  have been incorporated 
into the final  report when appropriate. 
The HCFA  suggests that we remove a reference in our conclusion  to prior  OIG recommendations 
on strengthening  the appeals and grievance procedures  for beneficiaries.  We agree with  their 
suggestion  and have removed this reference from  our report. 
The HCFA  also notes that our report  does not indicate  whether  physician  experience with 
Medicare  HMOs  differs  from their experience  with  non-Medicare  HMOs  and suggests that it 
would  be helpful  to conduct  a comparable  survey of physicians  about the Medicare  fee-for-
service system.  We agree that it would  be useful to study these comparisons;  however,  such 
analysis was not within  the scope of our work. 
The full  comments  from  HCFA  are presented in Appendix  F. 
iv  TABLE  OF  CONTENTS 
PAGE 

EXECUTIVE  SUMMARY 
INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..l 
FINDINGS  ...................................................................  . 
Overall  Physician  Satisfaction  With  Medicare  HMOs  Is Low  .........................  6 

Physicians  Report  Concerns  with  Medicare  HMOs  .................................  .7 

Physicians  Rate Medicare  Enrollee  Knowledge  of HMO  Low  ........................  11 

Despite  Misgivings,  Physicians  Believe  Medicare  Patient  Care Is Good  ................  12 

CONCLUSION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...14 

APPENDICES 
A:  Sample Selection  .........................................................  A-l 
B: Profile  of Medicare  HMO  Physicians  .........................................  B-l 
C: Non-respondent  Analysis  ...................................................  C-1 

D: Confidence  Intervals  for  Key  Survey  Questions  ................................  D-l 

E: Statistical  Tests for Key  Findings  .............................................  E-l 
F:Comments  ...............................................................  F-l  PURPOSE 
To determine  the experiences and perspectives  of physicians  who work  with  Medicare  health 
maintenance  organizations  (HMOs). 
BACKGROUND 
The Office  of Inspector  General (OIG)  has issued numerous  reports on Medicare  HMOs  over the 
past several years.  Some of these reports have raised concerns with  the impact  of HMOs  on the 
access and quality  of health care provided  to Medicare  beneficiaries.  These previous  studies 
have surveyed only  Medicare  HMO  enrollees and administrators.  This survey obtains the 
perspectives  of another important  player  in the Medicare  HMO  industry,  the physician. 
The HMO  Industry 
A health maintenance  organization  (HMO)  is a type of managed care plan that both provides  and 
insures a set of health care services for enrollees.  Most  HMOs  operate on a gatekeeper system, 
in which  a patient  selects a primary  care physician  from a group of approved plan providers  to 
act as her or his first point  of contact within  the health care system.  This physician  must 
authorize  any specialist,  hospital,  or other type of care the patient receives. 
Three basic models currently  dominate  the HMO  market.  In the first, a staff model, physicians 
practice  solely as employees  of the HMO  and normally  are paid a set salary.  In the second, a 
group model, the HMO  contracts with  medical  groups to provide  specific  covered services in 
exchange for a negotiated  payment  which  is then distributed  among the groups physicians. 
Finally,  an individual  practice  association  (IPA)  contracts with  individual  physicians  who then 
see patients in their private  practices.  Unlike  those in staff models, physicians  in IPA  and group 
HMOs  can participate  in multiple  managed care plans. 
Medicare  HMOs 
In certain geographical  areas, Medicare  beneficiaries  have the option  of receiving  health care 
either from private  providers  on a fee-for-service  basis or from an HMO.  To participate  in the 
Medicare  program,  an HMO  must apply  for either a risk or a cost contract  from HCFA.  Both 
contracts require  the HMO  to provide  all services covered by Parts A and B of Medicare.  Those 
HMOs  with  risk contracts  are paid on a prospective  per capita basis.  They receive a set premium 
per Medicare  enrollee,  regardless of how much care each patient  actually  receives.  Risk plans 
must assume financial  responsibility  for providing  all necessary covered services to Medicare 
enrollees.  They are required  to absorb any financial  losses, but are permitted  to retain any 
savings.  Cost plans are paid on a reasonable cost basis, with  adjustments  made at the end of the 
year for variations  from the predicted  budget. 
1 
 Growth  in Medicare  HMOs 
The Medicare  HMO  program  has experienced  rapid growth  over the past several years, adding 
new enrollees at a rate of more than 80,000 per month  in 1996.  As of April  1, 1997, 5.2 million 
beneficiaries  (approximately  13.7 percent of the total Medicare  population)  were members of one 
of 378 HMOs,  up from 4.5 million  in 325 plans as of September  1, 1996.  Participation  in risk 
plans accounts for most of the recent growth  in Medicare  HMOs.  Enrollment  in HMO  plans 
varies greatly  among geographic  locations.  The proportion  of beneficiaries  in Medicare  HMOs 
ranges from  over 35 percent in California  and Arizona,  to none in several other States. 
Physicians  in HMOs 
An HMO  can choose among several methods by which  to pay its affiliated  physicians.  First, the 
physicians  can be paid a set salary which  is independent  of the number  of patients treated and 
services utilized.  Alternatively,  physicians  may receive payment  on a capitation  basis.  Under 
this system the physician  is paid a fixed rate per HMO  member, regardless of the amount  of care 
each patient  actually  receives.  Providers  can also be paid on a fee-for-service  basis, in which 
they are compensated for actual services rendered.  It is possible  for a plan to pay some providers 
by capitation  and others by fee-for-service. 
The HCFA  regulations  state that a Medicare  HMO  is required  to contract  with  sufficient  numbers 
and types of providers  to enable it to provide  health care services which  will  assure adequate 
access and continuity  of care to its enrollees.  The HMO  can exercise its own discretion  in 
determining  provider  payment  methods and work  requirements.  However,  to meet HCFA 
requirements,  the following  six points  must be included  in its provider  contracts: 
1.  The provider  must agree to serve the HMO  members for a specific  period  of time. 
2.  The provider  must agree to provide  services to commercial  and Medicare  members. 
3.  The provider  must agree not to bill  HMO  members. 
4. 	 The provider  must agree to be reviewed  by the utilization  management  and quality 
assurance staff of the HMO. 
5.  Payments for services and incentive  arrangements,  if any, must be stated. 
6.  The contract  must be signed and dated by both the HMO  and the provider. 
Prior  Physician  Surveys 
Several studies have reported  on physicians  perceptions  of managed care in general but none 
have specifically  surveyed physicians  about the Medicare  HMO  program.  The Physician 
Payment Review  Commission  (PPRC),  in its Annual  Renort  To Congress,  1994, found that 32 
percent of physicians  report  serious problems  in external review  and limitations  under capitated 
plans, while  only  14 percent under Medicare  fee-for-service  report  similar  serious problems. 
Phvsicians  Weeklv  reported  an AMA  study of 1,010 physicians  in 1996 which  concluded  that a 
majority  of doctors feel that managed care is having  a negative impact  on the quality  of care and 
impairing  the doctor-patient  relationship  and that managed care is having  a negative impact  on 
2 
 the clinical  independence  of doctors.  On the positive  side, the AMA  survey also reported that 

many of the physicians  see HMOs  as having  a positive  effect on the affordability  of health care 

and on preventive  health care. 

A  1997 Commonwealth  Fund report based on telephone  interviews  with  a national  sample of 

1,7 10 physicians  reached similar  conclusions.  Physicians  perceive that managed care negatively 

affects their time spent with  patients, their  ability  to make good clinical  decisions,  and their 

ability  to keep up with  practice  guidelines.  Satisfaction  rates were higher  among physicians  in 

group or staff model HMOs  than those in other types of plans, such as IPAs. 

Prior  OIG HMO  Surveys 

The OIG Office  of Evaluation  and Inspections  has been actively  evaluating  Medicare  HMOs. 

Medicare  HMO  Appeal  and Grievance  Processes Overview,  OEI-07-94-00280,  and three other 

related inspections  on the Medicare  HMO  appeal and grievance processes reported  problems  in 

how  HMOs  implement  requirements  regarding  appeals and grievances, including  ineffective 

communication  with  Medicare  enrollees.  Another  report,  Medicares  Oversight  of Managed 

Care: Monitoring  Plan Performance,  OEI-0 l-96-001  90, found  limitations  in HCFAs  oversight 

of managed care plans.  Additionally,  the OIG is currently  completing  a survey of Medicare 

HMO  enrollees,  Beneficiary  Perspectives of Medicare  Risk HMOs,  OEI-06-96-00430.  This 

survey found,  among other things,  that most enrollees  give favorable  overall  ratings to their 

primary  doctors and HMOs  but rate the ease of getting  needed care under HMO  rules less 

favorably.  Future HMO  work  planned  for the OIG includes  a study of marketing  practices  of 

Medicare  managed care plans. 

METHODOLOGY 

Multiple  Data  Collection  Methods 

We used three methods of data collection  for this inspection.  First, we sent a mail questionnaire 

to a stratified  random  sample of 2,500 physicians.  Second, we conducted  structured  telephone 

interviews  with  25 physicians  who  volunteered  to be called for follow-up  interviews.  Third,  we 

reviewed  five contracts  sent to us by some of these physicians. 

Physician  Mail  Survey 

We were unable to specifically  identify  physicians  with  Medicare  HMO  contracts because 

neither  the Unique  Physician  Identification  Number  (UPIN)  file nor any other HCFA  database 

identifies  these physicians.  We, therefore,  selected a stratified  random  sample of 2,500 

physicians  from the UPIN  file of all physicians  who  are paid under the Medicare  program.  In 

order to maximize  the number  of physicians  with  Medicare  HMO  contracts, we eliminated  States 

with  no Medicare  HMOs.  We then stratified  our sample into two  groups -- those from  States 

with  high Medicare  HMO  enrollment  and those from  States with  low  Medicare  HMO 

enrollment.  The 13 States with  high  enrollment  account for 84 percent of Medicare  HMO 

3 
 enrollment  nationwide.  We selected 1,500 physicians  from the high stratum and 1,000 
physicians  from the low  stratum, excluding  non-medical  doctors such as chiropractors  and 
podiatrists,  residents and interns, and pediatricians.  See Appendix  A for further  discussion  of the 
physician  sample selection. 
We then sent a questionnaire  to each of these 2,500 physicians  in June 1997.  The questionnaire 
had a filter  question  which  asked the physician  if he or she had a current  or recent (within  the 
past year) contract  with  a Medicare  HMO.  Physicians  with  such a contract  were instructed  to fill 
out the questionnaire.  Those without  a Medicare  HMO  contract  were asked to return the 
questionnaire  indicating  they had no such contract. 
After  8 weeks of data collection,  during  which  time we conducted  a second mailing  to non-
respondents,  1,140 questionnaires  were returned to us, for an overall  response rate of 46 percent. 
Additionally,  we were unable to locate  187 of the 2,500 physicians.  Our response rates between 
strata were almost identical:  45 percent for the high  stratum and 46 percent for the low  stratum. 
This response rate, while  less than 50 percent, compares favorably  to the lower  response rates 
achieved in prior  physician  surveys discussed in the background. 
Of the 1,140 questionnaires  returned to us, 449 were from physicians  with  Medicare  HMO 
contracts.  All  percentages reported  in our findings  are based on these 449 physicians.  The other 
691 physicians  we heard from had no Medicare  HMO  contract.  Of the 449 Medicare  HMO 
physicians,  328 were from the high  stratum and 121 were from the low  stratum.  We weighted 
the data collected  from these 449 surveys by stratum.  See Appendix  B for a profile  of the 
responding  Medicare  HMO  physicians. 
While  relatively  good for a survey of physicians,  our response rate of 46 percent suggests the 
possibility  of non-response  bias.  We attempted to conduct  a follow-up  telephone  survey with 
150 randomly  selected non-responding  physicians,  but were able to complete  interviews  with 
only  five of them.  However,  we did conduct  a non-respondent  analysis of all 2,500 physicians  in 
our sample by analyzing  several variables which  may have influenced  responses.  See Appendix 
C for this analysis. 
All  differences  reported  between  subgroups  are statistically  significant  at the 95 percent 
confidence  level.  See Appendix  D for confidence  intervals  for key survey questions  and 
Appendix  E for statistical  tests for key findings. 
Physician  Telephone  Interviews  and Contract  Review 
On the mail questionnaire,  we asked physicians  if they would  be willing  to be called for a follow-
up telephone  interview.  Seventy-nine  physicians  volunteered.  We attempted to reach all of these 
physicians  at least twice,  and completed  interviews  with  25 of them.  Our telephone  interviews 
collected  additional  qualitative  data to supplement  our mail  survey. 
We also asked each of the 25 physicians  we interviewed  for a copy of their Medicare  HMO 
4 
 contract.  Some were reluctant  to share these with  us.  We obtained  five contracts  which  we 
reviewed,  looking  at both overall  content and specific  clauses which  illustrated  some of the 
issues cited by physicians  in the mail  survey. 
Reporting  Findings 
The reader should keep two  points  in mind while  reading this report.  First, this report makes no 
comparison  to physicians  perceptions  of the health care provided  in a fee-for-service  setting, 
since no comparable  survey work  has yet been conducted  in this area.  Second, while  this report 
confirms  many commonly  expressed concerns regarding  HMOs,  it also contributes  additional 
insights  into these concerns from Medicare  HMO  physicians. 
This inspection  was conducted  in accordance with  the Quality  Standards  for  Inspections 
issued by the Presidents Council  on Integrity  and Efficiency. 
5 
 OVERALL  PHYSICIAN  SATISFACTION  WITH  MEDICARE  HMOs  IS LOW 
Close To Half  Are  Dissatisfied  Overall 
When asked to rate their overall  satisfaction  with  their Medicare  HMO,  physicians  report low 
levels of satisfaction,  as illustrated  in Graph A below.  Forty-three  percent of physicians  say they 
are very or somewhat  dissatisfied  with  their HMO. 
On the other hand, just  18 percent of physicians  are somewhat  or very satisfied,  and the 
remaining  39 percent report that they are neither  satisfied nor dissatisfied.  These findings  are 
similar  to findings  from  other physician  surveys noted in the background. 
Graph A 

Proportion  Of Physicians  Satisfied  With  Medicare  HMOs 

EE 
Very  Satisfied 

Y  Somewhat  Satisfied 

La
~  Neither 

n 
Somewhat  Dissatisfied 

R  Very  Dissatisfied 

Satisfaction  varies among different  groups of physicians.  Half  of the physicians  who  are salaried 
HMO  employees  (13 of 27) are satisfied overall,  compared to 11 percent of  physicians  in solo 
practice  and 16 percent of physicians  in group practice.  Similarly,  physicians  who  are on the 
staff of an HMO  are more satisfied overall  (38 percent)  than those who  see their Medicare  HMO 
patients in their private  practices  (17 percent).  It appears that physicians  employed  full-time  by a 
6  Medicare  HMO  view  it differently  than physicians  who work  with  the HMO  on only  a part-time 
basis, perhaps because they are more familiar  with  the HMOs  operations  or are more invested in 
its success. Finally,  50 percent of specialists  are dissatisfied  with  HMOs,  compared to just  29 
percent of primary  care physicians. 
Satisfaction  does not vary by other physician  characteristics.  Physicians  satisfaction  levels do 
not appear to differ  significantly  based on the number  of years they have been in practice  or 
based on the size of their Medicare  HMO  practices.  Satisfaction  levels are also similar  between 
physicians  from  States with  high Medicare  HMO  enrollment  and those from  States with  low 
enrollment. 
MANY  PHYSICIANS  REPORT  CONCERNS  WITH  MEDICARE  HMOs 
Confirming  general opinion,  physicians  report  several concerns with  Medicare  HMOs.  These 
range from  operational  issues such as referral  practices, to restrictions  on their clinical 
independence.  These concerns are linked  to physicians  overall  dissatisfaction  with  Medicare 
HMOs. 
Referral  Process 
A majority  of physicians  have some experience with  their Medicare  HMOs  referral  process. 
Sixty-four  percent routinely  refer their Medicare  patients to specialists or for tests, and most of 
them need prior  approval  for their referrals. 
Most physicians  (79 percent)  wait  5 or more minutes to get through  to the HMO  when calling  for 
approval  of referrals;  30 percent of these wait  more than 30 minutes.  One physician  exclaims 
that every time our office  calls [the HMO]  we are placed on hold for an average of 45 minutes! 
Tables A below  illustrates  the length  of time it takes physicians  to get through  when calling  their 
HMO  for approval  of referrals. 
Table A 
Length  Of Time  To Get Through  To HMO  When  Calling  For  Approval 
Right  ~  Less than  5 to 30  More  than 
away  5 minutes  minutes  30 minutes 
6%  15%  49%  30% 
7 
 One quarter (27 percent)  of physicians  wait  3 or more days for the HMO  to make a decision  on 
their referrals.  Table B below  illustrates  the length of time for HMOs  to make this decision. 
Table B 

Length  Of Time  For  HMO  To Make  Decision 

Physicians  note that the referral  process varies widely  among Medicare  HMOs.  This lack of 
uniformity  in paperwork  and procedures  may create additional  administrative  work.  Not 
surprisingly,  a majority  of physicians  (82 percent)  say they would  favor a uniform  referral 
process among all Medicare  HMOs. 
Physicians  who  are salaried employees  of HMOs  report  fewer problems  with  the referral  process 
than physicians  in other types of practices.  Nearly  half of salaried HMO  physicians  (12 of 27) do 
not need HMO  approval  prior  to referring  their Medicare  HMO  patients for specialists or tests. 
Of those who  need pre-certification,  three-quarters  are able to get through  to an HMO 
representative  within  5 minutes,  compared to less than one-quarter  of physicians  in other types of 
practices. 
Forty-two  percent of physicians  are somewhat  or very dissatisfied  with  the HMO  referral 
process.  As physician  satisfaction  with  this process decreases, so too does their overall 
satisfaction  with  the Medicare  HMO.  A majority  (81 percent) who  are satisfied with  the HMO 
referral  process are also satisfied overall,  while  just  7 percent of those dissatisfied  with  the 
referral  process report being  satisfied overall. 
Three of the physicians  we interviewed  by telephone  volunteer  that they are required  to refer 
patients to poor quality  providers  (e.g., radiology  groups, medical  equipment  suppliers) just 
because these providers  have contracts with  the HMO.  One of the physician  HMO  contracts we 
reviewed  stipulates  this requirement  with  the following  clause:  Referral  Physician,  to the extent 
possible,  agrees to use those inpatient,  extended care, ancillary  service and other health facilities 
and health professionals  which  have contracted  with  [HMO].  Another  physician,  discussing  a 
lab he must use, says, They  get things  wrong  all of the time, and the contracts prohibit  the 
physicians  from telling  the patients to go somewhere  else to get the tests done correctly. 
Clinical  Independence 
Other HMO  restrictions  also affect physicians  satisfaction  with  the Medicare  HMO.  A majority 
of physicians  (62 percent)  believe that working  in a Medicare  HMO  at least occasionally  restricts 
their clinical  independence.  Twenty-three  percent say they often feel restricted,  and 39 percent 
say they sometimes feel restricted.  Additionally,  half of the physicians  believe working  in a 
8 
 Medicare  HMO  only  sometimes (40 percent)  or rarely  (15 percent)  allows  them to practice 
medicine  the way they think  is appropriate. 
Some physicians  also believe that their clinical  independence  has been restricted  by cost savings. 
One-quarter  (27 percent)  say the HMOs  costs always  or frequently  influence  referrals  for 
specialists or tests, 26 percent say costs always  or frequently  influence  post-acute  arrangements 
for their Medicare  patients,  and 20 percent believe costs always  or frequently  influence  general 
treatment  decisions.  A few physicians  say that over-emphasis  on the Medicare  HMOs  profits 
detracts from the medical  care provided  to its enrollees.  One respondent,  expressing the views  of 
many, says that HMOs  are businessmen  practicing  medicine  without  a license. 
Many  physicians  also express dissatisfaction  with  the method or amount of their payment  for 
their Medicare  HMO  patients.  More  than half (61 percent)  are very or somewhat  dissatisfied 
with  how  much they are paid by the HMO.  However,  fewer physicians  (23 percent)  say this is 
the factor which  most influences  their dissatisfaction  with  the Medicare  HMO.  Furthermore,  a 
few say they only  break even or lose money when treating  Medicare  HMO  patients, while  others 
mention  that the HMO  does not always pay them on time. 
Access  To Care 
In assessing Medicare  beneficiaries  access to care, more than one-half  of physicians  rate the 
traditional  fee-for-service  system higher  than the HMO  system.  A large majority  say fee-for-
service is better than HMOs  for access to specialists  (74 percent)  or for access to new treatments 
(69 percent).  I have to send patients out of town  to see some specialists because there are not 
enough participating  HMO  physicians  in town,  comments  one physician.  Another  physician 
says, HMOs  limit  care through  inconvenience.  Finally,  half of physicians  (54 percent)  say fee-
for-service  offers a wider  range of benefits than HMOs  for Medicare  beneficiaries. 
Physicians  also cite particular  problems  with  making  referrals  for their Medicare  HMO  patients. 
Twenty-nine  percent of physicians  think  referral  restrictions  are worse for Medicare  HMOs  than 
for all HMOs  in general, and another quarter (27 percent)  say they often feel restricted  in 
referring  their  Medicare  HMO  patients for specialists or tests.  Furthermore,  some of the 
physicians  we interviewed  by telephone  believe the referral  process is problematic  for Medicare 
beneficiaries  because they often do not fully  understand  the process.  The referral  process, 
states one, is too difficult  for elderly  patients. 
A few physicians  volunteer  other problems  in their HMO  specific  to the elderly.  Several point 
out that due to the greater complexity  of caring  for Medicare  patients and their comparatively 
poor health status, HMO  treatment  restrictions  are particularly  problematic  for this population. 
Other physicians  believe Medicare  beneficiaries  may not be getting  the best care because they are 
not able to understand  and work  the system to their advantage. 
9 
 Complaints  and Appeals 
Forty  percent of physicians  are dissatisfied  with  the way the HMO  handles physician  complaints, 
and 30 percent are dissatisfied  with  the formal  appeals process. Dissatisfaction  with  these 
processes also contributes  to their  overall  dissatisfaction  Most  (63 percent)  who  are satisfied 
with  the way the HMO  handles physician  complaints  are satisfied overall,  compared to just  4 
percent of those dissatisfied  with  how  complaints  are handled.  Finally,  50 percent who  are 
satisfied with  the appeals process but only  3 percent who  are dissatisfied  with  that process are 
satisfied overall  with  the Medicare  HMO. 
Only  one-quarter  (28 percent)  have ever formally  appealed an HMO  decision.  Those who report 
their clinical  independence  is frequently  restricted  are more likely  to have formally  appealed an 
HMO  decision  (43 percent)  compared to those who rarely  feel restricted  (17 percent). 
Furthermore,  one-half  of all physicians  (53 percent)  are generally  not satisfied with  how their 
complaints  are resolved,  and 16 percent say they have refrained  from complaining  to the HMO 
about something  because they thought  it might jeopardize  their contract. 
Utilization  And  Quality  Assurance  Reviews 
Not  all physicians  believe utilization  and quality  assurance reviews  are appropriately  conducted. 
The HCFA  has a policy  that requires inclusion  of a provision  in HMO  provider  contracts that 
states for  services rendered to health plan members, the provider  must agree to the review  by the 
utilization  management  and quality  assurance committees/staff.  However,  even though  not 
required  by regulation,  less than half (40 percent)  of physicians  say they have ever had any kind 
of quality  assurance review.  Thirty-seven  percent report never having  one of these reviews  and 
the remaining  23 percent do not know  if they have had one.  Of those physicians  who  say they 
have had such reviews,  three-quarters  (73 percent)  say they were done appropriately  but less than 
half (46 percent)  say they were used appropriately. 
Physicians  experiences with  utilization  and quality  assurance reviews  is related to their overall 
satisfaction  with  the Medicare  HMO.  One-quarter  (26 percent)  of physicians  who believe these 
reviews  are done appropriately  are satisfied overall,  compared to just  9 percent of those who  do 
not believe the reviews  are done appropriately.  Similarly,  33 percent of physicians  who  say the 
reviews  are used appropriately  but only  7 percent who  say they are used inappropriately  report 
being  satisfied overall. 
Marketing  Practices 
A few physicians  are concerned  that Medicare  beneficiaries  are particularly  susceptible  to 
questionable  HMO  marketing  practices.  Of the fifty-five  physicians  who report  observing  fraud 
in a Medicare  HMO,  eleven report  dishonest marketing  practices.  HMO  sales reps, writes  one 
physician,  lie  and distort  to get beneficiaries  to join.  Another  says, The way elderly  patients 
are treated by HMO  sales reps is shameful.  Seventeen of 270 physicians  who  volunteer 
suggestions to improve  the Medicare  HMO  program  recommend  closer monitoring  of marketing 
10 
 practices.  Other fraudulent  practices reported  by physicians  but not related to marketing  include 
delaying  or denying  medically  necessary services and overbilling. 
MOST  PHYSICIANS  RATE  MEDICARE  ENROLLEE  KNOWLEDGE  OF THEIR  HMO 
LOW 
A majority  of physicians  (at least 70 percent)  believe that Medicare  enrollees do not understand 
core elements of their HMO,  as illustrated  in Table C below. 
Table C 
Physicians  Assessment  of HMO  Medicare  Enrollee  Knowledge 
Plan  % that  do not 
Elements 
Appeals 
process 
Restrictions  17  I  83 
on services 
Benefits 
Referral 
procedures 
As one physician  expresses, Patients  dont know  exactly  what they sign up for.  Of the 
physicians  who volunteer  suggestions to improve  the Medicare  HMO  program,  the most 
frequently  cited recommendation  (by  19 percent of physicians)  is to improve  Medicare  enrollee 
education. 
Some physicians  believe they cannot freely  inform  their Medicare  patients.  Fifteen percent of 
physicians  do not feel free to discuss one or more of the following  with  their Medicare  HMO 
patients:  referrals  for tests, referrals  for specialists, referrals  for non-covered  services, or appeals 
and grievances.  Most  of these physicians  say they feel pressure from the HMO  not to discuss 
these issues. 
11 
 DESPITE  THE  MISGIVINGS  CITED  ABOVE,  MOST  PHYSICIANS  BELIEVE  THAT 
THEIR  MEDICARE  PATIENTS  RECEIVE  GOOD  CARE 
Most  Physicians  Feel Positive About  The Care Provided  To Their  Medicare  Patients 
Physicians  assessments of the quality  of care Medicare  patients receive at the HMO  are 
generally  positive.  Almost  three-quarters  of physicians  (71 percent) report that the overall 
quality  of care Medicare  enrollees get at their HMO  is excellent  or good.  Another  21 percent 
rate the care as fair, while  the remaining  8 percent say it is poor or very poor.  Physicians 
positive  assessments of quality  of care may appear to contradict  the other concerns they have 
about their Medicare  HMO.  This may be due, in part, to their  interpretation  of the survey 
question  asking them to rate the care Medicare  patients get at the HMO.  These physicians  seem 
to believe they can provide  good care to their patients despite some of the obstacles cited above. 
A few physicians  say that it is the health care providers  who  give good care, not the HMO. 
Primary  care physicians  are more likely  than specialists to rate the quality  of care received by 
Medicare  HMO  patients as high;  83 percent of the former  but only  63 percent of the latter say 
this care is excellent  or good. 
Similarly,  most physicians  (62 percent)  are satisfied with  their relationships  with  their Medicare 
patients.  This was the most frequently  cited factor by physicians  (43 percent)  for their overall 
satisfaction  with  the Medicare  HMO.  Additionally,  physicians  are also satisfied with  the amount 
of time they spend with  their Medicare  patients.  Almost  all (92 percent)  spend 10 minutes  or 
more with  their Medicare  HMO  patients for each visit.  Nearly  all physicians  (90 percent) think 
this is an adequate amount of time. 
Physicians  volunteer  various  suggestions  for improving  the care provided  to Medicare  patients in 
HMOs.  These include  improving  the referral  process, giving  physicians  greater medical 
autonomy,  monitoring  access to treatment,  and giving  Medicare  patients greater provider  choice. 
HMO  Referral  Times and Medicare  Enrollee  Knowledge  Are  Linked  To Quality  Of Care 
The length  of the referral  process is linked  to physicians  perceptions  of quality  of care.  Ninety-
four percent of physicians  whose staff gets through  right  away when calling  the HMO  for pre-
certification  rate their patients care as good, compared to only  62 percent of those whose staff 
takes more than 30 minutes to reach the HMO.  Furthermore,  one third  of the physicians  (36 
percent)  whose HMO  takes more than 7 days to reach a decision  report that their patients quality 
of care is poor or very poor, compared to only  3 percent of physicians  whose HMO  reaches that 
decision  within  1 hour. 
Physician  perceptions  of Medicare  enrollee  knowledge  are also linked  to their perceptions  of 
quality  of care.  Eighty-six  percent of physicians  who  believe their patients understand  HMO 
service restrictions  feel that overall  quality  of care in the Medicare  HMO  is good.  Conversely, 
just  67 percent of physicians  who  do not believe their patients understand  HMO  restrictions  on 
services believe quality  of care is good.  Similarly,  a majority  of physicians  who believe 
12 
 beneficiaries  understand  referrals,  benefits,  and appeals think  quality  of care in the HMO  is good 
(8 1, 87, and 87 percent respectively),  compared to fewer  of those who  do not believe their 
patients understand these aspects of the HMO  (65, 65, and 68 percent respectively). 
13 
 CONCLUSION 
Needless to say, HCFA  should  work  with  physicians  to address their  concerns  about Medicare 
HMOs  and to improve  the quality  of services provided  to Medicare  HMO  enrollees.  We 
believe  that greater  physician  satisfaction  with  the Medicare  HMO  program  will  enhance both 
enrollees  and providers  experiences  with  that program. 
This  survey  identifies  the issues which  most concern  Medicare  HMO  physicians,  many of 
which  are general  in nature,  such as a lack of clinical  independence  and restrictions  on access 
to care.  Such concerns  are most likely  to be resolved  through  overall  improvement  of the 
HMO  program. 
However,  there are other  distinct  concerns  we believe  might  be more  amenable to specific 
solutions.  In particular,  physicians  expressed the following  concerns: 
0 the appeals process 

l  beneficiary  knowledge 

l  the referral  process 

l  utilization  and quality  assurance reviews 

We believe  that the implementation  of the 1997 Balanced  Budget  Act  MedicarePlus  program 

provides  HCFA  with  an opportunity  to address physicians  concerns  about the lack of 

beneficiary  HMO  knowledge.  This  program  gives beneficiaries  the option  of receiving  their 

Medicare  benefits  through  MedicarePlus  plans,  which  would  include  HMOs  and other 

coordinated  plans such as Preferred  Provider  Organizations  (PPOs).  These plans will  be 

required  to provide  specific  information  to beneficiaries  at enrollment,  and annually  thereafter, 

about certain  plan features  such as quality  of care, utilization  reviews,  and procedures  for 

appeals and grievances. 

Other  approaches  HCFA  may want  to consider  in addressing  these issues include  establishing 

HMO  performance  standards,  such as for  referral  times and utilization  and quality  assurance 

reviews.  It may be necessary to conduct  further  studies of specific  areas of concern. 

Whatever  approach  is used, we believe  a process of consultation  between  HCFA  and physician 

groups  would  be a good  first  step towards  resolving  some of their  concerns. 

The OIG  plans to periodically  repeat this physician  survey  to determine  if progress  is being 

made in improving  physician  satisfaction.  We also plan to continue  our  surveys  of Medicare 

beneficiaries  to obtain  their  experiences  and satisfaction  with  their  HMOs. 

COMMENTS 

We received comments  on the draft report  from HCFA.  They concur with  our general 

observations  and conclusion  and state that the Balanced  Budget  Act  of 1997  addresses many of 

the physicians  concerns reported  in our study.  Both the Assistant  Secretary for Management 

14  and Budget  (ASMB)  and HCFA  provided  technical  comments,  which  have been incorporated 
into the final  report when  appropriate. 
The HCFA  suggests that we remove a reference in our conclusion  to prior  OIG recommendations 
on strengthening  the appeals and grievance procedures  for beneficiaries.  We agree with  their 
suggestion  and have removed this reference from our report. 
The HCFA  also notes that our report  does not indicate  whether  physician  experience with 
Medicare  HMOs  differs  from their experience  with  non-Medicare  HMOs  and suggests that it 
would  be helpful  to conduct  a comparable  survey of physicians  about the Medicare  fee-for-
service system.  We agree that it would  be useful to study these comparisons;  however,  such 
analysis was not within  the scope of our work. 
The full  comments from HCFA  are presented in Appendix  F. 
15 
 SAMPLE  SELECTION 
The universe  for this inspection  consisted of all physicians  in HCFAs  Unique  Physician 
Identification  Number  (UPIN)  database, excluding  pediatricians,  residents, interns, and non-
medical  doctors,  as well  as physicians  in States without  Medicare  HMOs  (Maine,  Mississippi, 
Montana,  New  Hampshire,  South Dakota,  and Wyoming). 
Because HCFA  can not identify  physicians  with  Medicare  HMO  contracts, we had to conduct  a 
test.  A pre-inspection  probe sample indicated  that approximately  30 percent of physicians  in the 
UPIN  database have one or more contracts with  Medicare  HMOs.  To increase the probability  of 
sampling  these physicians,  we grouped the physicians  into two  strata.  The high Medicare  HMO 
enrollment  stratum consisted of physicians  who practice  in the 13 States with  the highest 
percentage of Medicare  HMO  enrollees, and the low  stratum consisted of physicians  in the 
remaining  States.  For the 5 percent of physicians  with  business addresses in both strata, we 
randomly  selected one address per physician  and used it for stratum assignment. 
We determined  that a sample size of 2,500 physicians  was necessary to assure statistically  valid 
conclusions,  with  a 95 percent confidence  level and 5 percent precision  level.  We based this 
sample size on our estimation  of the percentage of physicians  with  Medicare  HMO  contracts  and 
on the assumption  of a 40 percent response rate.  We then randomly  selected 1,500 physicians 
from the high  stratum and 1,000 from the low  stratum as follows: 
Strata  Universe  :  Sample 
~~,--
High  Medicare  HMO  1500 
enrollment 
Low  Medicare  HMO  1000 
TOTAL  2,500 
We weighted  the collected  data by stratum, using the following  formula: 
WT = Universe  of nhvsicians  in stratum 
Sampled physicians  in stratum 
A-l  APPENDIX  B 
PROFILE  OF MEDICARE  HMO  PHYSICIANS 
I. 	 A variety  of physicians  appear to be contracting  with  Medicare  HMOs  as shown in the 
following  tables and charts. 
Table B-l 

Responding  Physician  By Primary  Specialty 

Primary  Specialty  (UPIN 
 Code) 
0 1 General Practitioner 

02 General Surgery 

05 Anesthesiology 

06 Cardiology 
 4% 
I 
07 Dermatology 
 -7  3%
-&- ~~ 
08 Family  Practice 

10 Gastroenterology 

11 Internal  Medicine 

13 Neurology 

16 Obstetrics/Gynecology 
 5% 
---+-
18 Ophthalmology 
 4% 
t-~~~~~~~~ 
20 Orthopedic  Surgery 

I  3%  ~~ ~~ 
26 Psychiatry 

29 Pulmonary  Disease 

30 Diagnostic 

34 Urology 

53 Hematology/Oncology 

_93_ _E_m_~e~rg~e~n~~c~~y~  ~M~e~d~icine 

3ther 

rOTAL 

B-l  Chart B- 1 
Responding  Physician  By Type  Of Practice 
n 
Solo  Practice 

L  1  Group  Practice 

E  Salaried  Employee  of HMO 

-1 
a  Salaried  Employee  of Hospital 

IIT 
Other 

* Four  physicians  did  not  indicate  type  of practice 
Table B-2 
Responding  Physicians  By Age 
Minimum  Age  28 
Maximum  Age  77 
Mean Age  48 
B-2 
 II. 	 In our telephone  interviews,  we asked 25 physicians  why  they chose to contract with  a 
Medicare  HMO.  Table B-3 shows the reasons they give. 
Table B-3 
Physicians  Reasons  For  Contracting  With  Medicare  HMO 
Reason  1  Physrians  ~ 
Preserve relations  with  long-time  1 
Medicare  patients  I 
-- 
Economic  survival  9 
~~- -~---
Attractive  HMO  market 
HMO  or Group decided 
Like  HMOs 
B-3  APPENDIX  C 
NON-RESPONDENT  ANALYSIS 
When questionnaires  are used to collect  data, the results may be biased if non-respondents  differ 
from respondents.  For this inspection,  a physician  for whom  a questionnaire  was not received is 
a non-respondent.  To test for the presence of any bias, we first obtained  information  from 
HCFAs  Unique  Provider  Identification  Number  file for all 2,500 physicians  who were sent a 
mail questionnaire.  A total of 1,140 questionnaires  were returned,  for an overall  response rate of 
45.6 percent.  The following  table illustrates  the number  of responses and the response rate by 
strata: 
STRATA  Number  Resnonse Rate 
High  Medicare  HMO  enrollment  States  678  45% 
Low  Medicare  HMO  enrollment  States  462  46% 
Total  Respondents  1140  46% 
To test for the presence of any non-response  bias, we analyzed the variables that might  influence 
whether  an individual  would  respond to the survey or that might  affect his or her responses.  For 
the 2,500 physicians  in our sample, we looked  at medical  specialty,  type of practice,  and strata. 
These categorical  variables were tested using Chi-square  with  the appropriate  degrees of 
freedom.  In order for the results to be statistically  significant  at the 95 percent confidence  level, 
the chi-square  value must be higher  than 3.84 with  1 degree of freedom. 
The results of this analysis are presented in tables C-1, C-2, and C-3.  The Chi-square  values 
given in the tables provide  a test of the difference  between the distribution  of the respondents  and 
that of the non-respondents  for the variable  of interest.  Also  provided  in the tables are the 
response rates by the different  values of the variables. 
C-l  Tahle  C-l 
--_-_- - -
Medical  Specialty 
------ 
Non-respondents 
~~ 
Total  1140  1360 
,~~ 
CHI-SQ  = .304 

Degrees of Freedom = 1 

* As classified  in the UPIN  file 
Table C-2 
Type  of Practice
i--~  ~~  ~~~~  ~~ 
Respondents  Non-respondents 
Group  526 F-
---~-+!?46% 
I
Solo  i 614  54%  i 
A----
Total  1140 
CHI-SQ  = 9.13 1 
Degrees of Freedom = 1 
* No data available  for 2 physicians 
c-2  Strata  (Extent  of Medicare  HMO  Enrollment  in State) 
Total  1140 

CHI-SQ  = .242 

Degrees of Freedom = 1 

Tables C-l  and C-3 show no statistically  significant  differences  between respondents  and non-

respondents  for medical  specialty  and extent of Medicare  HMO  enrollment  in State. 

Table C-2 shows a statistically  significant  difference  between respondents  and non-respondents 

with  respect to type of practice  (group  vs. solo).  In order to test whether  this difference 

introduced  any bias, we analyzed the rates of overall  dissatisfaction  with  Medicare  HMOs,  for 

differences  between  group and solo physicians. 

The proportion  of physicians  dissatisfied  with  Medicare  HMOs  differed  by  10 percentage points 

between types of practice,  so further  analysis was required.  Assuming  that non-respondents  and 

respondents  from the same type of practice  had the same level of dissatisfaction,  we calculated  a 

hypothetical  global  dissatisfaction  rate for all 2,500 physicians  in the sample.  This calculation 

gave only  a slightly  lower  dissatisfaction  rate of 42 percent (compared  to 43 percent for 

respondents).  This difference  is not statistically  significant. 

Given the results of this analysis, we believe that the inspection  findings  fairly  represent the 

experience  and opinions  of physicians  to whom  the questionnaires  were sent. 

c-3  APPENDIX  D 
CONFIDENCE  INTERVALS  FOR  KEY  SURVEY  QUESTIONS 
We calculated  confidence  intervals  for  16 key questions  from  the physician  mail  survey.  The 
response estimate and 95 percent  interval  are given  for  each of the following: 
1. 	 What  is your  overall  satisfaction  with  the Medicare  HMO? 
Very  or somewhat  dissatisfied  response estimate:  43 % 
Lower  interval:  38 % 
Upper  interval:  48% 
2. 	 Generally,  how  long  does it take for  you or your  staff to speak to an HMO 
representative  when  calling  for  approval  of referrals  for  specialists  or tests? 
More  than  l/2  hour  response estimate:  30% 
Lower  interval:  25% 
Upper  interval:  35% 
3. 	 Generally,  how  long  does it take the HMO  to approve  or deny referrals? 
3 or more  days  response estimate:  28% 
Lower  interval:  23% 
Upper  interval:  33% 
4. 	 Generally,  how  would  you rate the overall  quality  of care Medicare  enrollees  get at 
your  HMO? 
Excellent  or good  response estimate:  71% 
Lower  interval:  67% 
Upper  interval:  75% 
5. 	 Do you think  your  Medicare  patients  generally  understand  the HMOs  procedures  for 
referral? 
No  response estimate:  70% 
Lower  interval:  66% 
Upper  interval:  74% 
6. 	 Do  you think  your  Medicare  patients  generally  understand  the HMOs  restrictions  on 
services? 
No  response estimate:  83 % 
Lower  interval:  80% 
Upper  interval:  86 % 
D-l  7.    Do you think  your  Medicare  patients  generally  understand  their  HMO  benefits? 

No  response estimate:  75 % 

Lower  interval:  71% 

Upper  interval:  79% 

8.  Do you think  your  Medicare  patients  generally  understand  the HMOs  appeals and 

grievance  process? 

No  response estimate:  89% 

Lower  interval:  86% 

Upper  interval:  92% 

9.  Overall,  how  satisfied  are you  with  the Medicare  HMO  referral  process? 

Very  or somewhat  dissatisfied  response estimate:  42 % 

Lower  interval:  37% 

Upper  interval:  47% 

10.  Overall,  how  satisfied  are you with  the way  the Medicare  HMO  handles physician 

complaints? 

Very  or somewhat  dissatisfied  response estimate:  40 % 

Lower  interval:  35% 

Upper  interval:  45% 

11.  Overall,  how  satisfied  are you  with  the formal  appeals process? 

Very  or somewhat  dissatisfied  response estimate:  31% 

Lower  interval:  26% 

Upper  interval:  36% 

12.  Do  HMOs  or FFS provide  better  access to new treatments  for  Medicare  patients? 

FFS  is better  response estimate:  69% 

Lower  interval:  65% 

Upper  interval:  73% 

13.  Do HMOs  or FFS provide  better  access to specialists  for  Medicare  patients? 

FFS  is better  response estimate:  74% 

Lower  interval:  70% 

Upper  interval:  78% 

14.  Has working  for  a Medicare  HMO  restricted  your  clinical  independence? 

Often  or sometimes  response estimate:  62% 

Lower  interval:  57% 

Upper  interval:  67% 

D-2 
 15. 	 Do  Medicare  HMOs  allow  you to practice  medicine  the way  you think  is appropriate? 
Sometimes  or rarely  response estimate:  55% 
Lower  interval:  50% 
Upper  interval:  60 % 
16. 	 Do you  feel restricted  in referring  Medicare  HMO  patients  for  specialists  or tests? 
Often  response estimate:  27 % 
Lower  interval:  23% 
Upper  interval:  3 1% 
D-3 
 STATISTICAL  TESTS  FOR  KEY  FINDINGS 

We computed  chi-square  values for differences  in physicians  overall  satisfaction  for six 
variables.  In order for the results to be statistically  significant  at the 95 percent confidence  level, 
the chi-square  value must be higher  than 3.84 with  1 degree of freedom.  As shown  in the tables 
below,  each chi-square  test exceeded this requirement.  The direction  of the differences  noted 
below  are discussed in the findings  of this report. 
Table E-l 
Chi-Square  Values  for  Testing  Significance  of 
Differences  in Satisfaction 
I 
Variable 	 ~ DF*  1  Chi-Square
t 
Type of Practice (Salaried  HMO  10.02 
employee  vs. 
Specialists  vs. Primary  Care  14.88 
Satisfaction  with  Referral  Process  79.92 
(- ~ 
Satisfaction  with  Complaint  Process  I  1 i  55.99
~~j 
Satisfaction  with  Appeals  Process  27.26 
Quality  of Care Rating  53.34 
Rating  of appropriate  conduct  of  5.38 
utilization  and quality  assurance 
reviews 
~~~~~~ 
Rating  of appropriate  use of  9.17 
utilization  and quality  assurance 
reviews 
I 
* Degrees of Freedom 
E-l  We also computed  chi-square  values for differences  in physicians  ratings  for quality  of care for 
four variables.  Chi-square  values show that differences  on all four variables  were significant  at 
the 95 percent confidence  level. 
Table E-2 
Chi-Square  Values  for  Testing  Significance  of Differences 
in Quality  of Care  Ratings 
Variable
~~ 
Beneficiary  understanding  of 
HMO  procedures  for referral   
I-
Beneficiary  understanding  of  i  1  :  14.27 
restrictions  on services 
Beneficiary  understanding  of 
benefits with  HMO 
Beneficiary  understanding  of  1 
HMO  appeals and grievance 
nrocess 
q 
* Degrees of Freedom 
E-2 
 APPENDIX  F 
In this appendix,  we present in full  the comments from the Health  Care Financing 
Administration. 
F-l  DEPARTMENT  OF HEALTH  &  HUMAN  SERVICES  Health  Care  Financing  Administration 
J 
LG  The  Administrator 
Washington,.D.C.  20201 
_ - --.a..
ii:  / 

DIG-AS 

.DATE:  AFTI- I998  DIG-EC  / 

DIG-Et 

DIG-01 

DIG-l@ 

TO: 	 June Gibbs Brown  AlG-LC 

OGuiG 

Inspector General 
EECSCC 
Datcsult 
FROM:  Administrator 
Health Care Financing Administration 
SUBJECT: 	 Office of Inspector General (OIG) Draft Report: Physician Perspectivesof 
Medicare Health Maintenance Organizations (HMOs),  (OEI-02-97-00070) 
We reviewed the above-referencedreport that examinesthe experiencesand perspectives 
of physicians who work with Medicare HMOs.  The report found that: (1) overall 
physician satisfaction with Medicare HMOs is low; and (2) most physicians rate 
. 
Medicare enrollees knowledge of their HMO low. 
The report concludesthat the Health Care Financing Administration  (HCFA) should work 
with physicians to addresstheir concernsabout Medicare HMOs and improve the quality 
of servicesprovided to Medicare enrollees. 
We agreethat we should work with physicians to addressconcernsabout Medicare 
HMOs, and are already doing so. The Balanced Budget Act of 1997 (BBA) will  allow us 
to addressmany of the physicians concerns. However, while the OIG report is 
interesting and useful, it is important to note that it doesnot indicate whether physician 
experience with Medicare HMOs differs from their experiencewith non-Medicare 
HMOs.  Our detailed commentsfollow: 
.
OK  Ret-
HCFA should monitor HMOs to ensurebeneficiaries are issuedwritten determinations, 

including appealsrights. 

HCFARespm 

We concur.  Medicare is already in compliance with the Presidents Consufl)erBill  of 

Rights and Responsibilities provisions on appeals,and provides its beneficiaries with 

stronger appeal rights than those that exist in the private sector. 

HCFA is currently revising the Contractor PerformanceMonitoring  Reviewers Guide 

which is used to review health plans and ensurecompliance with written determinations 

and appealsrights.  The guide has been updated to include model language. 
 2 
Our Quality Improvement System for ManagedCare (QISMC)  includes clear 

also 
standardson how managedcare plans should inform beneficiaries on proceduresand time 

limits for resolving appeals,complaints, grievances,and other issues. We plan to review 

these standardson an annual basis at Medicare HMOs. 

OIG Recommendation#2 

HCFA should work with HMOs to establish standardizedappeal and grievancelanguage 

requirements in marketin~enrollment proceduresand operating procedures. 

HCFA Response 

We concur, and have already drafted model appeallanguageto be used in marketing 

materials, deniahotices,  and notices of non-coverage. This model languagewas sent to 

all Medicare managedcare plans in July, 1997. QISMC, which also featuresmodel 

language designedso standardscan be applied fairly, objectively, and uniformly, will   

allow us to work with managedcare plans to establishthesestandardsin their procedures. 

. 
OIG Recommendation#3 

implement the BBA MedicarePlus program which provides HCFA with an opportunity 

to addressphysicians concerns about the lack of beneficiary knowledge. 

HCFA Response 

We concur, and are currently drafting a regulation that will  addressmany of these 

concerns. 

OIG Recommendation#/4 

HCFA may want to consider establishing HMO performancestandards,such as for 

referral times, and utilization  and quality assurancereviews. 

HCFA Response 

We concur. We are planning to incorporate performancestandardsaddressingadditional 

HMO requirements for referral times, utilization, and quality assurancereviews in the 

BBA regulations.  These standardswill  be reviewed for compliance by HMOs on an 

annual basis. 

Y-
Technical Comments 

Page7, Referral Process- Waiting times of 3 days or less may not be unreasonablesince 

these are not emergencysituations,  Physiciansconcernedabout poor quality providers 

should document and submit complaints to the appropriate HMO, since physician 

feedback is essentialfor HMOs to maintain the integrity of their delivery networks. 
 3 
Physicians arejustified  in complaining about the number of different authorization and 
referral procedures of numerous HMOs.  However, it is generally the stti  in physician 
offices who must use theseprocedures,and HCFA compliance reviews ensurethat 
Medicare contracting companiessupply their physicians with provider manuals. These 
manuals not only explain referral and authorization procedures,but also explain how to 
file complaints with the HMO.  The OIG survey statedthat three interviewed physicians 
complained about poor quality providers. We hope thesephysicians also submitted their 
documented complaints to the appropriate HMO. 
Page 10, Utilization  and Oualitv AssuranceReviews - There is an incorrect statementthat 
Regulations require Medicare HMOs to provide for such reviews in their provider 
contracts.  HCFA has a policy rather than a regulatory requirement that requires 
inclusion of a provision in HMO contracts with providers which states,For services 
rendered to health plan members,the provider must agreeto the review by the utilization 
managementand..qualityassurancecommittees/staff  The review specified is not   
required to be a review of an individual providers operations, but is typically  a review of 
aggregateddata or proceduresrelating to a specific study area. Consequently, having 
one of these reviews is not a relevant concept and is not required by regulation or 
statute. There is no specified review, but there is a general agreementto permit review 
of all clinical behavior. 
Page,lO, Marketinp Practices- There is a sentencerelating to other fraudulent practices. 
It is unclear how delaying or denying medically necessaryservicesand over billing 
relates to marketing practices. Also, it is unclear who is engaging in theseactions. 
Conclusion Section - The information presentedrelating to appealsis confusing. Based 
on the survey, physicians were askedif they were satisfied with the formal appeals 
process. We assumethat this relates to: (1) the processthat a physician would use to 
appeal an HMO denial of a referral or prior authorization request; and (2) the study 
results as presentedon pages9 and 10. However, the recommendationsalso include prior 
OIG report recommendationsrelating to beneficiary appeal rights.  OIG should clarify 
whether it is recommending that HCFA implement physician appeal rights or beneficiary 
appeal rights.  It should be noted that physician appealproceduresare generally found in 
the HMO provider manuals, and on July 22, 1997,HCFA advised HMOs of new and 
expedited appealsproceduresfor beneficiaries, aspublished in regulation.  4 
Did the OIG survey ask the dissatisfied-physicians,what steps,if any, they had taken to 
convey their dissatisfaction to the plans and what eachplans responsewas? 
Has the OIG ever done comparable surveysfor original fee-for-service Medicare? If so, 
it would be helpful to have the comparisons. 
It would be useful to know if the concernsabout referrals relate to difficulties obtaining 
plan authorization to make referrals, or to inadequatecapitation paymentsfor physicians 
to pay for referral services. 
It is unclear if someconcernsrelated to beneficiaries are unique to HMOs or may also be 
the casefor beneficiaries in fee-for-service Medicare. For example,how well do fee-for-
service beneficiaries understandtheir Medicare benefits? (We recognize that it is more 
important for HMO enrollees to understandthesematters,given financial incentives for 
. 
HMO providers to render fewer servicesthan fee-for-service providers.) 
With respectto questionable HMO practices in enrolling Medicare beneficiaries, we note 
that the Administration sought authority during the BBA deliberations to have all 
enrollment handled by a neutral third party, but the Congressdid not include this 
pro,visionin the BBA.  The Congressdid, however, mandatea demonstrationof the use 
of third-party contractorsto conduct enrollment and disenrolhnent under the 
Medicare+Choice program. 
a--+- lGoL&-
Nancy-Ann Min DeParle